The First Circuit upheld the dismissal of a whistleblower suit against Pfizer for False Claims Act violations involving off-label uses and doctor kickbacks because allegedly fraudulent conduct is not actionable under the FCA unless it results in false claims being filed. Where whistleblowers allege FCA liability for off-label promotion of drugs, their fraud pleadings must be specific, including the who, when, and where of false claims being filed as a result of the off-label use; a general allegation of aggregate expenditure data that the government spent for the drug without providing the details of the false claims falls "far short" of what is required in an FCA complaint (U.S. ex rel. Booker v. Pfizer, Inc., January 30, 2017, Lynch, S.).
Background. In 2009, Pfizer, Inc., reached agreement with the U.S. Department of Justice to settle claims that it had violated the False Claims Act (FCA). In the Corporate Integrity Agreement (CIA) that Pfizer signed with HHS, Pfizer agreed to report all probable future violations and to pay a penalty of $2,500 per day that Pfizer was in violation. Less than a year later, two Pfizer employees filed a qui tam whistleblower suit in Massachusetts federal court on behalf of the U.S., more than two dozen states, and the District of Columbia contending that Pfizer was continuing to violate the FCA and the equivalent state laws. Neither the U.S., the states, nor D.C. elected to intervene. The whistleblowers alleged that Pfizer (1) induced third parties to file false claims for Pfizer drugs by marketing the drug Geodon for off-label uses and by paying kickbacks to doctors for prescribing the drug, (2) violated the CIA by failing to self-report FCA violations (called a "reverse FCA claim"), and (3) retaliated against one of the whistleblowers for his whistleblowing activities. The federal district court granted Pfizer’s motion to dismiss on the reverse FCA claim, and it granted Pfizer’s motion for summary judgment on the other two claims (see Relators lacked concrete evidence of false claims, May 26, 2016). The whistleblowers appealed.
Reverse FCA claim. The FCA imposes liability on anyone who knowingly avoids an obligation to pay money to the government (31 U.S.C. §3729(a)(1)(G)). Under the FCA, an "obligation" can arise from a contractual relationship (31 U.S.C. §3729(b)(3)). The reverse FCA claim, therefore, relied on the whistleblower’s allegation that Pfizer failed to self-report probable FCA violations to HHS as agreed to under the CIA. The CIA provided, however, that the right to determine what constituted a reportable event rested with Pfizer, after an appropriate investigation. The whistleblowers’ complaint, on the other hand, merely stated that a reportable event occurred when Pfizer manager’s ordered the employees to engage in off-label promotion. Pfizer, however, was not required to self-report all complaints; a complaint became a reportable event only after Pfizer determined that it was a reportable event. Thus, the whistleblowers’ complaint never established that Pfizer ever determined that their complaint constituted a reportable event. The whistleblowers could have argued that the CIA contained an implicit "reasonable man" requirement in determining a reportable event and that Pfizer violated that requirement in this instance, but they never did, so that argument was waived. Because the complaint never established that a reportable event had occurred that would have triggered Pfizer’s self-reporting obligation, the claim failed to state a claim for relief, and the lower court was correct in dismissing it.
Off-label FCA claim. The whistleblowers also alleged that, by promoting Geodon for off-label uses, Pfizer knowingly induced false claims to be made, in violation of the FCA. The trial court had granted summary judgment on the ground that the whistleblowers failed to establish through their pleadings that any actual false claims had resulted from the off-label promotion. The First Circuit agreed. Even if Pfizer engaged in fraudulent conduct, that conduct would not trigger FCA liability unless it resulted in a false claim being made to the government. Furthermore, because these claims involve fraud, they must be pleaded with particularity. In an FCA complaint such as this one, particularity means allegations that include (1) the name of the specific medical provider who submitted the false claim, (2) the time period, location, and amount of the claim, and (3) the specific government program to which the claim was made. In this case, the whistleblowers merely offered as evidence the amount of money that the government had spent for pediatric Geodon prescriptions (which was an off-label use) between January 2008 and March 2012, according to the National Disease and Therapeutic Index’s survey. Such data is "woefully inadequate" to support an FCA claim.
Retaliation. The retaliation claim was based on allegations that one of the two whistleblowers was fired after twice complaining to his supervisors that Pfizer was continuing to promote Geodon for off-label uses. The First Circuit affirmed the lower court’s grant of summary judgment, but for reasons that were different from the lower court’s reasons. The lower court found that the employee never objected to off-label promotion. The First Circuit assumed that the conversations did involve off-label promotion, but found that they still did not trigger FCA liability because no evidence existed that the conversations involved submissions of false claims. Activities involving potential violations of laws other than the FCA do not trigger FCA liability, unless those activities also involve FCA violations.
The First Circuit, therefore, affirmed the lower court judgment in full.
The case is No. 16-1805.
Attorneys: Thomas N. Burnham (Burnham International Law Office PC) for Alex Booker. Nicholas Sutherland Bradley (Ropes & Gray LLP) for Pfizer, Inc.
Companies: Pfizer, Inc.
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