When Should False Claim Act Complaints Be Dismissed? US Supreme Court Wants Government's Views

Solicitor General to weigh in on Gilead's petition asking court to clarify application of its Escobar decision; PhRMA and BIO say FDA, not jury, should decide whether company has complied with FDCA.

The US Supreme Court is giving closer scrutiny to Gilead Sciences Inc.'s request that the court clarify how a False Claims Act complaint should be resolved when the government knows about a company's alleged misrepresentations about a product but continues to pay for it.

In its April 16 order list, the court said it has invited the Solicitor General to file a brief expressing the views of the United States in the case, Gilead Sciences Inc. v. US ex rel. Campie. The suit has been closely watched by the biopharmaceutical industry as it could alter the outcome of False Claims Act (FCA) complaints against drug makers.

Gilead is appealing a decision by the US Court of Appeals for the Ninth Circuit, which reversed a district court dismissal of an FCA complaint brought against it by former Gilead employees. Plaintiffs allege that Gilead misrepresented in its new drug application to FDA that it would obtain emtricitabine, the active ingredient in the HIV drugs Atripla, Truvada, and Emtriva, from certain registered facilities but acquired a portion of the ingredient from a then-unregistered facility in China. They also allege Gilead concealed the role of that facility, Synthetics China, through record manipulation, faulty certificates, and misleading labeling, and did not review other manufacturing issues affecting emtricitabine.

Gilead contends that the government has known of its relationship with Synthetics China for years and never rescinded its approval of Gilead's medicines, and that federal purchasers continued to pay for them without seeking refunds or lodging complaints. It says the Ninth Circuit's decision conflicts with the Supreme Court's 2016 decision in Universal Health Services Inc. v. United States ex rel. Escobar, which limits circumstances in which companies can be found to have made false claims for government reimbursement.

The company asked the Supreme Court to clarify its application of Escobar. Gilead said that while the court found that a misrepresentation about compliance with a statutory, regulatory, or contractual requirement must be material to the government's payment decision to be actionable, it did not decide "how an FCA complaint should be resolved when the allegations demonstrate that the government knows about the alleged misrepresentations and yet continues to pay claims fully." (Also see "Gilead Asks Supreme Court To Restrict False Claims Act Cases" - Pink Sheet, 7 Jan, 2018.)

Enforcing cGMP Rules Through Litigation Is 'Especially Egregious' – PhRMA/BIO

Under the False Claims Act, a private individual, known as a relator, can file suit on behalf of the government alleging fraudulent claims have been submitted for government payments.

The Pharmaceutical Research and Manufacturers of America and Biotechnology Innovation Organization filed a joint amicus brief in support of Gilead. They argue that the Ninth Circuit's ruling permits relators "to proceed to trial on the question [of] whether a manufacturer committed 'garden-variety breaches'" of the Food, Drug, and Cosmetic Act, (FDCA) even if FDA has determined there was no violation warranting enforcement.

"The decision below effectively grants plaintiffs an end run around the FDCA's explicit prohibition on private lawsuits seeking to enforce its provisions," they state. "By allowing courts to second-guess FDA in this manner, the ruling below transfers the power to make significant policy judgments regarding the scope and enforcement of the FDCA from FDA to private litigants."

PhRMA and BIO say the attempt to enforce FDA's current good manufacturing provisions through private litigation is "especially egregious." They state that the cGMP framework is not designed to be interpreted by non-experts but is rather a matter of agency judgment.

"The court of appeals has thus, in effect, blessed respondent's bid to weaponize for litigation scattered evidence that a drug manufacturer may have engaged in even trivial violations of FDA's highly specialized regulatory provisions governing manufacturing practices," they state.