A recent decision from the District of Minnesota denied the government’s appeal of a federal magistrate judge’s order requiring that, as part of discovery, the government detail specific false claims and turn over notes and reports of witness interviews. The underlying case is a qui tam alleging that Precisions Lens and its founder provided kickbacks to physicians to induce the use of its eye surgery products.
In a March 8, 2017 ruling, the Ninth Circuit deepened a circuit split, holding that Dodd-Frank’s whistleblower protections extend to employees who raise concerns internally, and not merely to those who raise concerns to the U.S. Securities and Exchange Commission.
Almost four years after the passage of the Dodd-Frank Act, two recent developments suggest that clarifications regarding the whistleblower anti-retaliation provisions may be around the corner.
First, an upcoming case may shed light on whether a plaintiff must report alleged violations to the Securities and Exchange Commission (SEC) in order to be protected by the Dodd-Frank anti-retaliation provisions. On July 17, 2014, District Judge John M. Gerrard granted a motion to certify the question on interlocutory appeal to the Eight Circuit. Bussing v. Legent Clearing LLC et al., No: 8:12-cv-00238 (D. Neb).
The case arose after Julie Bussing, a former executive vice president for Legent Clearing LLC (now COR Clearing), alleged that she was fired after she responded to a FINRA document request by disclosing violations of the Bank Secrecy Act and anti-money laundering laws over the objection of her bosses.
In May 2014, Judge Gerrard held that the plaintiff was a “whistleblower” entitled to protection under the anti-retaliation provisions set forth in Dodd-Frank, finding that reporting the alleged violations to management within the company and to an independent regulator were sufficient to meet the whistleblower requirements, even though she had not reported the violations to the SEC. Specifically, the judge stated that Congress created the anti-retaliation section “with the aim of protecting a very broad range of disclosures, including many to persons or entities other than the SEC.” Disclosures required or protected under “any other law, rule, or regulation subject to the jurisdiction of the Commission” entitled a whistleblower to protection from retaliation. Although Bussing would be protected under the anti-retaliation provisions of Dodd-Frank, the judge held that she did not, however, meet the “whistleblower” requirements of the “bounty provision” of Dodd-Frank, which require reporting to the SEC.
While other lower courts are split on the issue, the only federal appeals court that has weighed-in, to date, is the Fifth Circuit, in Asadi v. GE Energy (USA) LLC, 720 F.3d 620 (5th Cir. 2013), holding that the retaliation protections under Dodd-Frank were only available to whistleblowers that report to the SEC. There is also a case currently pending at the Second Circuit on this issue. Liu Meng-Lin v. Siemens AG, No. 13-4385.
Second, the day following Judge Gerrard’s order, on July 18, a joint petition for rulemaking and issuance of a policy statement was submitted to the SEC by a former SEC official and the Government Accountability Project, an advocacy group supporting whistleblowers. The joint petition urges the SEC to increase and clarify the anti-retaliation protections for whistleblowers.
Specifically, the joint petition seeks clarification that whistleblowers are eligible for protection from retaliation when they make disclosures within their companies (and not to the SEC) and that private confidentiality agreements designed to prevent employees from reporting violations to the SEC or waiving their rights to receive monetary awards are illegal.
Posted by Kristin Koehler, Lauren Roth and Elizabeth Kolbe
On March 5, 2013, Par Pharmaceuticals (“Par”) became the latest pharmaceutical company to settle allegations of off-label promotion. Specifically, Par resolved criminal misbranding allegations by pleading guilty to a one-count misdemeanor violation of the Federal Food, Drug, and Cosmetic Act. The company also settled related civil allegations that its conduct violated the False Claims Act. In total, the company agreed to pay $45 million in criminal fines, forfeiture, and civil penalties.
The government alleged that Par promoted the use of Megace ES—an appetite stimulant approved for the treatment of patients with significant weight loss as a result of AIDS—for non-AIDS-related geriatric wasting. The government’s alleged evidence of misbranding included actions such as: (i) setting sales goals that exceeded the current sales trends for on-label use, (ii) creating call plans that included long-term care facilities and practitioners who treated geriatric patients, and (iii) adopting a strategy to convert physicians to Megace ES without regard for whether the physicians had been prescribing the competitor product for on- or off-label purposes. As part of this effort, Par’s marketing allegedly failed to acknowledge risks unique to elderly patients and made inaccurate or misleading comparative effectiveness claims between Megace ES and the competitor product, such as suggesting that practitioners “upgrade” their patients to Megace ES and falsely claiming that Megace ES worked faster than the competitor product.
As part of the global resolution of these claims, Par executed a Corporate Integrity Agreement (“CIA”) with the Office of the Inspector General of the Department of Health and Human Services (“OIG”) and the company accepted compliance-related obligations in its plea agreement with the Department of Justice. Among notable aspects of its CIA, Par must adopt restrictions on how incentive compensation is calculated for Megace ES sales professionals and it must institute a clawback mechanism for compensation previously paid to senior executives—two provisions that first appeared in the GlaxoSmithKline CIA (June 2012), but have not been required by OIG since then. Pharmaceutical executives, compliance professionals, and industry advisors had been waiting to see whether these requirements would be unique to GSK (which, to-date, remains the largest single settlement in history), or whether OIG would seek to impose them under other circumstances as well. Interestingly, although intervening settlements with Boehringer Ingelheim (October 2012) and Amgen Inc. (December 2012) were resolved for far higher dollar amounts than Par’s case, related CIAs had not included the incentive compensation provisions. Thus, going-forward, although it is now clear that OIG will seek to extend these provisions to other companies, predicting when it will do so remains a challenge.
The Par settlement concludes three qui tam suits filed in the District of New Jersey: U.S. ex rel. McKeen and Combs v. Par Pharmaceutical, et al., U.S. ex rel. Thompson v. Par Pharmaceutical, et al., and U.S. ex rel. Elliott & Lundstrom v. Bristol-Myers Squibb, Par Pharmaceutical, et al.