False Claims Act Litigation Update: Bayer Decision Sheds Light on Pleading in False Claims Act Cases

May 12, 2014   

A recent win for a large company in a False Claims Act suit (a seeming rarity as of late) alleging illegal off-label promotion could provide some helpful insight to similarly situated manufacturers and support dismissals of similarly defective lawsuits. Laurie Simpson, the relator and an employee at Bayer Corporation for seven years, helped market and promote Trasylol, a prescription drug approved by the FDA for patients undergoing coronary artery bypass graft using a cardiopulmonary bypass pump to prevent excess bleeding. In Simpson’s 131-page complaint containing 30 causes of action, she alleged that Bayer violated the False Claims Act by “engaging in a campaign of concealment and disinformation concerning Trasylol’s safety and efficacy.” Specifically, Simpson’s complaint alleged that Bayer promoted Trasylol for other types of surgeries and failed to provide safety and efficacy information about those other uses. Simpson alleged that such omissions resulted in the misbranding of Trasylol under the Federal Food, Drug, and Cosmetic Act (“FDCA”).

Generally, the False Claims Act is a federal law that imposes liability on corporations who defraud governmental programs. Notably, the Act includes a “qui tam” provision, which allows individuals not affiliated with the government to file actions on behalf of the government. There are two categories of false claims upon which a relator can base a qui tam complaint: factually false claims and legally false claims. While factually false claims are false as to a matter of fact, legally false claims involve false certifications of compliance with laws or regulations that are prerequisites to payment.

The allegations Simpson presented were legally false claims because they were based on the alleged misbranding of Trayslol in violation of the FDCA. In response to Simpson’s allegations, Bayer filed a motion to dismiss Simpson’s complaint. In its motion, Bayer argued that Simpson failed to adequately plead a false claim for payment, a critical element of a False Claims Act violation. Under the False Claims Act, to adequately plead a legally false claim, Simpson had to establish that Bayer made an implied certification that Trasylol complied with the FDCA restriction against misbranding, and that such compliance with the FDCA was a “condition of payment” from the government.

The U.S. District Court for the District of New Jersey reviewed each of the government programs that Bayer allegedly defrauded (i.e., Medicare, DOD, Tricare) to determine whether the government conditioned its payments for Trasylol on the limited on-label use of the drug.  On April 11, 2014, the court granted Bayer’s motion to dismiss Simpson’s complaint concluding that Simpson’s “bare legal conclusions” did not adequately plead the existence of a condition of payment. In other words, even assuming that Bayer marketed Trasylol for purposes other than those included on Trasylol’s FDA approved label, the District Court ruled that Simpson needed to allege more to properly state a claim under the False Claims Act. The court noted that the purpose of the False Claims Act “was not designed for use as a blunt instrument to enforce compliance with all medical regulations, but rather only those regulations that are a precondition to payment.” The court’s decision can be read here. This statement by the court will surely support dismissals of other complaints with similarly defective allegations.

The attorneys at Fuerst Ittleman David & Joseph, PL will continue to monitor developments in this and similar cases. Our attorneys have extensive experience in the areas of food and drug, administrative law, qui tam, regulatory compliance, and white-collar criminal defense.  If you have any questions, an attorney can be reached by emailing us at contact@fidjlaw.com or by calling (305) 350-5690. Let FIDJ show you how we can help today.