Landmark False Claims Decision Shoots Down Whistleblowers

If a device manufacturer is accused of lying to the FDA about complying with their regulations and then asks Medicare for reimbursement, a whistleblower is likely to sue the manufacturer under the False Claims Act (FCA). If the whistleblower makes a good case, the government is likely to join in.

That’s been the basis of many lawsuits, including lawsuits against soon-to-be-Irish-based Medtronic plc and its Infuse product. In that case the whistleblowers say the company cooked the scientific evidence books by paying physicians to say things about the product that weren’t true, and then asking for reimbursement. Even a private insurer jumped on that bandwagon and sued the company. The company vehemently denies the accusations.

But according to John Fleder, writing on the FDA Law Blog on January 14, 2015, that could all change soon. On January 7, 2015, a judge in California issued a decision, that Fleder says, “May put to rest plaintiffs’ efforts to use the FDC (Food, Drug and Cosmetic) Act to support an FCA case.”

Campie v Gilead Sciences, Inc.

Here is what happened.

Whistleblowers (U.S. ex rel. Campie v Gilead Sciences, Inc., No. 11-0941) in the Northern District of California, alleged that Gilead had violated FDA cGMP regulations and were thus liable under the FCA for submitting claims to Medicare.

“The court methodically went through each of plaintiffs’ theories and rejected all of them. These theories included: (1) using an unregistered manufacturing facility; (2) distributing adulterated drugs; (3) making false statements in NDAs [new drug applications], in that impurities in the drugs were not identified in the NDAs; (4) submitting false certificates of analysis that an API was in compliance with cGMPs; and (5) using adulterated drugs in clinical trial products, ” wrote Fleder.

Where’s The False Claim?

Basically the court said that the whistleblowers failed to state a direct link to a false claim. It said there was no evidence that Gilead made any false statement to Centers for Medicare and Medicaid (CMS) for reimbursement. Yes, said the court, the whistleblowers claimed that Gilead lied to the FDA about complying with their regulations, but that does not state a valid False Claims cause of action.

Fleder wrote that the court also said that “even when companies make a purported false certification to a regulatory agency such as FDA, asserting that the company is in compliance with provisions of the FDC Act, that certification cannot in and of itself serve as a basis for an FCA cause of action. Rather there must be a direct link between the alleged false statement and the resulting request for payment [sic], namely that the payment must be conditioned on the falsity. Here, the court concluded that reimbursement by CMS was conditioned only on the drugs having been approved by FDA, not whether Defendants were in compliance with FDA rules.”

If the FDA blessed the product and you provide the product to a CMS beneficiary and ask for reimbursement, then there is no false claim. The government can still haul you into court for false statements, but not for false claims.

Second Guessing FDA Approvals

Fleder also wrote the court noted the difficulty of second guessing FDA’s decision to approve a drug. “The court refused to delve into what it called ‘the complexities, subtleties and variabilities of the FDA approval process, ‘ because the court would have had to determine whether a falsity submitted to FDA would have caused the agency to make a different approval decision than the agency made. ‘Violations of for example cGMPs would seem better addressed by the FDA regulatory process than by the blunt tool of FCA litigation.'”

This court ruling, wrote Fleder, “should give comfort to many FDA-regulated companies that although they will continue to face a serious threat of so-called whistleblower suits under the FCA, the cases may well not make their way past a Motion to Dismiss.”