This post is a joint effort by Melissa Wojtylak and Bexis, both of Reed Smith. Bexis came up with the idea. Melissa did the real work. Then Bexis edited it.The blog has discussed significant rulings in FalseClaims Act (“FCA”) qui tam cases in the past – including the recent past. Since we’re mostly product liability lawyers,the qui tam cases that we’ve coveredtypically involved claims of off-label use of drugs or medical devices. Today, though, we’re reporting on a ruling ina qui tam case involving alleged fraudon the FDA - specifically, purported failure to report adverse drug events(“ADEs”) to the agency.
Fraud on the FDA? Isn’t that preempted, you ask? Well … not in the FCA context, since that’s a federal claim, not a statelaw claim. Preemption only applies tostate-law claims. And that’s the chiefreason why this case – which throws out the would-be fraud-on-the-FDA claim asa matter of law − is important.
The ruling comes from the District of Massachusetts– a jurisdiction that, in the context of quitam actions, the blog has previously recognized as one whose popular nicknamewe’re no longer allowed to use, but that if we were in elementary school, wemight spell by including a reference to double hockey sticks. (Remember hockey?) However, not in U.S. ex rel. Ge v. Takeda Pharmaceutical Co. Ltd., 2012 U.S. Dist.Lexis 156752 (D. Mass. Nov. 1, 2012). Rather,in Ge, the court dismissed two qui tam complaints brought by the samerelator, holding that the complaints were deficient under both Rule 12(b)(6)and Rule 9(b).
So, what happened? The relator worked for one of the defendants for about 16 months. She alleged that the defendant either didn’treport ADEs at all, or fraudulently misclassified them as non-serious. To make a case under the FCA (and similarlaws in 23 states), the relator claimed that this mis/non-reporting resulted infalse claims being made to various government programs, including Medicare andMedicaid.
How so? Her theorywas classic fraud on the FDA: if these ADEshad been reported (or reported properly), the FDA either: (1) might not haveapproved the drugs at all, or (2) might have withdrawn approval, or (3) might haverequired label changes that in turn might have caused doctors to prescribe thedrugs less often, thus resulting in fewer government reimbursements. Sounds like a lot of “might haves,” which ofcourse immediately gets us thinking of Rule 12(b)(6).
But that first claim simply stumps us. It’s impossible for post-marketing ADEs tohave any effect at all on the initial FDA approval, since by definition “post-”means “after.” (Parenthetically, wewonder if this sort of obvious impossibility would support Rule 11 sanctions.)
Anyway, defendants moved to dismiss under Rule 12(b)(6)and Rule 9(b). We’re interested in the Rule9(b) decision, since that’s where the valuable principle of law is stated. The relator apparently didn’t want to do any heavylifting, so she argued that all reimbursement claims for thefour drugs were automatically “false” because of the alleged fraud on the FDA. The court didn’t buy it, noting that thisrequired the court to assume that FDA “would have withdrawn approval from allfour drugs immediately upon receiving the proper adverse reports.” 2012 U.S.Dist. Lexis 156752 at * 16. The courtalso criticized the relator for not explaining how the alleged reportingirregularities would have rendered “false” any claims that had been made beforethe supposed reporting failures. There’sthat pesky physical impossibility problem again.
Looking at the claims through the 12(b)(6) lens, thecourt noted that a qui tam relator hasto do two things to survive a motion to dismiss: (1) show that the claims misrepresentedcompliance with a material precondition of Medicaid payment, such that theywere false or fraudulent, and (2) show that the defendants knowingly caused thesubmission of the false or fraudulent claims. Peculiarly, the court held that the complaints had adequately allegedthat the defendants had knowingly caused the claims at issue to be submitted,and that the question was whether the claims were false or fraudulent – i.e.,misrepresented compliance with a “material” precondition of payment. 2012 U.S. Dist. Lexis 156752 at *17. We respectfully disagree with the court on givingthe relator that kind of a pass. Thereare some major missing links in the chain. Since the court already recognized that there’s no basis to assume theFDA would have imposed its most severe penalty (a persistent problem with allfraud-on-the-FDA claims) and taken any of the drugs off the market, then howcan we assume that proper reporting of ADEs would have changed every (or evenany) particular prescriber’s decision to prescribe? That’s the minimum needed to find “knowing”causation.
Nevertheless . . . .The court killed the complaints– and the fraud-on-the-FDA theory – anyway. There was (and could be) no allegation that the claims at issue werefalse because they misrepresented compliance with a material precondition ofpayment. First, the court rejected therelator’s argument that compliance with ADE reporting requirements was an “impliedcondition of continued FDA approval” of the four drugs, and that thereforeevery claim for reimbursement contained an implied representation that thedefendants had complied with these reporting requirements. 2012 U.S. Dist. Lexis 156752 at *18. Instead, the court held that even assuming theclaims did include such an implied representation (and the court didn’t soundparticularly convinced that they did), the relator was still required todemonstrate that compliance with the ADE reporting requirements was a materialprecondition to payment in for her claims to be viable. Id. However, “that is simply not the case.” Id. at *18-19. Then came the death blow. The FDA has discretion to decide whether andhow to punish violations of ADE reporting requirements, and is not required totake any particular action. Id. at *19. Thus, the court found, compliance with thereporting requirements could not be a material precondition to payment ofclaims, at least where the FDA had not acted. (The FDA rarely shares aplaintiff’s apocalyptic vision of fraud on the FDA.) Finally, the court notedthat if the relator was so badly aggrieved by the purported misreporting, she shouldhave petitioned the FDA. Id. Ouch. ThisFDA-discretion rationale (something we’ve discussed before, see here for example)precludes any and all fraud-on-the-FDA-based attempts to invoke the FCA. It’s not preemption, but it’s the samepractical rationale that the Supreme Court invoked in Buckman Co. v. Plaintiffs Legal Committee, 531 U.S. 341, 349 (2001)(recognizing the prosecutorial options available to the FDA).
Finally, the court dismissed the various state law claims,noting that many of the state statutes contain language identical to the FCA,and that because the relator lost under the federal statute, she failed tostate claims under the states’ laws, too. However, the court also noted that even if the sketchy information inthe complaints was sufficient to allege that any state considered compliancewith ADE reporting requirements to be a material precondition to payment,dismissal was still appropriate, given the lack of details on any claim forpayment made to any state. 2012 U.S.Dist. Lexis 156752 at *20-21. Practice note: Buckman preemption of fraud on the FDA claims should also defeat the parallel state law counts.
We like Ge. The fraud-on-the-FDA theory is just asantithetical to FDA regulation when packaged as an FCA claim as when it’s assertedunder state law. The fundamental flaw isthe same: plaintiffs should not be ableto ignore in-place and never-rescinded FDA regulatory decisions. The rank speculation that on some otherversion of the facts the FDA might have done something different (and extremelysevere) is the same.
We dug a little deeper and found out that Ge is one of at least threerecently-filed cases (all in the District of Massachusetts, of course) where arelator has tried to transmute alleged ADE reporting irregularities into FCAviolations using a fraud-on-the-FDA theory. The same attorneys have peddled the theory ineach instance. See U.S. v. Infomedics, Inc.,No. 08-11775-NMG; U.S. v. Angioscore,Inc., No. 09-12176-RGS. So far, they’vefailed.
In a ruling on the defendant’s motion to dismiss inthe Infomedics case (where thegovernment chose not to intervene) the relator claimed that if the defendant hadtold the FDA that it was not going to comply with its reporting obligations, thedrug in question would never have been approved in the first place, orsupplemental NDA’s would not have been approved. In short, the plaintiff both made up the“offense” (an “unsubstantiated” claim concerning “7,000 adverse reports”) andthen sued the defendant for not confessing to it. U.S. v.Infomedics, Inc., 847 F.Supp.2d 256 (D. Mass. 2012), The relator’s “alternative” argument, that ifthe defendant had timely reported the ADEs, some incredibly restrictive labelingchange would have resulted in fewer prescriptions being written, and therefore,fewer reimbursement claims also failed as a matter of law. The court noted the complete failure todescribe any particular adverse event report (a defect shared in all of thesecases) that was not made to FDA, and pointed out that this also meant there wasno information on how any particular report would have compelled the FDA torequire a labeling change. 847 F.Supp.2dat 265.
In Buckman,the Supreme Court held that fraud on the FDA claims inherently conflicted withthe FDA’s administration of its regulatory scheme because the FDA had lots ofprosecutorial options and had the discretion to pick the right one for the jobin any given case. 531 U.S. at 349. That’s an inherent flaw in all fraud on theFDA claims, no matter what the purported legal basis on which these allegationsrest. But, as Ge and numerous other cases have held, the FDA has completeprosecutorial discretion, and private plaintiffs have no right to enforce theFDCA, particularly when flying in the face of what the FDA has actually done,and is continuing to do. Thus, evenputting preemption aside, fraud-on-the-FDA claims are not viable under thestatutory scheme that the FDA administers. That’s true, as Gedemonstrates, even in the District of Massachusetts.
Let’s hope the trend continues of courts rejectinglegally bankrupt and factually bogus fraud on the FDA theories, no matter inwhat guise they are brought.
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