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False Claims Act Statistics, News & Analysis

Escobar The Sequel? — Perhaps Coming Soon to SCOTUS

On April 16, 2018, the Supreme Court called for the views of the Solicitor General (or “CVSG”) as to whether it should review the Ninth Circuit’s decision in Gilead Sciences, Inc. v. United States ex rel. Campie (that we at LLB believe was wrongly decided and have covered previously). The CVSG may indicate the Court’s willingness to provide much-needed clarification to Escobar’s materiality standard. Whether or not the Solicitor General supports certiorari, perhaps unlikely given the Ninth Circuit’s opinion was consistent with the government’s narrow view of materiality, a CVSG in and of itself statistically speaking greatly increases the likelihood of a “grant.”1 At a minimum, it will provide a window into the government’s take on this thorny issue and force the SG to address the growing split among the circuits.  

In Campie, relators alleged that a pharmaceutical company violated the FCA by seeking payment from Medicare and Medicaid for HIV medication that was made using chemicals from non-FDA approved facilities in China. The district court initially kicked all of these allegations for failure to state a claim, in large part because the misrepresentations the relators alleged were made to the FDA, not the payor agency (CMS) and were not made as a condition of reimbursement. Thus, the district court held the misrepresentations immaterial to the government’s decision to pay claims. After the district court’s decision and while the case was on appeal, Escobar came down, theoretically providing further support for affirmance, particularly given that the government continued to pay claims for the drug even after it discovered the company was using chemicals from non-FDA approved facilities.

The Ninth Circuit nevertheless reversed, finding that the allegations could support a finding of materiality because the FDA may continue to approve, and the government may continue to pay for, drugs for a variety of reasons unrelated to the regulatory non-compliance at issue. In particular, the Ninth Circuit relied on the complaint’s allegations that the company had affirmatively misled the FDA to secure FDA approval for use of chemicals from a previously unapproved facility and it was unclear whether the government had full knowledge of the facts when it continued to approve claims. It also discounted the fact that the FDA had not withdrawn approval for the medication based on the alleged non-compliance, because it did, in fact, issue a “warning letter” relating to the unapproved sourcing of chemicals.

As we have discussed previously, the case squarely presents a circuit-split as other courts of appeal have held that the government’s inaction in the face of alleged non-compliance (i.e., here continuing to pay claims and failing to withdraw the drug) fails Escobar’s “rigorous” materiality test. Gilead’s position is supported by amici (including a brief by Vinson & Elkins in support of the U.S. Chamber of Commerce).

Since four Justices must agree to the issuance of a CVSG (the same number required for a decision to review the case), the request itself shows some interest on the Court in returning to this issue. There is no deadline for the SG to provide its response, but it should come in time for the Court to decide the case next Term (and we should therefore expect a brief most likely by December, if not earlier). In the meantime, stay tuned for further developments on this important issue.

1 David C. Thompson & Melanie F. Wachtell, An Empirical Analysis of Supreme Court Certiorari Petition Procedures: The Call for Response and the Call for the Views of the Solicitor General, GEO. MASON L. REV. 237, 274 (2009) (finding that a “petition in a paid case is over 46 times more likely to be granted following a CVSG”).

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Brittany Harwood

Brittany Harwood Associate

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