First Circuit Decision Signals Hurdles for Whistleblowers in Off-Label Promotion CasesNovember 19, 2007
We have seen a rash of cases brought by the government and private “whistleblowers” alleging that companies have violated the Federal False Claims Act (“FCA”) by promoting the sales of drugs and devices for “off-label” uses (i.e., uses that have not been approved by FDA). On November 15, 2007, the U.S. Court of Appeals for the First Circuit issued an opinion in United States v. Pfizer, Inc. that signals the hurdles that whistleblowers have to overcome to be successful in these cases.
Significantly, the court noted that “FCA liability does not attach to violations of federal law or regulations, such as marketing of drugs in violation of the [Federal Food, Drug, and Cosmetic Act], that are independent of any false claim.” The court concluded that even though the Relator had apparently alleged a fraudulent scheme (“Rost’s complaint amply describes illegal practices”), his complaint had to be dismissed. He failed to properly allege “that false claims were submitted for government payment in a way that satisfies the requirements of the Federal Rules of Civil Procedure that fraud be alleged with particularity.” The court’s opinion notes that “[i]n most, if not all, instances, patients taking Genotropin for anti-aging, cosmetic appearance, and athletic performance enhancement, paid for the Genotropin out-of-pocket without reimbursement from any public of private third-party payors.” However, the court also noted that it was not irrational to infer from the Complaint that at least some false claims were submitted to the government. Despite affirming the district’s court’s determination that the plaintiff’s complaint did not meet Federal Rule of Civil Procedure 9(b)’s heightened fraud specificity requirements, the First Circuit remanded the case to the district court to consider whether the plaintiff should be permitted to amend his complaint.
As the court noted, Pfizer resolved its issues relating to the promotion of GENOTROPIN (somatropin recombinant) with the federal government in April 2007 by paying $34.7 million. (Copies of the Department of Justice (“DOJ”) press releases are available here and here). In a series of agreements that had the earmarks of careful lawyering on both sides, one Pfizer subsidiary pled guilty to violation of the federal health care program antikickback law and paid a criminal fine, another Pfizer subsidiary entered into a deferred prosecution agreement relating to off-label promotion and paid a $15 million monetary penalty, and Pfizer, Inc. entered into a non-prosecution agreement. These agreements came nearly four years after Pfizer voluntarily disclosed these issues to the government and a year and one-half after DOJ declined to intervene in the Relator’s case.
Following the 9th, 10th, and 11th Circuits, the First Circuit also ruled that a voluntary disclosure to FDA, DOJ, and the Department of Health and Human Services Office of Inspector General does not constitute “public disclosure” under the FCA (31 U.S.C. § 3730(e)(4)(A)). The First Circuit’s decision follows the majority of circuits that have ruled on this issue. This ruling thus limits the protection from FCA whistleblower suits that companies can get from voluntary disclosures to the government.
By J.P. Ellison