The government’s motion to dismiss a qui tam action over the objection of the relators is granted, where the complaint had the potential to undermine regulatory and enforcement actions taken by the Food and Drug Administration and Centers for Medicare and Medicaid Services. The plaintiffs argued the request was arbitrary, but the court noted that at least two government agencies had investigated the claims over the course of several years and had taken action related to the alleged misconduct. The court also explained that the government had to provide only a reasonable basis to support its cost-benefit analysis of the litigation, not a mathematical calculation of actual costs and potential recovery.
Jeff and Sherilyn Campie filed a qui tame action against their former employer, pharmaceutical drug manufacturer Gilead Sciences Inc., alleging that Gilead violated the FCA by submitting or causing to be submitted false claims for payment under government payment programs such as Medicare and Medicare.
The district court previously dismissed the Campies’ claims, including those based on state law and unlawful retaliation, but the Ninth Circuit reversed. Although the government declined to intervene, it filed a motion to dismiss the portion of the complaint related to the federal FCA.
The gist of the Campies’ complaint is that Gilead falsely certified to the Food and Drug Administration that it would source ingredients for its anti-HIV drug therapies from approved countries, when in reality it had contracted with a manufacturer in China to provide the ingredient. The Campies alleged Gilead claimed the component had instead come from an approved supplier in South Korea. The complaint alleged Gilead had been using ingredients sourced from China in its drugs before receiving FDA approval.
The Campies also alleged Gilead falsified or concealed data to obtain FDA approval for its China-based supplier. According to the complaint, Gilead claimed the ingredients passed testing, when in reality two of the three batches received had failed internal tests. Rather than report the failure to FDA, Gilead obtained new batches and amended its application to include substitute data.
The Campies argued Gilead violated the FCA because it sought payment for drugs containing this ingredient both directly and indirectly from the government. Because payment was contingent on FDA approval of the drugs and because the drugs contained components that originated from unregistered facilities, the Campies argued the drugs were not FDA-approved, as purported by Gilead, and therefore not eligible for payment without a false certification.
In its motion to dismiss, the government identified two government purposes for the request. First, the government wanted to prevent the plaintiffs from undermining the considered decisions of FDA and CMS about how to address the conduct at issue, and wanted to avoid the additional expenditure of government resources on a case that it fully investigated and decided not to pursue. The government noted that the FDA had taken the Campies’ claims into account and taken actions it deemed appropriate.
In response, the Campies acknowledged that the government’s concerns were relevant, but argued there was an insufficient factual basis to support them. For example, the plaintiffs argued the government had not shown that it had considered the potential cost of the litigation or the potential proceeds.
The court disagreed, finding substantial evidence the government investigated the Campies’ allegations. The court noted the two-year review included interviews with the Campies, consultations with government healthcare experts, meetings with Gilead, and a collection of 600,000 pages of documents. Further, FDA had conducted its own separate investigation into the misconduct alleged by the Campies before they filed their suit. The four-year investigation included multiple documents requests to Gilead and numerous site inspections.
Given that investigative background, the court found the government was reasonably concerned that the lawsuit would undermine FDA and CMS decisions.
Further, although the government’s cost analysis of the litigation could have been more robust, the court found it sufficient. As an initial matter, the court did not accept the plaintiffs’ assertion that a cost-benefit analysis must be buttressed by a mathematical calculation. Instead, the court examined whether the government made a meaningful consideration of cost and benefit, such that it established a rational basis for its motion to dismiss. Further, despite the plaintiffs’ assertions, the court found the government had considered the potential recovery as part of its analysis.
Finally, the court rejected the plaintiffs’ assertion that the cost burden to the government would be minimal. The court noted that the crux of the argument is whether Gilead’s misrepresentations were material, which would necessitate an investigation into what the government knew about the certifications and when, and what actions were taken. The court concluded that resolving this question would require extensive discovery.
The court also found the government’s request was neither arbitrary nor capricious, noting again the multi-year investigations by FDA and the Department of Justice into various aspects of the allegations. The court noted the government had been involved in the case since 2010 and had never been dismissive of the allegations, to the point of supporting the Campies’ appeal before the Ninth Circuit. Given the circumstances, the court could not conclude the government had not taken the allegations seriously before filing its motion to dismiss.
The court therefore dismissed the claims based on violations of the federal FCA but allowed those related to state law and improper retaliation to proceed.
