Court Rejects “Tenuous” Connection Between FDCA Regulatory Violations and Claims for Payment

Recently, a district court in the Southern District of Florida dismissed with prejudice a qui tam complaint premised on the alleged sale of products adulterated and misbranded under the Food Drug and Cosmetic Act (“FDCA”). United States ex rel. Crocano v. Trividia Health Inc., No. 22-CV-60160-RAR (S.D. Fla. July 18, 2022).  In so doing, the court declined to embrace the arguments asserted in a Statement of Interest filed by DOJ and reiterated that “the False Claims Act is not the proper avenue for holding [companies] accountable” for violations of the FDCA, because “the FDA’s use of its regulatory enforcement  powers may be exercised fully to ensure further compliance.”

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DOJ Defends Viability of Fraud-on-the-FDA Theory in Statement of Interest

Over the past decade, relators have attempted to expand the long-established “fraudulent inducement” theory of liability into a novel “fraud-on-the-FDA” theory. The fraudulent inducement theory posits that when a defendant’s fraudulent conduct induces a government entity to enter into a contract with the defendant, the claims for payment submitted under that contract are false. However, the fraud-on-the-FDA theory stretches this causal chain by contending that fraudulent conduct directed at FDA can render false the claims for payment submitted to an entirely different government entity, such as CMS.  Courts have been divided as to the viability of this theory (as we have discussed here and here). (more…)

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Ninth Circuit Revives FCA Claim Based on “Fraud on the FDA”

The Ninth Circuit recently revived a claim in a qui tam lawsuit against a medical device manufacturer based on a “fraud on the FDA” theory of liability under the False Claims Act.  See United States ex rel. The Dan Abrams Co. LLC v. Medtronic PLC et al., No. 19-56377 (9th Cir. April 2, 2021).

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Ninth Circuit Affirms Viability of FCA Liability for Misrepresentations to FDA

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…)

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Applying Escobar, Court Rejects Comparative Effectiveness and “Fraud on the Formulary” Claims

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…)

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Third Circuit Provides New Guidance on Escobar’s Materiality Requirement in Healthcare Cases

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…)

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Ninth Circuit Urged to Reverse District Court Dismissal of “Fraud on the FDA” Claims

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.

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First Circuit Reins In Fraud-on-the-FDA Theory

In a recent opinion, the First Circuit significantly constrained the scope of the fraud-on-the-FDA theory of liability, which posits that had the FDA known of the defendant’s alleged violation of the Food, Drug, and Cosmetic Act (“FDCA”), it would not have approved the defendant’s product, such that no claims for that product would have been covered by federal healthcare programs.  See United States ex rel. D’Agostino v. ev3, Inc., No. 16-1126 (1st Cir. Dec. 23, 2016).  The court imposed a rigorous causation standard on fraud-on-the-FDA claims, requiring relators to show that FDA took “official action” after discovering that a manufacturer had submitted fraudulent information to the agency.  This standard mirrors the new materiality standard set forth by the Supreme Court in Escobar, in that both require relators to ground their allegations in how the government reacted to learning of the alleged fraud.

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Government Amicus Brief Urges First Circuit to Uphold Viability of Fraud-on-the-FDA Theory

DOJ recently filed an amicus brief urging the First Circuit to revive a suit premised on the contention that an agency would have acted differently had it known of defendant’s fraud.  See Brief for the United States as Amicus Curiae Supporting Neither Party, United States ex rel. D’Agostino v. ev3, Inc., No. 16-1126 (1st Cir. 2016).  The government warns the First Circuit that adopting the district court’s reasoning in dismissing a “fraud-on-the-FDA” theory of liability would have wide-ranging consequences and “categorically foreclose claims that involve federal agency oversight of a defendant’s conduct.”  Although courts generally agree that mere regulatory violations, standing alone, cannot serve as the predicate for FCA liability, relators often try to leverage so-called “fraud-in-the-inducement” theories (discussed further here) to repackage regulatory violations into ostensibly valid FCA claims.  DOJ has so far suffered losses when advocating for a similar theory of liability in the context of FCA claims based on violations of current Good Manufacturing Practices (“cGMP”) (as discussed here and here), and DOJ’s latest effort to protect FCA liability where it touches on FDA’s discretionary decisions could have broad impact on cases alleging fraud within the context of agency enforcement.  In addition, the effort by DOJ here to recast off-label promotion as a “fraud-on-the-FDA” also appears part of an evolving effort to maintain the viability of off-label claims in the face of growing judicial refusal to sanction off-label promotion as the predicate for FCA liability.

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District Court Refuses to Certify “Fraud on the FDA” Claims for Interlocutory Appeal

A judge in the Western District of Texas recently departed from a magistrate judge’s recommendation, ruling that the novelty of the relator’s FCA claims – which are based on allegations that the defendant medical device manufacturer committed “fraud on the FDA” by seeking clearance for its stent devices based on substantial equivalence with a predicate device, when the defendant allegedly had no intention of marketing its device for the predicate device’s use – could not overcome the failure to otherwise meet all of the requisite criteria for interlocutory appeal.  See United States ex rel. Sullivan v. Atrium Med. Corp., No. SA-13-CA-244-OLG (W.D. Tex. Oct. 1, 2015).  This suit involves a continued, but as yet unsuccessful, effort to expand the potential basis for FCA liability to fraudulent conduct directed to one government agency separate from the payor agency.

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