Is Anyone Safe From an FCA Whistleblower Suit?

By John R. Fleder –

Lawyers are often asked if a client can be sued if the client does something.  Almost without exception, the answer is yes.  It does not take much for a person to file a lawsuit in court without much or any evidence, and without a viable legal theory.  As shown below, a lawsuit filed in court hardly translates in many instances to a viable cause of action.   Nevertheless, these suits are being filed in great numbers.

These days, enforcement of the FDC Act in court stems largely from civil cases filed under seal under the federal False Claims Act, 31 U.S.C. § 3029 et. seq. (“FCA”).  The cases are typically brought by one or more individuals who previously worked for the defendant or defendants and are generally referred to as whistleblowers.  In the FDA arena, more often than not, the cases are filed against a drug or medical device manufacturer.  However, we have also seen FCA suits filed against individuals, state and local governments, and even FDA consultants.

We have previously discussed (see, e.g., here, here, here, and here) other cases where plaintiffs have filed FCA cases against companies regulated by FDA, using a theory that purported regulatory violations, such as those relating to good manufacturing practices, could form a legal basis for an FCA case.  Just last week a judge in California issued a thorough and well-written decision that may put to rest plaintiffs’ efforts to use FDC Act matters to support an FCA case.

In U.S. ex rel. Campie v. Gilead Sciences, Inc., No. 11-0941 (N.D. Cal. Jan. 7, 2015) a judge dismissed an FCA case.  Plaintiffs had alleged that Gilead and others had violated FDA cGMP regulations, and thus were liable under the FCA.  The court methodically went through each of plaintiffs’ theories and rejected all of them.  These theories included: (1) using an unregistered manufacturing facility; (2) distributing adulterated drugs; (3) making false statements in NDAs, in that impurities in the drugs were not identified in the NDAs; (4) submitting false certificates of analysis that an API was in compliance with cGMPs; and (5) using adulterated drugs in clinical trial products.

The court ruled that plaintiffs had failed to state a claim for relief under the FCA.  In particular, the court concluded that plaintiffs had failed to allege that defendants had engaged in any fraudulent conduct or made any false statement to CMS (Centers for Medicare and Medicaid Services).

Instead, plaintiffs had alleged that defendants falsely certified to FDA that they would comply with FDA’s cGMP regulations, and withheld information in various submissions to FDA.  However, the court’s thorough analysis of this issue resulted in yet another court ruling that alleged false certificates, statements and other allegedly fraudulent conduct directed at FDA during the approval process does not state a valid FCA cause of action, even though there are subsequent reimbursement requests made to CMS.

The court also said that even when companies make a purported false certification to a regulatory agency such as FDA, asserting that the company is in compliance with provisions of the FDC Act, that certification cannot in and of itself serve as a basis for an FCA cause of action.  Rather there must be a direct link between the alleged false statement and the resulting request for payment, namely that the payment must be conditioned on the falsity.  Here, the court concluded that reimbursement by CMS was conditioned only on the drugs having been approved by FDA, not whether Defendants were in compliance with FDA rules.

In a discussion that is relevant to many types of cases in suits filed against drug and medical device companies, the court also noted the difficulty of second guessing FDA’s decision to approve a drug.  The court refused to delve into what it called “the complexities, subtleties and variabilities of the FDA approval process,” because the court would have had to determine whether a falsity submitted to FDA would have caused the agency to make a different approval decision than the agency made.  “Violations of for example cGMPs would seem better addressed by the FDA regulatory process than by the blunt tool of FCA litigation.”

The answer to the question “can I be sued” is thus all too often yes.  The answer to “can I be sued for doing xxx” is also too often yes.  The better question to ask is “if I am sued for xxx, what is the likelihood that the suit will be successful?”  This court ruling should give comfort to many FDA-regulated companies that although they will continue to face a serious threat of so-called whistleblower suits under the FCA, the cases may well not make their way past a Motion to Dismiss.