District Court Rejects Fraud-On-The-FDA Theory Of False Claims Act Liability

In an opinion that continues a welcome trend in False Claims Act cases, Judge Saylor of the United States District Court for the District of Massachusetts has dismissed a relator's FCA complaint for failing to plead facts demonstrating that a manufacturer's breach of the Food & Drug Administration's ("FDA") adverse event reporting requirements resulted in any false claims against federal health care programs. United States ex rel. Ge v. Takeda Pharmaceuticals U.S.A., Inc. (Nos. 10-11043-FDS; 11-10343-FDS) (Nov. 1, 2012). Judge Saylor's opinion, like other recent opinions of Judges Gorton and Stearns in the District of Massachusetts, reflects an appropriate judicial resistance to attempts to convert any and all alleged regulatory violations into liability under the FCA, especially when the agency in question has broad discretion in how to respond to regulatory non-compliance.

Reporting Safety Information

The FDA's reporting requirement— intended to keep the agency abreast of post-market adverse events—establishes timelines that trigger reporting obligations for manufacturers depending on the severity and likelihood of the adverse event. See Wyeth v. Levine, 555 U.S. 555, 608 (2009). Failure to report adverse events can trigger civil and criminal penalties ranging from monetary fines to withdrawal of the drug's approval. But while the FDA is empowered to bring appropriate enforcement action in response to reporting violations, the agency has broad discretion over which enforcement tool it will utilize and whether it will bring an enforcement action at all. See 21 C.F.R. §§ 80(j), 81(d); Buckman Co. v. Plaintiffs' Legal Committee, 531 U.S. 341, 349 (2001); Community Nutrition Institute v. Young, 818 F.2d 943, 950 (D.C. Cir. 1987).

The relator's allegations in Ge exemplify – if in the extreme – the FCA plaintiff bar's improper attempts to convert regulatory violations into per se FCA liability. The premise of relator's FCA suit was that FDA approval was a precondition for payment and that the FDA would have exercised its discretion to withdraw from the market the drugs for which Takeda allegedly failed to report adverse events. On that basis, relator asserted that all claims for payment of the drugs in question were false. Judge Saylor rejected this outright, for failure both to state a claim under Rule 12(b)(6) and to satisfy Rule 9(b)'s particularity requirement. The court held that the complaint failed to state factual allegations to support...