Part of what makes holidays special is telling and listening to the same stories over and over. The things in the stories that dazzled us when we were young fade or lose their impact, but then other nuances in the stories strike our more mature selves as pertinent or poignant. As a lawyer, it’s hard not to be struck by Pontius Pilate’s question of “What is truth?” Is the question a mere sneer? Is it an admission that the trial of Jesus was unfair? Is it an exhibition of the contrast between sophistry and faith? Whichever of those possibilities is most true, who will dispute that truth can be elusive?
What is false? That is also slippery. It can be dangerous. We are reminded of our thesis advisor, Judith Shklar who realized that one way to shine a light on virtues was to study vices. It’s certainly a more concrete and arresting way to tackle morality, in the same way that Dante’s Inferno is an easier read than Purgatorio or Paradiso. We are tempted to think of falsehoods as infernal, but that notion runs aground on shoals of complexity and intention. Do these clothes make me look fat? Are you hiding the Frank family in your attic? Is Schrodinger’s cat dead?
There’s a Youtube video by a law professor where he tells the audience in no uncertain terms never-ever to talk to the police. Maybe you think you’re innocent and the truth will set you free, but it almost never does. If the government wants to get you, it will be persistent and might very well use your own words against you. Miranda warnings say nothing about how your words can be used for you – and that is because they never will be. The government might use your words against you in a manner only tangential to the original inquiry. Ask Martha Stewart.
All of which is to say that we hate the False Claims Act. What began as a means of punishing war racketeers who sold inferior goods to the government has morphed into a dragnet for catching people and companies who missed crossing an ‘i’ or dotting a ‘t’ – on a document for another transaction in another place at another time. That is only a slight exaggeration. We’d like to think it is not false. Like RICO and the statute criminalizing deprivation of the “intangible right of honest services,” the False Claims Act has become a weapon of abuse. Even worse – and like RICO – it is an abusive weapon that greedy private parties can commandeer.
We’ve groaned before about the abuse of the False Claims Act against drug and device companies that allegedly marketed products off label. Perhaps we are stubborn or stupid (or both), but we have a hard time finding the false statement in those cases. A couple of weeks ago, a judge dismissed claims in an off-label False Claims Act, but the dismissals were without prejudice and the reasoning was more intricate than what we’d like to see: a shout of “nonsense!” as we’d usher the plaintiff down the courtroom steps.
The case was Simpson v. Bayer Corp., 2014 U.S. Dist. LEXIS 51342 (D.N.J. April 11, 2014). Simpson brought a qui tam action against her former employer under the False Claims Act and similar state and local statutes. She had helped market Trasylol, and was now alleging that Bayer had illegally promoted Trasylol “engag[ing] in a campaign of concealment and disinformation concerning Trasylol’s safety and efficacy that continued at least until May 2008, when Bayer recalled Trasylol from the market.” Simpson, 2014 U.S. Dist. LEXIS 51324 at *3. These promotional activities, according to Simpson, violated the Food Drug and Cosmetic Act (FDCA) prohibition against “misbranding”. The tie-in between misbranding and off-label promotion is the residue of sloppy statutory language. A drug is misbranded if labeling, which under the FDCA includes all drug manufacturer promotional and advertising material, describes any intended use for the drug not approved by the FDA. Simpson alleged that Bayer misbranded Trasylol by promoting off-label uses of the drug.
Okay, okay. What did Bayer say that was false? Good luck figuring that out. Why isn’t this case dismissed before the ink dries on the complaint? The court tells us “there are two categories of false or fraudulent claims under the FCA: factually false claims and legally false claims.” Id. at *13. Dante would have enjoyed this kind of scholasticism. Us? Not so much. Our heads are starting to hurt. A claim is “factually false” when the claimant misrepresents what goods or services that is provided to the Government. We don’t have that here. It’s not as if anyone handed pills over to the government and said they were magic beans. What about legally false? That happens when the claimant knowingly falsely certifies that it has complied with a statute or regulation the compliance with which is a condition for Government payment. Id.
Got it? We’re not done yet. It turns out that there are two different “false certification” theories of liability: the express false certification theory and the implied false certification theory. Under the express false certification theory, an entity is liable under the False Claims Act for falsely (aha!) certifying that it is in compliance with regulations that are prerequisites to Government payment in connection with the claim for payment of federal funds. Nobody says that we have that here. So what the Simpson case must be about is the pimple on the rump of False Claims Act jurisprudence, the implied false certification theory, when an entity is liable if it “seeks and makes a claim for payment from the Government without disclosing that it violated regulations that affected its eligibility for payment.” Id. at *14. Let’s switch from anatomy and rumps to botany: isn’t this branch of the False Claims Act decision-tree, in truth, full of sap and sharp edges? But what is truth?
The plaintiff’s theory was that each claim for payment for Trasylol was “false or fraudulent in implying that the drug was not misbranded and was permitted in interstate commerce.” Id. Can you count the jumps of illogic buried in that formulation? It’s sophistry. What tripped the plaintiff up – and credit must be given here to smart defense lawyers and a smart judge (although it is a pity that so much smartness had to be devoted to slamming the window shut on such a frail theory of liability) – was the inability to show that compliance with the regulation that the defendant allegedly violated was a condition of payment from the Government. It is a heightened materiality requirement, and just as in securities cases, that materiality requirement is the highest hurdle for plaintiffs.
The Complaint made a valiant effort (please read irony into that word “valiant”) to plead that compliance with the FDCA’s misbranding provisions was a condition of payment from the Government, but it could not quite do it. The Complaint alleged that the government settlements with drug and device companies are evidence that the federal government deems misbranding to be a material ground for recovering federal funds expended on pharmaceuticals. According to the plaintiff, from that “evidence” it can be inferred “that the Government may eventually sue a drug manufacturer for failing to comply with the FDCA’s misbranding provisions.” Id. at *18. The court was not going to go so far in drawing inferences. It simply did not follow that the Government conditions its payments for pharmaceuticals on a drug manufacturer’s compliance with the FDCA’s misbranding provisions. Accordingly, the Complaint did not adequately plead the existence of a condition of payment. The Government’s (pernicious) prosecutions of false claims by drug and device companies has no bearing on whether compliance with the misbranding provisions of the FDCA is a condition of payment from the Government for Medicaid reimbursements. And since when are settlements evidence?
The Complaint also alleged that the defendant submitted or caused to be submitted claims for Medicare reimbursement of a drug when the use of that drug was not “reasonable and necessary for the diagnosis or treatment of illness or injury.” The Medicare Benefit Policy Manual (MBPM) provides that FDA approved drugs used for indications other than what is indicated on the official label may be covered under Medicare if the carrier determines the use to be medically accepted, taking into consideration the major drug compendia, authoritative medical literature and/or accepted standards of medical practice. The plaintiff seemed to suggest that if a major drug compendium did not support an off-label use, then the off-label drug use could not be “reasonable and necessary.” But the court concluded that there was more flexibility than the plaintiff contemplated. The MBPM language states only that a carrier should consider the major drug compendia. Moreover, an off-label drug use is considered medically accepted under the Medicaid statute if that use is supported by “one or more citations” in the major drug compendia.
The Complaint also alleged that the DRUGDEX entry for Trasylol lists numerous off-label uses for Trasylol, but none of those off-label uses had ‘good’ documentation that they are both safe and effective, and some, such as orthopedic surgery, were described as ‘ineffective’. That gotcha arises from the plaintiff’s predictably selective reading of the DRUGDEX. Of course other parts of that compendium support off-label use. What about them? The plaintiff asserted that the compendia listings themselves are the product of the defendant’s “misbranding of Trasylol through consistent false and misleading statements, articles, and reports about the drug’s safety and efficacy, including off-label uses.” Id. at *35. So what condemns the defendant is true, and what supports the defendant must be the offspring of the defendant’s lies. What is truth? Truth is whatever it takes to propel the plaintiff toward a multimillion dollar verdict. After all, doesn’t the word “verdict” mean to speak the truth? But here’s another truth: the Complaint does not “not allege a single fact regarding what Bayer submitted to the compendia or how the compendia evaluated Trasylol.” Id. at *36.
It is interesting how a False Claims Act complaint can contain claims that to an objective reader, or, at least, a nonobjective DDL defense hack, ring … false.