DOJ Files Amicus Brief Declaring Intention to Dismiss FCA Case

December 12, 2018 | Geoffrey R. Kaiser | FDA | False Claims Act | Fraud and Abuse | Legislation and Public Policy | Litigation | Pharmaceuticals

On November 30, the U.S. Department of Justice (DOJ) filed an amicus curiae brief urging the U.S. Supreme Court to deny a petition for a writ of certiorari filed by Gilead Sciences, Inc. from a Ninth Circuit Court of Appeals decision which had revived a declined False Claims Act (FCA) lawsuit brought by two former Gilead employees that had been dismissed in the district court. In doing so, however, DOJ revealed its intention to seek dismissal of the lawsuit under the FCA’s dismissal authority (31 U.S.C. § 3730(c)(2)(A)) if it were remanded to the district court, inciting speculation over whether DOJ was signaling an intention to more aggressively implement the guidance set forth in the so-called “Granston Memo” in January 2018. The memo had urged DOJ attorneys to consider dismissing, and not merely declining, FCA cases when warranted to prevent meritless claims, parasitic lawsuits, or interference with agency policies and programs, or to preserve resources, control litigation, safeguard classified information or address egregious procedural errors.

The employee whistleblowers (Relators) alleged that Gilead obtained drug approvals from the U.S. Food and Drug Administration (FDA) by concealing that it intended to source the active ingredient from a Chinese facility not registered with the FDA, and that when Gilead subsequently sought to obtain approval to use the Chinese facility, it falsified or concealed data to obtain the approval. The Relators filed suit under the FCA, alleging that the drugs containing the ingredient sourced from the Chinese facility were not reimbursable. The district court dismissed the complaint for failure to state a claim, but the 9th Circuit reversed. Among other things, the 9th Circuit held that the Relators adequately alleged materiality of the misrepresentations under the Supreme Court’s decision in Universal Health Services, Inc. v. United States ex rel. Escobar, and that while the government continued to make payments after becoming aware of the Relators’ allegations, “the parties dispute exactly what the government knew and when, calling into question its ‘actual knowledge’” regarding Gilead’s misconduct.

In requesting denial of the petition, DOJ defended the reasoning of the 9th Circuit on the issue of materiality, arguing that the ruling was consistent with the positions of other courts of appeals, and that the case was otherwise a “poor vehicle” for clarifying the Supreme Court’s Escobar decision. DOJ did not stop there, however: In an apparent effort to ensure that the High Court would deny the petition, DOJ declared that if the case were remanded to the district court, it would seek dismissal of the lawsuit. DOJ first noted that its dismissal authority could “be exercised whenever the government concludes that continued prosecution of the suit is not in the public interest.” DOJ then argued that if the lawsuit were to move forward, “both parties might file burdensome discovery” requests in order to establish the government’s knowledge “which would distract from [FDA’s] public-health responsibilities” and “impinge on agency decisionmaking and discretion,” thereby “disserv[ing] the interests of the United States.”

On the one hand, DOJ’s stunning announcement, which effectively allowed Gilead to avoid billions of dollars in damages under the FCA, will surely encourage other defendants to lobby DOJ to dismiss declined cases, no matter the procedural stage of the lawsuit. On the other hand, DOJ’s move might have been less about the dismissal authority discussed in the Granston Memo, and more about an effort to preserve the 9th Circuit’s very pro-government interpretation of Escobar and the FCA’s materiality requirement by not affording the Supreme Court an opportunity to reverse the ruling. Only time will tell – stay tuned.

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