By Jeffrey Hoffmann
On February 25, 2013, the U.S. District Court for the District of Massachusetts (“Court”) dismissed a qui tam suit brought by Constance A. Conrad (“plaintiff”) alleging that twenty-four different drug manufacturers, distributors, and labelers (collectively “defendants”) violated the False Claims Act (“FCA”).[i] Specifically, the suit alleges that the defendants fraudulently misrepresented their products as having been a) approved as safe and effective by the U.S. Food and Drug Administration (“FDA); and b) eligible for reimbursement under Medicaid, resulting in the defendants’ improper receipt of in excess of $500 million in reimbursements.[ii] In granting the defendants’ motion to dismiss, the Court found that it lacked subject matter jurisdiction under the FCA’s so-called “public disclosure bar”[iii] because the qui tam action was based on an alleged fraud that was previously publicly disclosed through qualifying sources.[iv] The FDA’s public disclosure bar states:
No court shall have jurisdiction over an action under the False Claims Act based upon the public disclosure of allegations or transactions in a…hearing,… administrative… report, or from news media… unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.[v]
The Court began by considering whether the alleged fraud was previously publicly disclosed.[vi] The Court noted that for a disclosure to constitute a public disclosure, the relevant disclosure must present either a direct allegation of fraud, or else both a misrepresented state of facts and a true state of facts such that the recipient may infer fraud.[vii] In finding that the alleged fraud was previously publicly disclosed, the Court noted the lack of a prior public disclosure directly alleging fraud, but agreed with the defendants’ position that the misrepresented facts and true facts were publicly disclosed and available for consideration. In particular, the defendants noted the data available in CMS’ drug product data files, state drug utilization data files, the FDA’s Orange Book, the FDA’s National Drug Code Directory and published Fedral Register Notices. [viii] The plaintiff argued that the omission of the defendants’ products from the sources listing the FDA-approved products did not constitute public disclosure.[ix] However, the Court held that requiring an “‘affirmative and explicit disclosure’ of fraud or misrepresentation would add new words to the statute Congress enacted.”[x]
The Court next found that the sources publicly disclosing the alleged fraud qualified as administrative reports, placing the alleged fraud within the scope of the FCA public disclosure bar.[xi] The plaintiff argued that the CMS data files revealing the misrepresentations were not administrative reports because they “contain[ed] no analysis.”[xii] However, the Court concluded that the data files fell “within the ordinary meaning of the term “report””.[xiii]
Finally, the Court considered whether the qui tam action was based on the alleged fraud previously disclosed through qualifying sources.[xiv] In finding that the qui tam action was based on the alleged fraud, the Court relied on precedent establishing that claim is considered based on previous public disclosures if the claim is “substantially similar to allegations or transactions already in the public domain at the time.”[xv] The Court found that the plaintiff’s claim met this standard because the plaintiff’s allegations were substantially similar to the inconsistency between the misrepresented facts in the CMS data files and the true facts in the Orange Book, Federal Register and National Drug Code Directory..[xvi]
The plaintiff argued that dismissing the suit under the public disclosure bar would frustrate the purpose of the FCA because it would discourage citizens with the ability to detect fraud that is difficult to recognize from bringing such actions.[xvii] The court, however, found that the FCA’s purpose is to reward whistleblowers with first-hand knowledge, not hard work and expertise. Otherwise, “anyone with time and the relevant expertise could have combed through the public sources…, discovered drug manufacturers who were out of compliance, and filed the same suit.” The court noted that the data-mining of publicly available information is “a classic example of the ‘opportunistic’ litigation that the public disclosure bar is designed to discourage.”
Jeffrey Hoffmann is a student at Boston University School of Law concentrating in health law. He earned his B.A. from Columbia University, during which he worked at the U.S. Senate, Brooklyn District Attorney’s Office, and Manhattan Attorney General’s Office. He has since been a paralegal at Willkie Farr & Gallagher in New York City and has worked as a legal intern for Common Cause Massachusetts and the Joslin Diabetes Center. Mr. Hoffmann is currently a member of the American Journal of Law and Medicine for which he will serve as Note Editor in the coming year.
[i] 31 U.S.C. § 3729; U.S. ex rel. Conrad v. Abbott Labs. Inc., No. 02-11738-RWZ, 2013 WL 682740, at *1 (D. Mass. Feb. 25, 2013).
[ii] Conrad, 2013 WL 682740, at *1.
[iii] 31 U.S.C. § 3730(e)(4)(A)
[iv] Conrad, 2013 WL 682740, at *2-3.
[v] 31 U.S.C. § 3730(e)(4)(A)
[vi] Conrad, 2013 WL 682740, at *3-4.
[vii] Conrad, 2013 WL 682740, at *4-5 [citing United States ex rel. Poteet v. Bahler Medical, Inc., 619 F.3d 104, 109 (1st Cir. 2010; and also United States ex rel. Ondis v. City of Woonsocket, 587 F. 3d. 49, 54 (1st Cir. 2009).
[ix] Id. at *5-6.
[xi] Id. at *4-5.
[xiv] Id. at *6.
[xv] Id. at *6 (citing U.S. ex rel. Ondis v. City of Woonsocket, 587 F.3d 49, 58 (1st Cir. 2009)).
[xvi] Conrad, 2013 WL 682740, at *6.
[xvii] Id. at *6-7.