It took us a long time to understand how off-label promotion of prescription drugs had anything to do with the False Claims Act, and we’re still not so sure that the two are a fit. The FCA penalizes anyone who presents, or causes to be presented, to the federal government “a false or fraudulent claim for payment or approval.” 31 U.S.C. § 3729(a)(1). Easy, right? As we explained just last month in this quick primer on the FCA, Congress enacted the FCA after the Civil War to curb abuses in government procurement. That part we get. If you sell the Army 1,000 horses and send them a bill for 2,000 horses, that’s a false claim.

We’re writing about this today because the First Circuit issued an opinion last month that comes to the correct result and also illustrates how FCA claims are alleged in connection with off-label promotion—and how they fail. In Lawton v. Takeda Pharmaceuticals Co., No. 16-1382, 2016 U.S. App. LEXIS 20943 (11th Cir. Nov. 22, 2016), a patent lawyer filed a qui tam action against the manufacturer of a prescription diabetes medication. He did not actually use the medication, nor did he buy or sell it. So what did he allege? He alleged that the manufacturer engaged in an elaborate scheme to promote the drug for un-approved uses—off-label promotion—and that the manufacturer thereby induced medical providers to make allegedly false claims for reimbursement to Medicare and Medicaid. Id. at **4-7.

It’s a two-step process. The manufacturer did not itself make a false claim, but rather engaged in alleged conduct that induced someone else to make a claim, whether the claimant knew it was false or not. The problem for the plaintiff (or more accurately, the “relator”) is that he alleged neither falseness nor a claim. We call that a double whammy. Or maybe it’s a double fault.

You can call it whatever you want, but the district court called it “dismissed with prejudice,” and the First Circuit affirmed. The first really interesting thing is that the district court and the First Circuit applied Rule 9(b)’s heightened pleading standard across the board. That is to say, the plaintiff had to allege with particularity the circumstances of the alleged fraud and the facts surrounding the claims themselves. Id. at **8-10. Because justice cannot operate in a vacuum, we think that rule is only fair.

On falseness, the court recounted the plaintiff’s allegations of off-label promotion in some detail: The company allegedly paid doctors to conduct studies that supported the off-label use, but which were later criticized. The company also allegedly mobilized “thought leaders” and a “specialized” sales force to promote the unapproved use of the product to physicians. Id. at **4-7. The First Circuit characterized this as the manufacturer’s alleged “marketing machinations,” but what is obviously missing from this story? There is no allegation that the company said anything false or misleading. Recall that this is a False Claims Act case. We are aware of the authorities holding that off-label promotion, even truthful off-label promotion, can form the basis of an FCA action, but we do not agree with them. From our point of view, the court could have rejected this action for failure to allege falseness.

But that is not what the First Circuit did. Instead, the court held that the plaintiff had not alleged a claim. He alleged generally that some portion of the prescriptions for the drug were written off label and that Medicare and Medicaid funds had generally been used to pay for the drug. But that was not sufficiently particular. The applicable standard typically required allegations stating “specific medical providers who allegedly submitted false claims, the rough time periods, locations, amounts of the claims, and the specific government program to which the claims were made.” Id. at **9-10 (internal quotations omitted). As the court further explained:

[D]etails concerning the dates of the claims, the content of the forms or bills submitted, their identification numbers, the amount of money charged to the government, the particular goods or services for which the government was billed, the individuals involved in the billing, and the length of time between the alleged fraudulent practices and the submission of claims based on those practices are the types of information that may help a relator to state his or her claims with particularity.

Id. at *10. The plaintiff’s speculative generalizations did not come close to meeting this pleading burden. As the court held,

[Plaintiff] merely alleges that off-label prescriptions of [the product] submitted to government programs were unlawful. But [he] . . . identifies no false claims, either individual or aggregated, from particular medical providers that were submitted for reimbursement. [¶] Instead [he] simply postulates that “as much as” 30% of [the product’s] annual sales were for off-label prescriptions, points to the amounts of Medicare and Medicaid funds used to pay for [product] prescriptions . . . , and asks us to infer that a portion of these funds must have been used to pay unlawful claims. As Yogi Berra allegedly said, “It’s like déjà vu all over again.”

Id. at *12. Okay, we don’t fully understand the Yogi Berra reference, but the court made its point. It did not suffice to allege the possibility of a false claim; the plaintiff had to allege specific facts demonstrating that someone had made a false claim for reimbursement from the government. The court did not exclude the possibility that a plaintiff could meet his or her pleading burden using statistical evidence, but this plaintiff offered evidence and argument “more by insinuation.” Id. at *13.

Such insinuation did not state a claim, and because the federal court applied Rule 9(b) also to the plaintiff’s allegations of state law fraud-based claims, the plaintiff had not sufficiently alleged state-law claims either. Id. at **13-14. In the end, the court’s application of Rule 9(b)’s particularized pleading standard to all aspects of the case is probably the most noteworthy part of opinion. We will store that one away for future reference.