A federal judge in the Northern District of Illinois has dismissed United States ex. rel. Michael Thornton v. Pfizer Inc et al., a qui tam complaint filed against Pfizer and Hospira under the federal False Claims Act (FCA) and the Illinois False Claims Act (IFCA). The purported whistleblower, a former Hospira employee, raised concerns about the quality of certain infusion pumps and compliance with related reporting requirements under US Food and Drug Administration (FDA) regulations. The relator also alleged he was demoted after raising his concerns to management. Pfizer sold its infusion pump business to another company before it knew about the relator's lawsuit.
The relator filed his qui tam action, under seal, in 2016. In 2018, the federal government and the State of Illinois declined to intervene in this case. Shortly thereafter, the complaint was unsealed and Thornton decided to pursue this litigation on his own. The defendants retained DLA Piper to represent them and filed a motion to dismiss under Federal Rules of Civil Procedure 12(b)(6) and 9(b).
On March 14, the court granted Pfizer's motion and the case was dismissed in its entirety (the relator has 14 days to amend). The court's opinion adopts Pfizer's position on several critical FCA issues − Rule 9(b), the Escobar materiality standard, and the narrow scope of FCA retaliation claims.
The court found that the relator failed to plead falsity with particularity. First, the court noted that the relator failed to plead that a single claim was submitted to the government for reimbursement. And then the court noted, "even if Defendants submitted claims . . . a fact that Relator does not expressly allege–it is well-settled in the Seventh Circuit that a 'simple demand for payment does not constitute a specific representation about the goods and services provided.'' The court concluded the complaint failed under Rule 9(b) "because [the relator] does not allege the submission of any claim relating to [the medical devices at issue], therefore offering this Court and Defendants no explanation as to the 'nature of the charge.'"
The court found that even assuming the relator pleaded "falsity with sufficient particularity," there was no evidence that the purported regulatory reporting violations were material to the government's decision to pay for the devices at issue. The court, citing Escobar (136 S. Ct. 1989, 2002 (2016)), noted "materiality looks to the effect on the likely or actual behavior of the recipient of the alleged misrepresentation" requiring specific facts showing the government's payment decision "would likely or actually have been different if the government knew about the alleged regulatory violations." Moreover, "if the Government pays a particular claim in full despite its actual knowledge that certain requirements were violated, that is strong evidence that those requirements are not material." Id. at 2003.
Here, the court not only found that the relator failed to explain why the defendants' purported regulatory violations were material to any government payment decision, but the court also highlighted the FDA's inaction in response to the relator's qui tam complaint as strong evidence of immateriality under Escobar.
Lastly, the court agreed with the defendants that an FCA retaliation claim requires proof that the relator was investigating false claims or fraud, not merely quality or regulatory issues − "particularly when Relator fails to allege he made any complaints relating to government claims or payments."
The DLA Piper team expects this case will be cited frequently by qui tam defendants in future cases. Among other things, the court's opinion joins the many other federal cases that have recognized and applied the FCA's heightened materiality standard after Escobar. These cases show that, when the government continues to pay claims despite knowledge of an alleged fraud, the relator's allegations may not satisfy the FCA's demanding materiality requirement.
Further, the court's opinion demonstrates that, consistent with the Supreme Court's instructions in Escobar, the materiality analysis is not "too fact intensive" to resolve at the motion to dismiss stage of qui tam litigation. See Escobar, 136 S. Ct. at 2003, 2004 n.6. When conducting the materiality analysis in pharmaceutical cases, the post-filing conduct of FDA and CMS are highly relevant.