False Claims Act

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People supplement a lot of things. You can supplement your diet with a multivitamin. You can supplement your income with a part-time side job. On the DDL Blog, we are always supplementing our scorecards and cheat sheets. Generally speaking, supplement is a pretty common word and has a fairly universally accepted definition. A supplement is an add-on. Something you do to make something more complete. Does the food you eat contain vitamins and minerals? Sure. But that multivitamin adds to it. It’s a boost.

In litigation too, we do a lot of supplementing. In fact, we are required to do so. Federal Rule 26(e) requires a party to supplement its discovery responses if it “learns that in some material respect the disclosure or response is incomplete or incorrect.” This duty to supplement extends to expert reports as well. Fed.R.Civ.P. 26(e)(2). But what does it mean to “supplement” an expert report? And when does supplementing to make a correction or completion go too far?

Plaintiffs got the answer to that question in U.S. ex. rel. Brown v. Celgene Corp., 2016 U.S. Dist. LEXIS 156826 (C.D. Cal. Aug. 23, 2016). Plaintiff-Relators brought a False Claims Act and Medicare Anti-Kickback Statute case against defendant alleging it illegally marketed Thalomid and Revlimid off-label and paid kick-backs to physicians for prescribing off-label. Id. at *6. The court set a deadline for the expert reports and relators timely served a report from their damages expert. Shortly thereafter, however, relators sought leave to supplement that expert report based on late produced Medicare data. Id. at *6-8. Relators wanted to time to analyze the data and supplement the report with that analysis. Relators also represented that while the supplement would be based on new data, the opinions were not expected to differ significantly. Id. at *8. The court granted the leave requested. Defendant was likewise given an opportunity to amend its expert reports in rebuttal and relators’ expert was deposed after his supplemental report was served. Id. at *11.Continue Reading Plaintiffs Learn Supplementing Isn’t a Second Bite at the Apple

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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

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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

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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

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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?

Photo of Rachel B. Weil

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

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Usually, when res judicata comes up in our cases, we are trying to fend it off. Luckily, non-mutual offensive res judicata is rarely recognized, so plaintiffs usually fail when trying to preclude the drug or device manufacturer from putting up a full defense based on a prior ruling or verdict in a different case. Occasionally, in serial product liability litigation, we find a plaintiff trying to sue over the same injury twice, but that rarely requires motions, let alone motions based on res judicata. Today, however, we are discussing a Georgia state court case where a drug company’s settlement with Georgia and other governmental entities in a longstanding federal case precluded eight Georgians from suing the same company on behalf of Georgia. Were we to channel a fellow blogger, we might draw some parallel to “The Walking Dead,” which is filmed in Georgia and had been based in Georgia until season 5 (when the gang headed up to Virginia). We might say something about how related cases that pop up after an adjudication on the merits are like “walkers” and have to be disposed of accordingly. We might inject some spoilers by mentioning which main character got shot in the most recent episode and which main character is rumored to die in the next episode. We might even connect these events to an earlier failure to resolve an earlier dispute more definitively. Instead, we will just stick to the case.

Jordan v. State, No. A15A1733, 2016 Ga. App. LEXIS 176 (Ga. App. Mar. 23, 2016), does not have the drug manufacturer as a party to the appeal because it was the State of Georgia that filed and won the motion to dismiss below (although treated as a motion for summary judgment on appeal). This procedural quirk flows from the nature of qui tam litigation. In 2004, a relator named Starr filed a suit in the Eastern District of Pennsylvania against her former employer claiming that its marketing of a prescription anti-psychotic for off-label uses created liability under various statutes, including the federal False Claims Act for reimbursement by various governmental entities. (Some of this background is presented in Jordan, but some details are added from public information.) Over time, other relators filed similar cases, the United States intervened, and Starr’s complaint was amended to include claims under the later-enacted Georgia False Medicaid Claims Act (GFMCA) and various similar state statutes. In late 2013, there was a massive settlement of criminal and civil cases between the manufacturer, the United States, and a number of states—including Georgia—resulting in, among other things, payment of millions of dollars to Georgia and a dismissal with prejudice of the Starr case.Continue Reading Some Good Georgian Res Judicata

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Here is another guest post, one expressly not emanating from the Dechert side of the blog. Rather it is written by Reed Smith’s Elizabeth Graham Minerd.  As always with our guest posts, she is entitled to all the credit from her shared wisdom, as well as any blame.  So, without further ado:

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I recently had a partner ask me:  Will the court consider our client’s actions (not in any FDA safe harbor) to be off-label promotion—i.e., were their actions “promotional” in nature even though they were not advertising the product for off-label uses.  After extensive research, I returned to him more or less empty-handed.  I explained the arguments for and against our client’s actions being considered “promotion” of off-label uses, but I could not provide a definitive answer because there was simply no case law on point.
Over the last several years, there have been numerous cases discussing the legal ramifications of promoting drugs or medical devices for off-label uses from seemingly every angle. Indeed, this blog has a handy tag “Off-Label Use” that discusses many of these cases. But this basic question—what counts as off-label promotion?—has largely gone unanswered.  Recently, however, the Court in United States ex rel. King v. Solvay S.A., 2016 U.S. Dist. LEXIS 14804 (Feb. 8, 2016 S.D. Tex.), laid out a few examples of what is not off-label promotion.
Photo of Stephen McConnell

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

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