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Government Whistleblower Cases: Alleged Fraud and False Statement Was Not Included in Actual Claim

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

United States  ex rel. Helen Ge v. Takeda Pharmaceutical Co.

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")[1] 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that had Takeda not submitted false reports or made material omissions in its reports to the FDA, the FDA could have withdrawn approval for Actos or not recommended Actos as a safer alternative to a competing drug, which would have resulted in fewer or perhaps no claims made on federal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 claims;
  • 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 *16-20.

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.[2] 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 liability."  Id.

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 Whistleblowers

The 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.

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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 information or to schedule your confidential consultation, use the form on this page or call us at 1-800-424-6690.

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[1] See 21 C.F.R. §314.80(c)(1)(i).

[2] 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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