People send us things to consider discussing in our posts. Usually, those things are court decisions in drug and device cases.  Sometimes, they are so far afield from our comfort zone that we do not give them much consideration.  This week, we received a motion from a False Claims Act case that we thought was interesting enough to enlist a colleague to add some subject matter expertise while we fretted about the election, work, the election, and some other stuff (i.e., the election).  Much of the credit for this post goes to Andy Bernasconi, a fine lawyer for a crazy Red Sox and Patriots fan.

While we do dabble in the FCA on this blog, we lean on Andy for a quick primer on the FCA’s provisions.  Congress originally passed the FCA in 1863 as a way to deter and punish government contractors’ fraud against the U.S. and Union troops during the Civil War.  The statute (as amended) generally creates liability for any person who knowingly submits a materially false claim demanding payment from the United States. See 31 U.S.C. § 3729(a)(1). An FCA violation is punishable by treble damages, civil penalties of up to $21,563 for each false claim, and an award of attorneys’ fees. Id. §§ 3729(a)(1) &(3); id. § 3730(d)(1); 81 Fed. Reg. 42491 (June 30, 2016).

One of the most notable aspects of the FCA is that it contains unique qui tam provisions that permit a private whistleblower, also known as a “relator,” to file FCA claims on behalf of the federal government. Id. § 3730(b)(1). In doing so, the relator files the case under seal, at which point the Justice Department investigates the allegations and decides whether the government will intervene and take over the case to litigate for itself. Id. §§ 3730(b)(2), (4).  If the government declines to intervene in the case, the relator may litigate the case in the name of, and on behalf of, the government. Id. § 3730(c)(3).

Continue Reading Putting the False in False Claims Act Cases

What follows is the promised second guest post from Reed Smith’s Lindsey Harteis concerning the UHS v. Escobar False Claims Act case.  Lindsey’s first post set the stage.  The Supreme Court decided Escobar yesterday, so now she’s back with her take on the version of FCA “implied certification” that the unanimous Supreme Court recognized.

As always our guest posters deserve all the credit, and any blame, for the contents of their posts.

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To someone born in 1984, the phrase “Elvis Lives” is tough to figure out.  We don’t know what things were like back when he was alive and on TV (from the waist up).  But we do get the general concept that something can live on after death, just in a different way.  And we definitely enjoyed the trio of violin-playing Elvises in a Coldplay music video a few years back.  So, Elvis is still around.  Just in a different way.

Unfortunately for us defense bloggers, so is the implied certification theory.  Yesterday the Supreme Court handed down its opinion in Universal Health Services, Inc. v. Escobar, No. 15-7, slip op. (U.S. June 16, 2016).  This is the pending Supreme Court decision we blogged about last month (here) that has determined both the scope and validity of the implied certification theory of False Claims Act liability.  While the theory survived, the opinion is not all bad news.  In fact, it should have relators all shook up more so than defendants.  So we’ll get going with a little less conversation and try to ease your suspicious minds about how a case that allows a pro-relator theory of liability to survive can actually still be good.

The case is overall good for FCA defendants because the Supreme Court emphasized just how rigorous the materiality threshold is in these cases.  The bad news is that the implied certification theory is still (at least in some circumstances) valid.  (As a quick refresher, implied certification cases are founded on the idea that when a provider submits a claim for payment to the Government, that claim impliedly certifies compliance with all conditions of payment.  Thus, the theory goes, if the claim fails to disclose the defendant’s violation of a material statutory, regulatory or contractual requirement, that claim is false and actionable under the FCA.)

Continue Reading Guest Post – FCA Implied Certification, the Slim, Early Elvis Version

Recently, we noted that one of the first decisions we wrote a post about had been affirmed by the Second Circuit.  Of the district court decision, we had penned “It is nice to see a judge with a proper understanding of how drug labels, FDA, and cockamamie theories about off-label marketing should fit together.  We would like to see more of the judges handling product liability cases with similar issues follow the lead of the judges handling FCA cases and dismiss complaints premised on nonsensical interpretations of labels and regulations.”  In discussing U.S. ex rel. Polansky v. Pfizer, Inc., No. 14-4774,  2016 U.S. App. Lexis 8974 (2d Cir. May 17, 2016), we could be lazy and swap in “a panel” for “a judge” in the preceding quote.  That would be true, but it would be incomplete.  A few weeks after the district court’s decision in Polansky, the Second Circuit decided U.S. v. Caronia, 703 F.3d 149 (2d Cir. 2012), where it vacated the conviction (conspiracy to sell a misbranded drug under 21 U.S.C. §§ 331(a) and 333(a)(1)) of a sales representative for promoting a prescription drug for off-label use.  Then, a few months before the Polansky appeal was argued, the Southern District of New York enjoined the FDA from prohibiting a manufacturer’s truthful off-label promotion concerning a (generic) prescription drug.  Next, a few months later, FDA reached a well-publicized settlement with that manufacturer, preserving that “Amarin may engage in truthful and non-misleading speech promoting the off-label use” of its drug without risking prosecution for misbranding.  While there are still decisions like Neurontin out there and many cases still seek to impose liability under the FCA or other statutes for truthful off-label promotion, the off-label landscape has clearly changed.

With that in mind, we turn back to Polansky.  For eight years and through multiple amended complaints, the plaintiff pursued a FCA claim that Pfizer’s promotion of Lipitor for use within the approved indications was actually off-label—and therefore allegedly led to false claims for Medicare and Medicaid reimbursement—because of references in the label to the National Cholesterol Education Program Guidelines.  We will be blunt—shocking to our readers, we know—this was always a dubious claim because any common sense reading of the label does not come close to supporting the contention that the Guidelines narrowed what was “on-label” compared to the five indications that were approved and described in the label.

The NCEP Guidelines, which came out of NIH and were expressly not intended to trump clinical judgment, set out an algorithm for  recommendations for the general type of treatment (e.g., just lifestyle modifications) depending on risk categories derived from lab results and clinical history.  2016 U.S. App. Lexis 8974, **7-9.  The Indications section in the pre-Physician Labeling Rule label referenced the Guidelines in conjunction with stating that lipid-altering agents should be used only when response to diet and other lifestyle modifications “has been inadequate” and included a summary of the Guidelines. Id. at **10-11.  When PLR changes went into effect in 2009, the reference and summary were omitted, which suggested something about the relative importance of these references. Id. at *9.  Both before and after PLR, the Dosage section of the label had a cite to the Guidelines when stating, for one subcategory of patients, that “The starting does and maintenance doses of Lipitor should be individualized according to patient characteristics such as goal of therapy and response.” Id. at *11.

Continue Reading A Blow Against False Claims Act Liability For Off-Label Promotion

Today’s guest post is courtesy of Reed Smith’s Lindsey Harteis. She’s been following the big-deal UHS v. Escobar False Claims Act that the Supreme Court could decide any day now (or could wait until the end of June), which involves the existence and (perhaps) extent of the so-called “implied certification” theory of FCA liability.

As always our guest posters deserve all the credit, and any blame, for the contents of their posts.

Finally – be sure to read the IMPORTANT ANNOUNCEMENT at the end of this post. DDLaw blog is getting ready to move, and that means you’ll have to resubscribe to continue getting our posts. But don’t worry, it’s easy.

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We spent this past weekend chasing our ten-week old Samoyed puppy around the backyard, where he ventured “down in the weeds” more than a few times. This caused the OCD in us to go over him multiple times with a fine-toothed comb: We reasoned that he was bound to pick up some ticks. Lucky for us, he didn’t. But it got us thinking that when courts go down in the weeds like our dog did, they are bound to pick up a few nasty buggers themselves. In the oral argument for the appeal in United Health Services v. Escobar, 780 F. 3d 504 (1st Cir. 2015), the Court definitely took a run through the weeds. (We blogged briefly on the case here). We’re taking our fine tooth comb through the oral argument to look for ticks, and we fear we’re bound to find in this ruling another “corpus juris festooned with various duties.”

That’s a quote from a Justice we missed dearly while listening to the oral argument in this case. Justice Scalia used it in his concurring opinion in Skilling v. United States, 561 U.S. 358 (2010), which limited a fraud statute in the criminal context due to vagueness and via the 5th Amendment Due Process route.

Skilling reminds us of United Health Services for a couple of reasons: (1) It dealt with defining the contours of a sort of fraud – honest services fraud – for which the lower courts took an expansive view that wasn’t foreseeable based on the plain language in the statute; (2) Scalia was accusing the Courts of Appeals of invention of law rather than interpretation in their rulings on what constituted honest services fraud; and (3) the case involved a fusion of Restatement and black letter law in an unrelated area (Agency and Trusteeship) but was a criminal case.

Continue Reading Guest Post − Implied Certification: An Eradicated Pest or Here to Stay?

How much is “enough?” Will we have enough money to retire someday? Did the Drug and Device Law College Sophomore study enough for her computer science midterm? Is there enough salt in the matzo ball soup? In the realm of summary judgment, we who represent defendants are painfully familiar with courts that dodge this question, allowing claims to proceed and avoiding the complicated issues of admissibility that determine whether a plaintiff has presented enough evidence to create a genuine issue of material fact.

Not so in United States of America ex rel. John King and Tammy Drummond, et. al. v. Solvay S.A., et al.. 2016 U.S. Dist. LEXIS 43133 (S.D. Tex. Mar. 31, 2016). In King, a False Claims Act case, the Relators claimed that the defendant promoted three drugs for off-label uses, and that the off-label promotion resulted in false claims being submitted for prescriptions paid for by government health care programs. King, 2016 U.S. Dist. LEXIS at *5. The defendants moved for summary judgment on these claims, arguing that the relators did not have any admissible evidence of false claims. Specifically, the defendants argued that the Relators relied on inadmissible Texas and New York claims data to create summary charts of supposed false claims and didn’t disclose who created the charts or explain how they were created. Further, the defendants objected to the Relators’ reliance on sales representatives’ “call notes,” arguing that the call notes contained hearsay and lacked foundation. Id. at *8-9.

New York Claims Data

The Relators claimed that the New York claims data was self-authenticating because it was produced in response to a subpoena. The court disagreed, holding, “. . .[W]hile certainly Relators’ assertion that the State of New York produced the New York Claims Data pursuant to a subpoena must be what was requested in the subpoena,” documents produced pursuant to a subpoena are not always self-authenticating. Id. at *13. In contrast to a case cited by the Relators, which involved documents that were going to be used against that producing party, the Relators, who sued on behalf of the State of New York, were using the documents to benefit New York. The court concluded that the New York claims data was not self-authenticating “simply because it was produced pursuant to a subpoena.” Id. at *13-14.

Continue Reading Summary Judgment for Defendants in FCA Action: No Admissible Evidence of False Claims

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.

Continue Reading D.Mass. Invokes Public Disclosure Bar, Demands Specificity, and Refuses to Second-Guess FDA in Dismissing Axium/Onyx Qui Tam Case

We have today another False Claims Act case in which the plaintiff—or, we should say, “Relator”—alleges that reimbursement claims made to the government for drugs purchased for off-label uses are false claims.  United States v. Solvay S.A., 2015 U.S. Dist. LEXIS 166639 (S.D. Tex. Dec. 14, 2015).  That’s nothing new.  But “Relator” did something to make it a little more interesting.  He couldn’t argue that Medicaid hadn’t authorized reimbursement for the off-label uses at issue in this litigation.  It had.  Medicaid authorizes reimbursement for off-label uses of a drug if a qualified compendium cites clinical studies supporting that use for that drug.  And a qualified compendium had done so here.

But “Relator” didn’t accept that.  He attacked the validity of the inclusion of the studies in the compendium.  He alleged that the pharmaceutical company tricked and cajoled the compendium company into listing those articles, pointing to all the types of evidence that we have seen over the years in product liability cases:  Suppressing bad studies.  Manipulating data.  Ghostwriting articles.  Obscuring bad results by hiding the true number of dropouts from studies.  Publishing articles in non-peer-reviewed supplements.  “Relator” claimed that these improper tactics by the pharmaceutical company created misinformation and misleading studies that the compendium was tricked or wooed into citing.  And, on that basis, “Relator” asserted an FCA claim against the pharmaceutical company.

Continue Reading Happy Holidays to “Relator”

Earlier this month the United States Supreme Court agreed to hear Universal Health Services, Inc. v. United States ex rel. Escobar (No. 15-7), in which the Court will decide whether a False Claims Act claim can succeed under the so-called “implied certification” theory, and if so whether that theory goes beyond situations where compliance is an express precondition to payment.  We’re not FCA lawyers, but other folks at Reed Smith are, so rather than sorting through all this ourselves, we’re linking (a first for us) to a Reed Smith client alert that has what we think is a good explanation of why this case – and this FCA theory – is important to our clients and to our readers generally.

Halloween has come and gone.  The Drug and Device Law Little Dogs stayed in their costumes (Batgirl and a rabbi) long enough to be photographed for (unsuccessful) entries for a pet costume contest.  There was ample candy – about 15 pounds, which more than sufficed for the seven times the doorbell rang. And we enjoyed the modest stream of excited kids, flushed with the thrill of pretending to be something they weren’t.

We assume that the plaintiff/relator in United States ex rel Gerasimos Petratos v. Genentech, 2015 U. S. Dist. LEXIS 146525 (D.N.J. Oct. 29, 2015) is less thrilled.  In this qui tam action, plaintiff pretended that the wrongdoing he alleged was something it wasn’t:  a violation of the False Claims Act.  The court summed it up in the first paragraph of its decision: “This case concerns whether the False Claims Act can be extended to cover wrongful behavior that does not lead to a false claim.  It cannot, so Plaintiff’s Amended Complaint must be dismissed.”  Petratos, 2015 U.S. Dist. LEXIS 146525 at *1.  Two big issues were decided:  (1) no product liability-style (prescriber specific) causation in FCA cases; and (2) the FCA is not a catch-all negligence per se statute for regulatory violations.  The defense won both, so this case is significant.

The allegations surrounded defendant Genentech’s anti-cancer drug Avastin, a “monoclonal antibody cancer drug that limits the growth of tumors by preventing the growth of blood vessels that feed tumors.”  Id.  The court explained that, in 2010, the Oncologic Drugs Advisory Committee of the FDA recommended denying approval of Avastin for metastatic breast cancer due to concerns about clinical trial data Genentech had provided.  Nevertheless, later that year, the FDA approved Avastin for treatment of patients with metastatic breast cancer.  Id. at *3.   The approval “was conditioned on completion of adequate studies showing the drug’s clinical benefit.”  Id.   Subsequent clinical studies failed to demonstrate such benefit, and the FDA removed the metastatic breast cancer indication from Avastin’s label in 2011.  Id.  The drug, which can cause serious side effects, remains approved to treat metastatic colorectal cancer, nonsquamous non-small cell lung cancer, glioblastoma, and metastatic renal cell carcinoma.  Id.  In addition, it is used off label for renal cancer, ovarian cancer, ovarian cancer, pancreatic cancer, and various eye diseases.   Id. 

Continue Reading No False Claims Act Case Where There is No False Claim – DNJ Throws Out Qui Tam Action Against Genentech

This post is from the non-Reed Smith side of the blog.

Modglin v. DJO Global Inc., 2015 U.S. Dist. LEXIS 60812 (C.D. Cal. May 8, 2015) is one of those cases that has so much good stuff going on, we just want to dive right in.  It is the complete dismissal with prejudice of an attempt to state a False Claims Act (“FCA”) case against the manufacturers of Pre-Market Approved (“PMA”) bone-growth stimulators based on allegations that the manufacturers were aware their products were being used off-label – a fact they failed to disclose to Medicare and other federal healthcare plans when submitting claims for reimbursement.  We’ve got allegations of fraud, connected to off-label promotion, surrounding a PMA medical device and all tied up in a dismissal with prejudice.  It’s like package wrapped in shiny paper with a big red bow on top.  As pretty as the trappings are, we’re still going to rip them off to see what’s inside. And we don’t think you’ll be disappointed.

Relators’ specific allegations are that defendants requested reimbursement for stimulators approved for lumbar spine use when they knew that the stimulators were being used with the cervical spine – an off-label use – which they claim is not allowed.  Id. at *25.  So, what is allowed?  Under the Medicare Act, to be reimbursed, the device must be “reasonable and necessary” for diagnosis or treatment.  Id. at *13.  The Department of Health and Human Services (“HHS”) has decided that PMA devices generally can be reimbursed.  Id. at *15.  So far so good for stimulators.

Continue Reading California Federal Court Gets Tough on Off-Label Promotion FCA Claims