A court in the Eastern District of Pennsylvania recently ruled that, despite a relator’s publication during an employment retaliation suit of allegations relating to the defendant’s alleged off-label promotion and payment of kickbacks, such allegations were not publicly disclosed, nor was the relator’s execution of a release of liability effective. U.S. ex rel. Gohil v. Sanofi-Aventis U.S. Inc., No. 02-cv-02964 (E.D. Pa. Mar. 30, 2015). This case demonstrates the way policy arguments regarding a perceived congressional intent in favor of private enforcement of the FCA can impact legal arguments in FCA litigation.

The court first considered whether the relator’s claims had previously been publicly disclosed. The relator, a former sales representative employed by the defendant, filed a qui tam suit a month before resigning his position with the defendant in June 2002. Upon resigning, he filed a wrongful termination action pursuant to New Jersey’s Conscientious Employee Protection Act (“CEPA”). While the government weighed whether to intervene, the parties in the CEPA action engaged in discovery. They ultimately settled—with the relator signing a broad release of liability—and the qui tam suit was subsequently unsealed, with the government declining to intervene. The defendant argued that the relator’s Statement of Facts (“SoF”) in the CEPA action constituted disclosure through a “civil hearing,” thereby triggering application of the public disclosure bar. The court ruled that although the SoF “exhaustively details” the alleged off-label promotion of defendant’s cancer drug Taxotere, and corresponding payment of kickbacks, the SoF was not “substantially similar” to the relator’s complaint because the SoF did not state that any provider had submitted a claim to a federal health care program (“FHCP”). Accordingly, the court reasoned that the allegedly fraudulent transactions were not previously disclosed, and inferring the allegation of fraud “would impermissibly broaden the scope of the public disclosure bar and restrict private enforcement of the FCA.” The defendant has since filed a motion for reconsideration, arguing that where submission of false claims to the government is a “logical and obvious consequence” of an alleged scheme, all essential elements of the FCA claim are publicly disclosed.

The court next determined whether the relator had nonetheless waived his right to prosecute the qui tam suit through his settlement and release of liability in the CEPA action. Although the Third Circuit Court of Appeals has yet to rule on whether relators can unilaterally settle a qui tam suit post-filing, all of the courts of appeal to consider the issue have held that, based on the statutory language of the FCA, the government’s written consent is a prerequisite. In contrast, several courts of appeal have held that a pre-filing release can wipe out a would-be relator’s attempt to file a later qui tam suit, so long as the release covers the allegations in the suit and there are no countervailing public policy considerations. Consistent with the prevailing approach to post-filing releases, the Gohil court ruled that the relator’s release had no effect on the litigation. The defendant responded by suggesting that the release be effective as to the relator, but that the claims be dismissed without prejudice to the government’s ability to intervene. The court declined to adopt this approach, again invoking the “clear congressional intent of encouraging private enforcement of the FCA.”

As to the merits of the relator’s claims, the court first ruled that, even under the Third Circuit’s more lenient “reliable indicia” standard to the submission of false claims—in place of pleading the details of particular false claims submitted—the off-label promotion allegations did not meet Rule 9(b)’s requirements. This was so because all of the off-label uses related to medically accepted indications, which would have been eligible for government reimbursement. However, the court denied the defendant’s motion to dismiss the kickback allegations, holding that certifying compliance with the AKS is a precondition to payment by the FHCPs and that the relator had provided sufficient examples of kickbacks allegedly offered to providers. Finally, the court refused to dismiss the relator’s conspiracy count, ruling that a conspiracy between the defendant and providers could easily be inferred from examples of kickbacks supposedly paid by the defendant, followed by the recipient physician’s increase in Taxotere prescriptions.

A copy of the court’s opinion can be found here.