Halloween has come and gone.  The Drug and Device Law Little Dogs stayed in their costumes (Batgirl and a rabbi) long enough to be photographed for (unsuccessful) entries for a pet costume contest.  There was ample candy – about 15 pounds, which more than sufficed for the seven times the doorbell rang. And we enjoyed the modest stream of excited kids, flushed with the thrill of pretending to be something they weren’t.      

We assume that the plaintiff/relator in United States ex rel Gerasimos Petratos v. Genentech, 2015 U. S. Dist. LEXIS 146525 (D.N.J. Oct. 29, 2015) is less thrilled.  In this qui tam action, plaintiff pretended that the wrongdoing he alleged was something it wasn’t:  a violation of the False Claims Act.  The court summed it up in the first paragraph of its decision: “This case concerns whether the False Claims Act can be extended to cover wrongful behavior that does not lead to a false claim.  It cannot, so Plaintiff’s Amended Complaint must be dismissed.”  Petratos,2015 U.S. Dist. LEXIS 146525 at *1.  Two big issues were decided:  (1) no product liability-style (prescriber specific) causation in FCA cases; and (2) the FCA is not a catch-all negligence per se statute for regulatory violations.  The defense won both, so this case is significant.

The allegations surrounded defendant Genentech’s anti-cancer drug Avastin, a “monoclonal antibody cancer drug that limits the growth of tumors by preventing the growth of blood vessels that feed tumors.”  Id.  The court explained that, in 2010, the Oncologic Drugs Advisory Committee of the FDA recommended denying approval of Avastin for metastatic breast cancer due to concerns about clinical trial data Genentech had provided. Nevertheless, later that year, the FDA approved Avastin for treatment of patients with metastatic breast cancer.  Id. at *3.  The approval “was conditioned on completion of adequate studies showing the drug’s clinical benefit.”  Id.   Subsequent clinical studies failed to demonstrate such benefit, and the FDA removed the metastatic breast cancer indication from Avastin’s label in 2011.  Id.  The drug, which can cause serious side effects, remains approved to treat metastatic colorectal cancer, nonsquamous non-small cell lung cancer, glioblastoma, and metastatic renal cell carcinoma.  Id.  In addition, it is used off label for renal cancer, ovarian cancer, ovarian cancer, pancreatic cancer, and various eye diseases.   Id. 

Plaintiff alleged that Genentech “knowingly based regulatory submissions on patient databases that contained inadequate information about Avastin’s real-world risks and did not use electronic medical records which would have better answered questions about Avastin safety.”  Id. at *4.  Plaintiff had recommended the use of a different database, and certain Genentech employees “recognized that the database proposed by plaintiff was more relevant” than those used by Genentech. According to the court, Genentech declined to examine the new database “because there was too much business risk.”  Id.(internal punctuation omitted).

In 2010, after an independent study found a dose-dependent relationship between Avastin and proteinuria – a form of kidney failure – a key opinion leader asked Genentech for information about the incidence of proteinuria in Avastin patients and was told the data was not available.   Plaintiff “claims that [the KOL] would have changed his opinion on the risk-benefit profile for Avastin if he was given more complete information, which would have had an impact on the prescribing habits of oncologists.”  Id. at *5.   In 2011, the Center for Medicare and Medicaid Services (“CMS”) asked Genentech for information to “determine appropriate reimbursement from the federal government,” but Genentech “allegedly supplied data which projected significantly reduced annual costs associated with the drug’s side effects across the patient population.”  Id. (citation omitted).  Plaintiff alleged that Genentech’s “data deficiencies were the result of an intentional campaign to maximize profits by suppressing clinical and epidemiological information,” and led to underreporting of side effects from Avastin.  Id. at *6-7.  He alleged that, if Genentech had revealed complete information about Avastin, many fewer doctors would have prescribed it, and federal and state governments “would have reimbursed for few Avastin indications, for lower dosages, or not at all.”  Id.  Plaintiff alleged four federal causes of action under the False Claims Act and claimed “hundreds of millions of dollars” in damages.  Id. at *7-8.

Missing from all of this was a false claim.  As the court explained, “[i]n order to state a claim for violation of the False Claims Act, 31 U.S.C. 3729(a)(1) ("FCA"), a plaintiff must provide facts sufficient to plausibly show that "(1) the defendant presented or caused to be presented to an agent of the United States a claim for payment; (2) the claim was false or fraudulent; and (3) the defendant knew the claim was false or fraudulent." Id at *8 (citation omitted).  A claim can be factually false – a claimant misrepresents the goods or services it provided to the government – or legally false, under either an express or implied certification theory.  “Express certifications are those actually stated. Id. Implied certifications occur where "a claimant seeks and makes a claim for payment from the Government without disclosing that it violated regulations that affected its eligibility for payment."  Id. at * 9 (citation omitted). 

The court explained that neither Genentech’s submissions to the FDA to get Avastin approved nor its submissions to compendia authors and KOLs were claims for payment.  Thus, “the only conceivable claims discussed in the Amended Complaint are the submissions doctors make for Medicare and Medicaid reimbursements. Therefore, in order to state a claim, Plaintiff must allege that the claims made by doctors for Medicare and Medicaid reimbursements are false.”  Id at *11. 

“Medically Reasonable and Necessary”

Plaintiff argued that doctors' claims were false because some of the reimbursed procedures were not "medically reasonable and necessary" as required by statute and regulations.   Defendants replied that the “medically reasonably and necessary” determination was made by CMS, not by individual doctors, and there were “no allegations that CMS would make a different decision as to whether Avastin is medically reasonable and necessary for any particular use.”  Id. at *12. 

The court agreed, holding that Avastin was “approved by the FDA and supported by compendia listings, [thus] Relator cannot make this concession and still argue that the prescriptions for Avastin were not reasonable and necessary.”  Id. at *14 (internal punctuation and citations omitted).   The court further commented that one decision had noted that “if the particular use of the drug is supported by listing in a major drug compendium – even if the use is for an off-label purpose – that drug may fall within the ‘reasonable and necessary’ standard of Medicare.”  Id. at *15 (internal punctuation and citation omitted). 

The court concluded,

Put simply, this dispute comes down to whether medically "reasonable and necessary" is assessed by doctors individually or is defined by the regulatory scheme. . . . Reasoning from the Supreme Court and the majority of courts that have directly discussed this issue make clear that medically "reasonable and necessary" is a determination made by the relevant agency, not individual doctors . . . . Given that, the Amended Complaint is clearly deficient. It does not allege any facts to show that CMS would find Avastin not to be medically reasonable and necessary for any particular use in the but-for world. This is fatal to Plaintiff's claim that some doctors would not have prescribed Avastin had they been given more information about its risks. Plaintiff does not allege that CMS would have changed its reimbursement schedule or that any compendia would have changed its indication from supporting to non-supporting or to opposing use for any given indication. Thus, Avastin would have legally still been reasonable and necessary for the uses at issue. Plaintiff has not alleged any false claim based on the "reasonable and necessary" requirement.

Id. at *18-19.

Regulatory Violations – “Implied Certification”

Plaintiff also argued that “claims were false based on an implied certification that Defendants complied with certain regulations” when they hadn’t.  Specifically, plaintiff alleged “three violations of an implied certification: (1) reliance on self-serving data sources; (2) inadequate examination or reporting of dose-related effects of Avastin; and (3) delay in reporting adverse events.” Id. at *19-20.  Noting that “the implied certification theory of liability should not be applied expansively . . . ,” the court explained that “[v]iolations of regulations only give rise to FCA liability if such regulations are preconditions of payment.  The fact that a company may have knowingly violated these statutes and regulations, without more, does not suffice to state a FCA claim.”  Id. at *20 (internal punctuation and citations omitted). 

In this case, plaintiff cited “nothing to show that the databases used violated any regulation at all, much less one which was a precondition of payment.  Nor does plaintiff cite anything showing that the alleged inadequacy in examining and reporting adverse events violated any regulation [or was] a material precondition to payment here.”  Id. at *21.   In sum, Plaintiff alleged no facts showing that a precondition of payment had been violated – in fact, there were “no allegations dealing with preconditions of payment at all,” and this “absence [was] fatal.”  Id. at *21.   The court emphasized that this limitation – that plaintiff must demonstrate that regulatory compliance was a precondition of payment – was “critical.  Otherwise, the FCA could be used as a relator-driven enforcement mechanism for all healthcare regulations.  That is not the purpose of the FCA.”  Id. at 22. 

Fraud on the Compendia

Finally, plaintiff claimed that Genentech submitted false information to a KOL seeing information about adverse events related to Avastin.  The court held, “A false statement is not the same as a false claim for payment.  Congress used particular words, and this statutory scheme is not a broad-based consumer protection statute designed to punish generalized wrongdoing. The allegations in this Complaint do not include any allegations showing any false claim for payment was ever made. Therefore, these claims are dismissed.”  Id. at *23-24.

No false claim for payment – no False Claims Act violation. Simple, well-reasoned, self-evident.  We are all familiar, in the drug and device context, with other attempts to stretch statutes to provide recovery for persons and violations they were never intended to address.  (Consumer protection statutes spring to mind.)  We were pleased to see this attempt unmasked.