The Qui Tam Blog

By: Joel Androphy, Rachel Grier, and Stephanie Gutheinz 

In Rodriguez v. Our Lady of Lourdes Medical Center, the Third Circuit noted that it has declined to adopt either an express or implied false certification theory.  The court further held that even if it did adopt such a theory, FCA liability will not attach unless the relator shows that a defendant’s certification of compliance with applicable regulations is a condition of payment of federal funds.  Under the express false certification theory, a defendant is liable for falsely certifying its compliance with statutory or regulatory requirements in connection with the receipt of federal funds.  Under an implied certification theory, FCA liability can attach even when the defendant has not expressly certified that it complied with the regulations that it violated.  While declining to adopt either false certification theory, the Third Circuit noted that, under either false certification theory, it is still the relator’s burden to demonstrate that the defendant failed to comply with applicable regulations, and that the payment of federal funds was conditioned on compliance with those regulations.  In affirming the dismissal of the case, the court held that the relator did not satisfy this burden because the relator did not even suggest a connection between certification and condition of payment.

 By: Joel Androphy, Rachel Grier, and Stephanie Gutheinz         

A district court in the Southern District of Texas recently held that nothing in the text of the FCA or its legislative history prevents employment-related retaliation claims from being arbitrated under a valid and enforceable arbitration agreement.  Under the Federal Arbitration Act, a valid agreement to arbitrate certain disputes is valid and enforceable unless Congress has precluded arbitration of the statutory right at issue.  The relator argued that the FCA precludes arbitration of retaliation claims because arbitration of such claims would allow defendants to immunize themselves against relator-initiated claims of FCA violations, undermining the purpose of the FCA to protect whistleblowers.  The relator further argued that such arbitration proceedings could constitute public disclosures, thereby unfairly triggering the public disclosure bar.  The court reasoned, however, that relators can avoid this issue by filing their retaliation claims with or after the qui tam claims.  The case is United States ex rel. Cassaday v. KBR, Inc.

By: Joel Androphy, Rachel Grier, and Stephanie Gutheinz 

In order to be successful, a relator must establish that a fraudulent statement or record was material to the government’s decision to pay a false claim.  For claims reimbursed under a diagnosis related group (“DRG”) code system, only identifying line items on a patient’s bill may fall short of this materiality requirement.  Reimbursement under the DRG system provides a fixed payment based on the patient’s DRG, which is calculated based on the patient’s diagnosis and age.  In most circumstances, the DRG rate satisfies full payment for all services provided, including prescription drugs.  Thus, under the DRG system, individual prescriptions are immaterial to the amount the government pays for the treatment of a given patient because payment is based solely on the DRG rather than any individual charges on the patient’s bill.  As such, those line item charges cannot serve as the basis for FCA liability under these circumstances.  The case is United States ex rel. Kennedy v. Aventis Pharmaceuticals, Inc., a court in the Northern District of Illinois.

 By: Joel Androphy, Rachel Grier, and Scott Braden

Whistleblowers should be mindful that disclosures in foreign periodicals can be considered public if the periodicals are regularly read by an international community. In a recent opinion, a U.S. District Court decided that an article in a foreign scientific journal was a public disclosure, given the international nature of the scientific community. The court reasoned that the foreign publication of a scientific article does not make it “any less accessible to the American public than if it were published in a scientific journal located in the United States.  The court also clarified that not all foreign publications are public disclosures, such as an ordinary article in a Greek newspaper. In these instances, there is no public disclosure when an article is published in a different language in a foreign publication not regularly read by an international community. The case is USA ex rel. Radcliffe v. Purdue Pharma L.P., a court in the Western District of Virginia.

Federal False Claims Act and Qui Tam Actions
Law Journal Press Webinar
By: Joel M. Androphy, Sarah Frazier and Rachel Grier

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By: Joel Androphy, Rachel Grier, and Scott Braden

The Texas FCA does not contain an express limitations period on Medicaid fraud claims. However, under Texas law, if a cause of action does not contain an express limitations period, it is subject to a default four-year limitations period unless the cause of action is one that belongs to the state. The whistleblower argued that a qui tam lawsuit is a right of action belonging to the government and is therefore exempt from the four year limitations period. Relying on Fifth Circuit case law, the court held that if the state has not intervened, the right of action belongs to the whistleblower and is subject to the four year default statute of limitations. The case is United States ex rel. Foster v. Bristol-Myers Squibb Co., a court in the Eastern District of Texas, Lufkin.

By: Joel Androphy, Rachel Grier, and Scott Braden

Medicaid can only reimburse drugs that are used for a medically accepted indication, meaning an indication that is either approved by the FDA or supported by one of three drug compendia. In Rost, the whistleblower, a former Pfizer marketing executive, brought a qui tam suit alleging that Pfizer unlawfully promoted the off-label use of Genotropin (human growth hormone) for treatment of short stature in children. Pfizer argued that one of the compendia, DRUGDEX, cited Genotropin as “possibly effective” for short stature in children.  Citing to a recent statement by the Center for Medicaid and State Operations, the court pointed out that to be reimbursable, an off-label use must be supported by the compendia as opposed to merely listed.  It was unclear from the record whether being cited by DRUGDEX as “possibly effective” could be read to “support” an off-label use. 

The court stated that Pfizer’s stronger argument was that the off-label claims were not false because they were approved by Indiana Drug Utilization Review (“DUR”) Board.  For example, if a state knowingly reimburses for the off-label use of a drug “after a prior authorization review,” the government knowledge could “negate the intent requirement under the FCA.”  This argument, however, was trumped by the allegations (and potential proof) that the false qui tam claims were caused by unlawful kickbacks.

 By: Joel Androphy, Rachel Grier, and Scott Braden

In August 2006, Peter Rost, a former Pfizer marketing executive, was dealt a crushing blow by the U.S. District Court in Boston when it dismissed his ­qui tam action for failing to plead his fraud claims with specific particularity as required by Rule 9(b).  On appeal, the First Circuit agreed that Rost failed to plead specific enough details, but vacated the dismissal and remanded Rost’s claims because the district court never ruled on Rost’s motion to amend his complaint. Last month, Rost’s second trip to the district court proved to be much more successful when it concluded that the amended complaint satisfied the heightened pleading requirement.

Rost’s original complaint detailed the mechanics of an alleged fraudulent scheme that Pfizer implemented to market its drug Genotropin to physicians for off-label anti-aging and body improvement purposes, but it failed to specify any specific claims that were sent to Medicaid.  The amended complaint corrected these deficiencies by alleging over 200 false claims, each of which listed the Medicaid reimbursement codes, the medical diagnosis accompanying the claim, the dates of the diagnosis and the dispensation of the drugs, and the prescription dosage.  

A federal judge in Brooklyn rejected a pharmaceutical sales representative’s defense of commercial free speech in responding to charges of criminal misbranding.   The Court found that the prohibition of off-label promotion of drugs is essential to maintaining the integrity of the FDA’s drug approval process,  The government used informants in investigating the case.   The case is United States v. Caronia, a court in Brooklyn, the Eastern District of N.Y.

In a whistleblower case, a Magistrate Judge, following the law from the Eleventh Federal Circuit Court of Appeals, decided that in order for a whistleblower to properly plead a qui tam case, he must plead with particularity the actual submission of false or fraudulent claims to the government. In other words, it was not enough for the whistleblower to allege that there were illegal off-label marketing campaigns causing the submission of hundreds of thousands of false claims for prescriptions. The whistleblower was also required to include specific allegations of an actual false claim that was submitted to the government. The obvious inference was insufficient. The message from the 11th Circuit Court is simple. If you are going to prevail in our circuit, you must be prepared to have as clients or witnesses everyone in the chain of alleged misconduct, especially people in the billing department to prove that the time and effort devoted toward a scheme culminated in an actual billing. The message is clear.  Do not file off-label marketing cases in this federal circuit, or for that matter any other claims that require specific billing information.  The case is USA ex rel. Hopper v. Solvay Pharmaceuticals, a court in the Middle District of Florida (Tampa).