Ninth Circuit Affirms Broad Reach of Public Disclosure Bar

A recent decision by the U.S. Court of Appeals for the Ninth Circuit affirms the real challenges the public disclosure bar can pose to whistleblowers. In Amphastar Pharms. Inc. v. Aventis Pharma SA, No. 5:09-cv-00023-MJG-OP, 2017 WL 1947890 (C.D. Cal. May 11, 2017), the U.S. Court of Appeals for the Ninth Circuit affirmed a California federal judge’s dismissal of a False Claims Act suit by Amphastar Pharmaceuticals, Inc. (“Amphastar”) alleging the government overpaid for a blood thinner that was improperly patented, finding that the allegations were already public.

Aventis Pharma (“Aventis”) applied to the U.S. Patent and Trademark Office (“USPTO”) for the blood thinner enoxaparin in June 1991, and filed a New Drug Application (“NDA”) with the Food and Drug Administration (“FDA”) one month later. Initial versions of the NDA were rejected, but a 1993 revised NDA was accepted due to a French scientist’s declaration that data from Aventis’ studies demonstrated that enoxaparin was original and innovative. Amphastar subsequently pursued generic development of enoxaparin and filed an abbreviated NDA with the FDA. In subsequent patent litigation, Amphastar prevailed.

In 2009, Amphastar filed an FCA complaint against Aventis, alleging fraud against the USPTO which led to an illegal monopoly on enoxaparin and caused the federal healthcare programs to overpay for the drug. The complaint was unsealed in October 2011 after the government declined to intervene.

The three-judge panel affirmed the U.S. District Court’s dismissal of the case, holding Amphastar’s claims barred by the public disclosure bar on the basis that the FCA allegations are “nearly identical” to the counterclaims it made in the earlier patent infringement case. Amphastar contended that it previously made only general allegations of fraud, but said these past allegations “never mentioned any false claims submitted to or paid by the federal government and state governments.” The Court dispensed with that argument, holding an allegation does not need to include a direct reference to the FCA to trigger the public disclosure bar, nor does a disclosed allegation “need to contain every specific detail to constitute a disclosure.” Amphastar’s counterclaims in the patent infringement case accused Aventis of obtaining an invalid patent due to misrepresentations, and further claimed that, despite knowledge of these misrepresentations, Aventis maintained a monopoly. The only new allegation Amphastar made in the FCA suit was that the monopoly was illegal, which the Ninth Circuit held is an “obvious inference” based on its prior allegations. Thus, the FCA allegations were so “substantially similar” to the prior allegations that the public disclosure bar applied. Amphastar also argued that, even if its earlier allegations triggered the public disclosure bar, it qualified as an original source because it had direct and independent knowledge of the facts alleged in the underlying counterclaim. The Court rejected that argument as well, finding the Company’s testimony regarding its “knowledge” was not credible.

This case provides further support for the view that prior disclosures need not explicitly mention federal or state false claims, or overlap precisely with public statements, to trigger the FCA’s public disclosure bar.