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In Closely Watched False Claims Act Case, First Circuit Weighs in on Fed. R. Civ. P. 9(b) But Avoids Important Issue of Interplay Between the FCA and FDA Law

Late last year, we wrote about the False Claims Act qui tam case of United States ex rel. Ge v. Takeda Pharmaceuticals Company pending in the First Circuit, that raised a rather routine issue under Fed. R. Civ. P. 9(b) (pleading fraud with particularity) and an important and novel issue under Rule 12(b)(6) (stating a claim on which FCA liability could be based). The First Circuit has now affirmed the district court’s dismissal of the case, but in doing so, the Court reached only the Rule 9(b) issue and did not weigh in on the more intriguing question of if and when a violation of FDA laws can serve as the underpinnings of an FCA violation. Opinion.

The Court’s opinion on the Rule 9(b) issue is hardly surprising given how meager the details alleged by relator Ge were in comparison to what is required by well-established First Circuit precedent. As the Court noted in dismissing her appeal, in a qui tam action such as this in which the defendant is alleged to have induced third parties to file false claims with the government, a relator can satisfy the Rule 9(b) requirement by providing factual or statistical evidence to strengthen the inference of fraud beyond possibility without necessarily providing details as to each false claim. But, the complaint must nevertheless sufficiently establish that false claims were submitted to the government for payment as a result of the defendant’s alleged misconduct. Opinion at pp. 14-15.

“Dr. Ge has, however, alleged next to no facts in support of the proposition that Takeda’s alleged misconduct resulted in the submission of false claims or false statements material to false claims for government payment. Dr. Ge alleges a conclusion that numerous claims for the four subject drugs would not have been submitted for government payment but for Takeda’s misconduct, but alleges no more than that. What is missing are any supporting allegations upon which her conclusion rests and any particulars. Dr. Ge’s pleadings fall far short of what was found barely adequate in Duxbury I, see 579 F.3d at 29-30, and are far less particular than those there whose sufficiency was deemed a ‘close call,’ id. at 30.”  See Opinion at pp. 15-16.

The relator attempted to salvage her case under Rule 9(b) by raising three new theories of FCA liability, but the First Circuit found these claims were waived because they were not raised in the district court. While not reaching the Rule 9(b) issue on these waived theories, the Court did note that it was “doubtful” any of these theories under any subsection of the FCA would have added the needed specificity under Rule 9(b). Id. at pp. 17-18.

In doing so, the Court cited the Eleventh Circuit’s Clausen case and the Fourth Circuit’s Nathan case (which is the subject of a pending petition for a writ of certiorari to the Supreme Court), leading some to wonder if the First Circuit is signaling that it is becoming more restrictive on Rule 9(b) issues in whistleblower cases. We don’t think so. Rather, relators and their counsel must continue to look at Duxbury I cited in the Ge opinion as the floor for what must be alleged in a complaint to survive a defense challenge under Rule 9(b).

The most watched issue in the case, and the one on which the United States had filed an amicus curiae brief, was the important emerging question of whether FCA liability can ever hinge on failure to comply with the FDA’s post-approval reporting requirements (such as adverse events) FDA and whether alternative administrative remedies (such as those available through the FDA) preclude FCA liability. Opinion at pp. 12-13 n. 3.

We will have to wait for another day to learn the First Circuit’s view on this theory of FCA liability.

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