CMS has recently committed significant resources to advance the use of electronic health records (“EHR”) systems. One of the biggest initiatives is the “meaningful use” program, through which CMS offers incentive payments to healthcare providers who demonstrate and attest to using EHR systems that have certain qualities and satisfy specific objectives. (more…)
If the government “repeatedly concludes that it has not been defrauded,” could fraud have nonetheless occurred? The Fifth Circuit grappled with this question when reviewing an appeal from a $663 million jury verdict against Trinity Industries, a manufacturer of highway guardrails. See United States ex rel. Harman v. Trinity Indus., No. 15-41172 (5th Cir. Sept. 29, 2017). In finding the relator’s allegations of materiality wanting, the Fifth Circuit’s grant of judgment as a matter of law for Trinity Industries reiterated that the Supreme Court’s Escobar decision “heightened” the materiality standard to “adjust tensions between singular private interests and those of government and cabin the greed that fuels” False Claims Act litigation.
In Escobar, the Supreme Court upheld implied certification claims “at least where two conditions are satisfied,” namely specific misrepresentations and noncompliance with a material requirement. Some courts have interpreted this phrase as defining two necessary conditions to establish implied certification liability under the FCA. Other courts view the phrase as introducing one potential path to liability, where the first condition, specific misrepresentations, is not required. Citing what has emerged as a “majority view” among district courts in the Second Circuit that the two conditions are mandatory, the Southern District of New York recently deepened the divide. See United States ex rel. Forcier v. Computer Scis. Corp., No. 12-cv-1750 (S.D.N.Y. Aug. 10, 2017). (more…)
Both before and after the Supreme Court’s decision in Escobar, courts have hesitated to accept “fraud on the FDA” theories of liability, which posit that misrepresentations aimed at FDA render subsequent requests to government payors false. Breaking with a growing line of courts, the Ninth Circuit recently articulated a broad understanding of how noncompliance with FDA regulations can form the basis of FCA liability. See United States ex rel. Campie v. Gilead Sciences, Inc., No. 15-16380 (9th Cir. July 7, 2017). (more…)
The heightened materiality standard imposed by the Supreme Court last year in Escobar continues to pose a formidable bar to relators pursuing expansive theories of FCA liability. As we explain below, one court recently rejected a claim against pharmaceutical manufacturers alleging that the defendants had fraudulently induced state formulary committees to cover the defendants’ drug, refusing to take a “step toward bringing all misrepresentations to government bodies within the purview of the FCA.” See United States ex rel. Dickson v. Bristol-Myers Squibb Co., No. 13-cv-01039 (D.N.J. June 27, 2017). (more…)
Noncompliance with ambiguous regulations often presents a weak case for an FCA suit. A growing number of courts (as discussed here and here) have held that reasonable interpretations of regulations, absent contrary guidance from the government, reflect a mens rea inconsistent with the requisite “knowing” misconduct under the FCA. However, the Eleventh Circuit recently reached a contrary conclusion, holding that defendants who articulate reasonable interpretations of ambiguous regulations can nonetheless be liable under the FCA. See United States ex rel. Phalp v. Lincare Holdings, Inc., No. 16-10532 (May 26, 2017). (more…)
In the wake of the Yates memo eighteen months ago, DOJ offered an early signal that its commitment to focus more on individual accountability would have bite: alongside a $125 million settlement with Warner Chilcott, DOJ also indicted the former president of the company’s pharmaceutical division for conspiring to violate the Anti-Kickback Statute (discussed here). Since then, the government suffered a speedy loss at his trial, and DOJ’s focus on individuals has not always been so overt. However, two recent settlements highlight the imprint of the Yates memo, and in particular, a new trend of DOJ holding owners of closely held companies personally liable for FCA settlements.
In a recent opinion, the Third Circuit provided new guidance on the application of Escobar’s ”heightened” materiality standard to cases involving healthcare entities. The relator in United States ex rel. Petratos v. Genentech, No. 15-3805 (3d Cir. May 1, 2017) alleged that a pharmaceutical manufacturer ignored safety information about one of its drugs and potentially violated FDA’s adverse event reporting requirements. As a result, the relator contended, physicians submitted Medicare claims for prescriptions that were not “reasonable and necessary.” The Third Circuit concluded that the relator did not meet the “high standard” for pleading materiality post-Escobar because he failed to plead that CMS, the federal agency to which Medicare claims for the drug were submitted, consistently refuses to pay claims like those alleged (and indeed “essentially concedes that CMS would consistently reimburse these claims with full knowledge of the purported noncompliance”). Moreover, the court noted, not only had FDA not taken any enforcement action, but it had actually approved multiple new indications for the drug at issue. The court also observed that DOJ “has taken no action against Genentech and declined to intervene in this suit.” (more…)
Courts have focused their attention post-Escobar primarily on whether plaintiffs have met the heightened standard for pleading the violation of a material statute, regulation, or contractual requirement. Under the implied certification theory claims must also still be false, yet the Supreme Court in Escobar provided less guidance as to the contours of falsity. The Fourth Circuit recently advanced a broad definition that permits plaintiffs to avoid pointing to any specific misrepresentations. See United States ex rel. Badr v. Triple Canopy, Inc., No. 13-2190 (4th Cir. May 16, 2017).
In a variety of matters, DOJ and relators have attempted to base claims under the FCA on alleged violations of the FDCA or FDA regulations, by arguing that such violations constitute “fraud on the FDA,” and that the resulting claims for payment to other agencies for associated products are false. As we have discussed (here, here, and here), so far plaintiffs have had little success with this theory, including in the First and Fourth Circuit Courts of Appeal. Last week, a panel of the Ninth Circuit heard oral arguments in United States ex rel. Campie v. Gilead Sciences, Inc., and the government and the plaintiff’s bar no doubt have pinned their hopes on that court reversing the trend.