The Ninth Circuit Court of Appeals in United States ex rel. Campie v. Gilead Sciences recently revived a whistleblower’s False Claims Act (FCA) case. The Court held that the whistleblowers plausibly alleged an FCA violation, finding that the alleged violations could be material to the government’s decision to pay for HIV drugs manufactured by the Defendant drug maker, Gilead Sciences. Even though the lower court had twice dismissed the whistleblower’s FCA complaint for failure to state a claim, the Ninth Circuit revived the whistleblower’s case by heavily relying on the U.S. Supreme Court’s landmark decision in Universal Health Servs. Inc. v. United States.
In Universal Health Servs. Inc., the U.S. Supreme Court held that the relators did not state a claim because the alleged fraud was directed at the U.S. Food and Drug Administration (FDA) rather than a payor agency – i.e., Medicare or Medicaid. Thus, in Campie, the district court judge dismissed the case on several grounds including that the fraud was directed at the FDA, not the payor agency, and that payment was not conditioned on compliance with FDA regulations. However, the Ninth Circuit in Campie found that it is not the distinction between regulatory and payor agencies that matters, “but rather the connection between the regulatory omissions and the claim for payment.” In Campie, the whistleblowers alleged that Gilead falsified information about its drug suppliers and concealed problems of adulteration in HIV drugs in order to gain FDA approval. The Ninth Circuit held that because the government only pays for drugs that are FDA approved, Gilead’s alleged misrepresentations to the FDA are what allowed the company to seek reimbursement from the payors.
The Ninth Circuit’s willingness to allow the FCA suit to advance and wade into the regulatory regime of the FDA could cause drug makers concern over potential FCA suits against them. The Ninth Circuit essentially allowed the case to go forward because in addition to submitting claims for payment, Gilead misrepresented its compliance with FDA regulations by omitting critical information regarding compliance with FDA standards. In doing so, the Ninth Circuit has opened the door for more Plaintiffs to attempt to transform FDA violations into FCA suits.
Gilead emphasized the decision’s “enormous potential implications for the pharmaceutical industry,” predicting that it “may open the floodgates to a host of False Claims Act cases in the Ninth Circuit based on pharmaceutical regulatory violations, even when the government and the Food and Drug Administration have declined to take any action.”
It remains to be seen what impact the Campie decision will have on the pharmaceutical industry as a whole, but there is little doubt the panel’s decision could have serious consequences for Gilead.
Lawyers at Beasley Allen handle a variety of qui tam cases and pharmaceutical drug cases very similar to Campie. If you have any questions about this article or about any potential fraud and whistleblower cases, feel free to contact Ali Hawthorne, a lawyer in our firm’s Consumer Fraud Section, at Alison.Hawthorne@beasleyallen.com.
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