Fourth Circuit Rejects FCA Claims on Scienter Grounds Based on Ambiguous Regulations

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Manufacturers of allergenic extracts that are injected into a patient must obtain a Food and Drug Administration approved license in order to ensure their products are safe for consumption. Until the FDA issued regulatory guidance in 2015, most manufacturers interpreted the FDA regulation at issue as allowing a general license for the custom mixes of extracts. But the FDA’s 2015 guidance clarified that a separate license was required for custom mixes. Seizing on the guidance, relators have sought False Claims Act liability for earlier claims that do not comport with the regulations as they stand today. Two former employees of Greer Laboratories filed a False Claims Act lawsuit based on regulatory compliance concerns. The relators alleged that Greer Labs sold custom mixes of allergenic extracts under a general license to physicians, who then received reimbursement from the government in violation of FDA regulations. On January 7, the U.S. Court of Appeals for the Fourth Circuit affirmed summary judgment for Greer Labs, holding that the relators could not establish scienter under the FCA and also had not engaged in a protected activity under the FCA.

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