First Circuit Skirts the Issue of the Scope of the False Claims Act Regarding FDC Act Violations

By John R. Fleder –

On August 8, 2013, we reported on a brief filed by the Department of Justice in United States ex rel. Ge v. Takeda Pharmaceutical Company Limited.  The case involves the defendants’ alleged failure to timely report to FDA adverse drug events associated with certain drugs.

The government’s brief asserted that the court below had erred in relying on FDA’s Citizen Petition procedures as an “alternative administrative mechanism” that bars FCA actions.  The brief also argued that failure to report adverse events to FDA can theoretically form the basis for FCA liability.  The brief stated that pharmaceutical companies must report adverse events associated with their drugs to FDA.  The government indicated that FDA approval is relevant to whether the government can reimburse for drugs under some government programs.  The relator claimed that all of the claims for reimbursement submitted with regard to Takeda’s drugs were “false” because Takeda had not properly filed adverse events reports.  The government concluded that the circumstances where a failure to report an adverse event could form the basis for FCA liability are “rare.”  Indeed, the government stated that simply “alleging that a company failed to comply with FDA’s adverse event reporting requirements is insufficient to state an FCA claim.”  The government further argued that compliance with the FDCA’s adverse event reporting requirements “is not, in itself, a material precondition of payment under Medicare or Medicaid.”  In the government’s view, only when it is determined that the unreported adverse events “are so serious that the FDA would have withdrawn a drug’s approval for all indications had these events been properly reported” would the failure to report be material to the government’s payment decisions, and thus trigger a potential FCA action.

On December 6, 2013, the United States Court of Appeals for the First Circuit affirmed the lower court’s decision dismissing the case.  The Court of Appeals concluded that the Relator’s Complaint was legally deficient under Rule 9(b) of the Federal Rules of Civil Procedure because of the absence of evidence that the defendants’ alleged misconduct resulted in the submission of false claims or the making of false statements.   The Court also ruled that relator had not timely raised certain issues, such as the belated claim that the False Claims Act was violated under a FDC Act misbranding theory.

Unfortunately for those who were hoping for some clarity on the issue of the interplay between the False Claims Act and the FDC Act, the Court circumvented a ruling on that issue by affirming the dismissal on other grounds.  Indeed, the Court made reference to DOJ’s brief only in a short footnote that neither adopted no rejected the approach suggested by DOJ.  Thus, we will have to await another case to obtain clearer rulings from courts regarding the interplay between these two statutes.