Feds Say Whistleblower Cases Can Be Pursued
Even Where the United States Could Pursue Relief Through an
Administrative Avenue or Where the Alleged False Statement Was Not
Included in the Actual Claim for Government Funds
States ex rel. Helen Ge v. Takeda Pharmaceutical
In a little-noticed and curiously-denominated filing last month,
the United States Department of Justice articulated several very
significant points of law under the federal False Claims Act.
The case is United States ex rel. Helen Ge v. Takeda
Pharmaceutical Co., Nos. 13-1088, 13-1089, pending in the United
States Court of Appeals for the First Circuit. The relator
was a former medical reviewer in Takeda's pharmacovigilance
division. Relator alleged that Takeda Pharmaceutical's
failure to comply with the Food and Drug Administration's
regulations requiring the reporting of adverse events ("AE's")
for its oral antidiabetic drug, Actos, led to the submission
of numerous false claims for reimbursement. The theory of
liability advanced under the
False Claims Act was that had Takeda not submitted false
reports or made material omissions in its reports to the FDA, the
FDA could have withdrawn approval for Actos or not recommended
Actos as a safer alternative to a competing drug, which would have
resulted in fewer or perhaps no claims made on federal healthcare
programs for Actos. In her second False Claims Act case
against the same company and disposed of by the district court in
one combined opinion, relator made similar claims of false AE
reporting concerning additional Takeda drugs. The complaints
alleged that Takeda "intentionally misrepresented and altered the
descriptions of adverse events in reports, and intentionally
misclassified adverse events as "non-serious" or as "labeled"
drug-drug interactions, to avoid filing expedited 15-day adverse
event reports.... With respect to Actos, Takeda intentionally did
not report hundreds of non-hospitalized or non-fatal congestive
heart failure cases as "serious" adverse events." United States v.
Takeda Pharm. Co., 2012 U.S. Dist. LEXIS 156752 at *6 (D. Mass.
Nov. 1, 2012).
The district court granted Takeda's motion to dismiss, holding
that the relator:
- a) had not satisfied Rule 9(b)'s specificity requirements
in terms of identifying details of any specific false
- b) had not sufficiently alleged that the FDA would have
withdrawn approval for the various Actos drugs; and
- c) did not state an actionable claim that Takeda had
misrepresented compliance with a material precondition of payment
for the Actos drugs because the violation of AE reporting
requirements was not a precondition of payment. Id. at
In conjunction with the ruling about the material preconditions
of payment, the court stated that the FDA has alternative
administrative regulatory responses, and thus the relator's proper
course of action would have been to file a citizen's petition
before the FDA seeking action against Takeda. Id. at *19.
After relator's motion for reconsideration was denied,
appeals were filed with the First Circuit.
In a filing encaptioned Brief for the United States of
America as Amicus Curaie in Support of Neither Party (hereafter,
"Amicus Brief"), the Department of Justice took issue with a number
of the district court's positions, claiming that the district
court's opinion would unduly limit the reach and effectiveness of
the False Claims Act. In forceful language strongly supportive
of the legal theories underpinning the two relator cases, DOJ
stated the "where a defendant misrepresents its compliance with a
legal requirement that authorizes the government to deny payment,
that statement is material, even if the government had the
discretion to consider other enforcement alternatives other than
withholding payment." Amicus Brief at 10. From this,
the government argued that the district court was mistaken in
its determination that the existence of alternative mechanisms for
uncovering or remedying fraud has any bearing on the existence of
parallel False Claims Act liability. Id. Plainly
stated, "the existence of alternative administrative remedies or
mechanisms to report fraud does not affect, let alone preclude, the
availability of False Claims Act liability, and to the extent the
district court concluded otherwise, it erred." Id. at
15. In support of its argument, the government cited
Congress' passage of the Program Fraud Civil Remedies Act, 31
U.S.C. XXX 3802(a)(1), at practically the same time as
its expansive amendment of the FCA in 1986 and the recent opinion
of the Eighth Circuit in United States ex rel. Onnen v. Sioux
Falls Indep. Sch. Dist. No. 49-5, 688 F.3d 410 (8th Cir.
2012), expressly holding that even a "complex regime of regulatory
sanctions" would not preclude civil enforcement through the FCA
since Congress "intended to allow the government to choose among a
variety of remedies, both statutory and administrative, to combat
fraud." Id. at 415.
In a second point of great significance for FCA
enforcement, the government urged the First Circuit to
reject the district court's implicit holding that compliance with a
specific regulatory provision must be an express precondition of
payment in order for a claim for payment to be actionable under the
FCA. Amicus Brief at 12. Drawing on several lines of interpretation
about the reach of the FCA and the recent statutory clarification
that a statement is material if "it has a natural tendency to
influence or is capable of influencing" the government's payment
decision, see 31 U.S.C. XXXXX 3729(b)(4), DOJ contends that a
"false statement that is integral to a causal chain leading to
payment may prompt FCA liability, even where that statement [or
omission] is not included in the actual claim for government
funds." Amicus Brief at 12 (citations and quotations omitted).
Finally, the United States argued that an allegation of
non-compliance with a legal requirement that allows the
government to deny payment can constitute a material
misrepresentation triggering FCA liability even where the
government entity in question might not have chosen to actually
deny payment. Id. at 14. Just as an agency might decide
to continue funding even after learning of a material falsity,
without precluding later redress under the False Claims Act, the
key question is not whether the agency in fact denied payment or
whether it was required to deny payment, but simply whether the
agency "was permitted to deny payment." Id. at 15. In
that situation, where the agency would be permitted to deny payment
in connection with the violation of a regulatory requirement, "then
the defendant's false statement had a natural tendency to affect
the government's payment decision and may serve as a basis for FCA
This case will be worth watching as it progresses through the
appellate process. The First Circuit has plainly stated its
frustration with -- and rejection of -- some of the artificial
constructs that have permeated False Claims Act jurisprudence over
the last decade. See United States ex rel. Hutcheson v.
Blackstone Med., Inc., 647 F.3d 377, 385 (1st Cir. Mass.
2011)(rejecting the classification of claims as "factually false"
or "legally false" claims, or "express certification" or
"implied certification," none of which terms appear in the
text of the False Claims Act). It will be interesting to see
how the district court's narrow construction of the FCA in these
two cases fares under review by the First Circuit, especially in
light of the strong positions advanced by the United States in
opposition to the district court's rulings.
The False Claims Act Provides Awards To Successful
False Claims Act provides for an award to a qui tam plaintiff in
the event the government settles a qui tam suit. If the
Government settles a qui tam action brought by a whistleblower
notifying the government of fraud, the whistleblower (often called
a "relator") is entitled to "receive at least 15 percent but not
more than 25 percent of the proceeds of the action or settlement of
the claim, depending upon the extent to which the person
substantially contributed to the prosecution of the action."
31 U.S.C. § 3730(d)(1).
Read more about Life of a Whistleblower Qui Tam Lawsuit and Why You
Want the Government to Intervene.
If you have discovered evidence of government fraud,
contact an experienced False Claims Act attorney before blowing the
whistle. You may be entitled to a substantial reward and the legal
protections afforded to whistleblowers under state and federal
laws. The attorneys of Berger & Montague are nationally
recognized experts in Whistleblower/Qui Tam actions with over a
decade of experience pursuing these complex fraud cases. For more
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Have you witnessed fraud against the government? - I need a
 See 21 C.F.R. §314.80(c)(1)(i).
 In fairly typical fashion, DOJ did not take any
position on the district court's "fact-bound dismissal" of the
relator's complaints. Amicus Brief, at p 2.
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