Fourth Circuit Establishes Rigorous 9(b) Standard For Conduct That Merely “Could” Have Led To Submission of False Claims

Posted by Douglas Axel and Tom Joksimovic

On January 11, 2013, the Fourth Circuit Court of Appeals, reaffirming its adherence “firmly to the strictures of Rule 9(b) in applying its terms to cases brought under the [False Claims] Act,” upheld the district court’s dismissal with prejudice of a qui tam false claims action against a pharmaceutical company. See U.S. ex rel. Nathan v. Takeda Pharmaceuticals North America, Inc., No. 11-2077, slip op., (4th Cir. Jan. 11, 2013).

The relator alleged that the company violated the False Claims Act (FCA) by causing the off-label use of its drug by: (1) promoting the drug to rheumatologists, who typically do not treat the conditions for which the drug had been approved; and (2) distributing samples only containing 60 mg of the drug – double the dose for the most common condition for which it had been approved.

These allegations, the Court held, fell short of the pleading standard under Rule (9)(b). The Court rejected the relator’s argument that alleging a fraudulent scheme obviates the need to allege a specific false claim to satisfy Rule (9) (b). Instead, because FCA liability attaches only to a specific claim actually presented to the government for payment, the court held that “Rule 9(b) requires that ‘some indicia of reliability’ must be provided in the complaint to support the allegation that an actual false claim was presented to the government.”

The Court recognized that this requirement may act as a barrier to a relator without independent access to certain medical records, and it held that Rule 9(b) could be satisfied when “specific allegations of the defendant’s fraudulent conduct necessarily [lead] to the plausible inference that false claims were presented to the government.” (Emphasis added). However, “when a defendant’s actions, as alleged and as reasonably inferred from the allegations, could have led, but need not necessarily have led, to the submission of false claims, a relator must allege with particularity that specific false claims actually were presented to the government for payment.” In this case, the Court found that the relator’s fraud allegations did not involve “an integrated scheme in which presentment of a claim for payment was a necessary result.”

Nathan is another in a line of cases strictly applying Rule 9(b)’s heightened pleading requirements in a False Claims Act case.