It’s not as if the standard for amending pleadings is a particularly hot DDL topic, but here we go for the second time this week discussing a case where precisely that was at issue.  This time the case was U.S. ex rel. D’Agostino v. EV3, Inc., 2015 U.S. Dist. LEXIS 173025 (D.Mass. Dec. 30, 2015), and, again, the motion to amend was denied.  The reasons for the denial were futility and undue delay.  The reasons for those reasons are fairly interesting.

But first, permit us to vent about qui tam cases.  That “ex rel” in the caption of today’s case tells you that it is a qui tam case.  The D’Agostino case was brought by a former employee of one of the defendants.  Some might call him a whistle-blower.  Some, as we shall see, might not.  He was a medical device sales rep and he alleged that the defendants violated the federal False Claims Act and the False Claims Acts of twenty-six states and the District of Columbia.  A False Claims qui tam action is brought on behalf of the government.  It is a relic from the Civil War era and arose to address sellers of war goods who were cheating the government.   A do-gooder who knew about the cheating would file an action and get moneys returned to the treasury, with the do-gooder taking a cut.  Everybody wins, right?  By the way, the do-gooder is not actually called a do-gooder; instead, the term “relator” is used.  After the relator files a qui tam action, the government then decides whether it wants to intervene in the case.

In D’Agostino, the governments  did not intervene.  By the light of any sentient onlooker, that decision not to intervene suggests that the case is not especially strong.  It also appears that some of the whistle-blowing was no big deal, because some of the allegations were already matters of public disclosure.  That is not at all atypical of these cases.  While the qui tam plaintiffs bar likes to brag about how it is doing a public service, more often the cases are merely opportunistic lunges for bounties.  That qui tam plaintiffs bar is also indignant that not every state has seen fit to pass its own False Claims Act.  Multiple false claims acts multiply bounties without actually increasing any worthwhile enforcement.  And we have not yet even gotten to the bit about how the allegations of false claims are specious because there is no actual false claim.

But the D’Agostino court did get there, and it got there in style.

The proposed amendment would have been the fifth iteration of the D’Agostino qui tam complaint.  The claims centered around Onyx and Axium.   Onyx is a synthetic liquid that, when introduced by a catheter, forms an embolus inside a patient, blocking blood flow.  It was approved in 2005 by the FDA for use in the presurgical treatment of a vascular defect in the brain known as brain arteriovenous malformation.  The plaintiff alleged that the defendant misled the FDA during the Onyx approval process by proposing an overly narrow indication for its use while concealing the true scope of its marketing strategy, and failing to report relevant safety information.  The proposed amended complaint alleged that the defendant gave false assurances that it would institute a program to train all surgeons in the proper use of Onyx. The plaintiff also alleged that the defendant failed to alert the FDA during the approval process about certain problems with the product.  The plaintiff argued that because the defendant fraudulently induced the FDA to grant the initial approval for Onyx, all off-label reimbursement claims were tainted as a result.

Axium is an embolization coil attached to a delivery pusher equipped with a manual detacher.  A surgeon threads the coil into the position at which she wishes to promote the formation of an embolus, and then detaches the coil and removes the pusher.  First marketed in 2007, Axium was developed with the intent of embolizing intracranial aneurysms and other neurovascular anomalies.  The proposed amended complaint alleged that the defendant hurried the development of Axium, resulting in the launching of a product that “was not adequately designed, was not properly manufactured, and was not safe for use.”  The proposed amendment also alleged that the defendant’s investigations into Axium adverse events were “often bogus, blaming the problem on everything but the defective product.”

The proposed amended complaint contrasted submissions to the FDA and the FDA advisory panel during the Onyx approval process with the FDA’s internal records concerning safety issues.  But by citing publicly available documents sourced to the FDA, the proposed amendment itself established the Public Disclosure Bar.  Under the Public Disclosure Bar, a court does not have jurisdiction over a False Claims case if substantially the same allegations as alleged in the action were publicly disclosed in a government proceeding or in news media, unless the relator was the original source of the information.  That bar makes sense.  The only reason for awarding a relator a bounty is that the relator added value by unearthing frauds that would otherwise have remained, um, earthed.  Relators and their attorneys get plenty rich under the qui tam system, but they should not get rich if all they did was manage to be the first to file after alleged frauds were disclosed by someone else.  In D’Agostino, the plaintiff could not qualify as an “original source” of the disclosure.  Consequently, the qui tam allegations about the Onyx FDA approval process were precluded by the Public Disclosure Bar.

The same is true with respect to the Onyx training program.  The company’s promise to the FDA advisory panel to implement an “all physician” training program was placed in the public domain by the FDA.  Those disclosures were made public before the plaintiff began his employment at the defendant, so he could not have been their original source.  Thus, the court held that it lacked jurisdiction over the training program allegations by operation of the Public Disclosure Bar.

With respect to allegations against the marketing of Onyx, the plaintiff ran afoul of the Rule 9(b) particularity requirements.  The plaintiff theorized that because Onyx should not have been approved by the FDA in the first instance, or, alternatively, because it should have been withdrawn from the market or placed under more stringent controls, all reimbursement claims for the use of Onyx must be deemed “categorically” false.  “Categorically” apparently means there is no need for specificity.  Nice try.  The plaintiff’s conclusory allegation that “hundreds” of similar incidents must have occurred and that some of these must have cost the government money is illustrative of the kind of opportunistic pleading that Rule 9(b) is designed to prevent.  The court held that the plaintiff’s theory that “every claim paid by the government which involved the use of Onyx violated the FCA,” fit into a “legal-argument-disguised-as-fact category” that could not pass muster
under Rule 9(b).

Moreover, the plaintiff failed to allege with specificity how any misrepresentations to the FDA about the off-label marketing of Onyx were material to the FDA’s decision to approve the device.  The plaintiff alleged no facts plausibly showing that the FDA relied upon, or even considered, the defendant’s marketing strategy when it approved Onyx for use, or that the FDA would not have approved the device were it aware of the defendant’s plans for off-label marketing.”  (At this point, the court dropped a footnote to the preeminent article ever written about off-label use and informed consent, which was co-authored by Bexis.)  In addition, the D’Agostino court pointed out that a broken promise about how a company would market a drug is not the same thing as a false claim.

Want of specificity also doomed the claims regarding Axium.  In his memorandum in opposition to the motion to dismiss, the plaintiff collated disparate allegations in the Complaint under the headings “Who,” “What,” “When,” and “How.”  That sounds like smart briefing.  But there was no there there.  Under “Who”/where”, the plaintiff cited six hospitals named as sources of false claims, but it turned out that only one of them was linked to Axium. In the discussion under “What,” the plaintiff simply alleged a legal conclusion: that because Axium was knowingly sold as a defective and misbranded device, it was not medically necessary.

In broad generalizations, the plaintiff alleged that all Axium devices on the market were defective and therefore, any claim for Medicare reimbursement involving Axium was false.  That is typical of False Claims Act qui tam cases.  Too many courts, including courts from the same district as this case, have permitted plaintiffs to get away with pleading False Claims Act cases bereft of actual false claims.  Not here.  And what is even better about this case is how the court invokes policies that sound very like Buckman preemption or primary jurisdiction in rejecting the proffered amendment.  Boiled down to its essence, the proposed amendment asserted that, but for the defendants’ misrepresentations, the FDA would not have approved the medical device in the first instance.  Similarly, the plaintiff speculated that, had the FDA known of all of the alleged hidden defects, it would have withdrawn its approval of the product or ordered its recall.

The court reasoned that the proposed amendment was worse than speculative; it invited the court to speculate and to second-guess the FDA.  The court declined that invitation:  “The FDA is charged with the difficult task of balancing the risk and benefits of placing drugs and medical devices on the market, and D’Agostino is, in effect, asking this court to usurp the FDA’s prerogative and assume that function.  D’Agostino proposes, in the guise of an FCA action, that this court reevaluate years of FDA decisions concerning the approval or recall of EV3’s medical devices…. In short, an FCA action is not the appropriate vehicle for this court to exercise its judgment in second-guessing decisions taken by the FDA in approving the use of medical devices simply because the government happens to pay for some of them.”

That sort of rigorous reasoning imperils a lot of the qui tam cases out there.  It would be nice to think that their days are numbered.  Perhaps courts with clogged dockets (that is to say, all of them) should award bounties to enterprising, civic-minded defense hacks who bring motions to dismiss bogus qui tam cases.  Just a thought.

Finally, the plaintiff in D’Agostino trotted out some purportedly new evidence about adverse events (as well as a conveniently produced statement by an expert witness), but the D’Agostino court concluded that such information had already been available for use in one of the earlier iterations of the complaint, and the plaintiff  was not “entitled to wait and see if [his] amended complaint was rejected by the district court before being put to the costs of filing [an additional] amended complaint.”  Why, it is almost as if a court thinks that a qui tam plaintiff might be engaging in gamesmanship.

The D’Agostino case came out near the very end of last year.  Its solid analysis and refusal to second-guess the FDA are as pleasantly musical as the sound of champagne corks popping.