Supreme Court Seeks Solicitor General Views on FCA Case, Signaling Possible Review of Escobar

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On April 16, 2018, the Supreme Court invited the U.S. Solicitor General to file a brief expressing the United States’ views on United States ex rel. Jeffrey Campie, et al. v. Gilead Sciences Inc. — a False Claims Act (FCA) qui tam lawsuit which contemplates what constitutes a “material representation” by companies submitting alleged false claims to the government for payment.  This request from the Supreme Court suggests that it may grant certiorari and review the Ninth Circuit’s decision overturning the district court’s dismissal of the case.

As background, the relators who brought the FCA action accused a biopharmaceutical company of issuing false statements and representations about its compliance with federal regulations in connection with the drugs it manufactures.  In response, the company asserted a “government knowledge” defense, arguing that the FDA “never altered its approval of the drugs at issue,” and continued to “make direct payments and provide reimbursements for the drugs” even through the time of the circuit court’s decision in this case.  Despite these arguments, a Ninth Circuit panel reversed the district court’s dismissal of the complaint, finding that the relators had sufficiently alleged a “false claim,” and adequately pled scienter and materiality.

The company, in seeking review by the Supreme Court, argues that the case should not be allowed to move forward because (1) when the government paid for the products despite its knowledge that FDA requirements were violated, it created a presumption that the requirements were not material; and (2) the relators did not assert any allegations to overcome that presumption.

The biopharmaceutical company takes issue with the Ninth Circuit’s decision to not “read too much into the FDA’s continued approval” and its application of a “more than mere possibility” standard for pleading materiality under the “implied false certification” theory of the FCA.  The company believes the Ninth Circuit’s ruling on materiality runs afoul of Supreme Court precedent.  In its landmark FCA decision in Universal Health Servs., Inc. v. United States ex rel. Escobar, the Supreme Court opined that “if the Government pays a particular claim in full despite its actual knowledge that certain [regulatory] requirements were violated, that is very strong evidence that those requirements are not material” to the government’s decision to pay for the product in question.  If the Supreme Court decides to grant certiorari and hear the appeal, it may be inclined to review Escobar and offer additional guidance concerning the materiality standard under the FCA.

It will also be interesting to see how the Solicitor General responds to the Supreme Court’s request given that the Department of Justice declined to intervene in the case, but filed an amicus curiae brief with the Ninth Circuit supporting the relators.

The writ of certiorari petition is accessible here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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