In a recent federal district court case, U.S. District Judge Rya W. Zobel ruled in U.S. ex rel. Constance A. Conrad v. Abbott Laboratories, et. al., No. 02-11738, that because the plaintiff relator’s qui tam complaint could have been pieced together from public sources, the court lacked subject matter jurisdiction over the matter. As a result, the court granted the defendants’ motion to dismiss the complaint, breathing some life back into the public disclosure defense as a jurisdictional hurdle for would-be whistleblowers — a defense that the Affordable Care Act of 2010 (“ACA”) seemed to seriously restrict.
In her qui tam suit brought under the False Claims Act, relator Conrad alleged that the federal government spent over $500 million in erroneous Medicaid reimbursements on the defendants’ products. Essentially, the relator claimed that the defendants engaged in three types of fraudulent misrepresentations in their CMS filings:
- Listing unapproved drugs as FDA-approved covered outpatient drugs
- Listing false Drug Efficacy Safety Implementation (“DESI”) codes (“2” or “3” instead of “5”)
- Listing non-drug products as covered outpatient drugs
However, the defendants argued that the relator’s claims were based upon five qualifying publicly disclosed sources and that, accordingly, her case was barred and should be dismissed for want of subject matter jurisdiction based on public disclosure of the information. The defendants referenced the following public sources for the information in the relator’s complaint:
- Drug product data files published quarterly by CMS
- State drug utilization data files, also published by CMS
- Approved Drug Products with Therapeutic Equivalence Evaluations (a/k/a the “Orange Book”)
- National Drug Code Directory, published by the FDA
- Federal Register notices
The relator countered by claiming that the public sources did not disclose the fraud alleged in her complaint.
The Court’s Ruling
In dismissing the relator’s complaint, Judge Zobel cited United States ex rel. Ondis v. City of Woonsocket, 587 F.3d 49, 54 (1stCir. 2009) and the Supreme Court’s decision in Schindler Elevator Corp. v. United States ex rel. Kirk, 131 S. Ct. 1885 (2011). Specifically, the court rejected the relator’s argument that, because the Orange Book didn’t list the defendants’ drugs that were unapproved, her information was not publicly disclosed. Judge Zobel noted that public disclosure doesn’t necessarily mean “affirmative public disclosure” and that the very absence of a drug from the Orange Book necessarily conveys to the public the lack of FDA approval. The court also rejected the relator’s argument that even if the raw information she relied upon had been made public, it was her expertise and analysis of the information that established the defendants’ alleged fraud. By essentially ruling that “public information is public information,” the court was telling the relator (and other would-be entrepreneurial whistleblowers) that the public disclosure bar can’t be circumvented through diligent homework, no matter how expert the analysis. Finally, as the court noted, the relator did not allege that she was an “original source” of the relevant information. Indeed, the absence of this standard boilerplate clause in the relator’s qui tam complaint may have been fatal to her case.
Although unmentioned in Judge Zobel’s ruling, the Government’s decision not to intervene — suggesting the weakness of the relator’s case — most likely also weighed heavily in the Court’s thinking. In any case, even post- the ACA amendments to the False Claims Act, the Conrad case offers important lessons to lawyers for whistleblowers and manufacturers alike on the importance of careful pleading and what it means to be an “original source” for public disclosure bar purposes.
Parties to U.S. ex rel. Constance A. Conrad v. Abbott Laboratories
Defendant drug companies included Abbott Laboratories, Duramed Pharmaceuticals, MedPointe, Teva Pharmaceuticals USA, Cypress Pharmaceutical, Hi-Tech Pharmacal Company, Propst Distribution, Shire US, The Harvard Drug Group, and other active defendants. A number of additional defendants were terminated from the case earlier in the litigation cycle.
Intervenor plaintiffs included the states of Florida, Virginia, Kentucky, Pennsylvania, Arkansas, Delaware, Indiana, Rhode Island, and others.