Posted: 14 Nov 2019 10:18 PM PST
By Serra J. Schlanger —
On November 5, 2019, the U.S. District Court for the Northern District of California added another entry in the long running saga United States ex rel. Campie v. Gilead Sciences, Inc. when it granted the DOJ’s motion to dismiss. We have extensively covered this case (see here, here, here, here, here, here, here, and here), but an overview is helpful to understand the latest development.
This case results from a qui tam complaint filed in 2010 by two former employees alleging that Gilead made false statements to the FDA about the company’s anti-HIV drugs. According to the relators, if the FDA had been aware of the false statements it would not have permitted Gilead to market the drugs. Because the drugs were reimbursed by federal healthcare programs, the relators contended that Gilead’s actions resulted in the submission of false claims in violation of the False Claims Act (FCA). The DOJ declined to intervene in the case, but the relators chose to proceed with the litigation. The District Court dismissed the relators’ complaint twice for failure to state a claim under the FCA. However, in July 2017, the Ninth Circuit Court of Appeals reversed the District Court and found that the relators had alleged sufficient facts to state a claim for relief. Gilead’s petition for rehearing before the Ninth Circuit was denied, so the company filed a petition for certiorari with the Supreme Court in December 2017. In April 2018, the Supreme Court invited the U.S. Solicitor General to file a brief expressing the views of the United States on Gilead’s petition. The DOJ’s Statement of Interest, filed in November 2018, generally agreed with the Ninth Circuit decision but also disclosed that the government would affirmatively seek dismissal of the case if it was remanded. The Supreme Court denied Gilead’s petition for certiorari in January 2019, and the case returned to the District Court. The DOJ filed its motion to dismiss in March 2019.
The District Court evaluated the DOJ’s motion to dismiss using the two-step analysis established in United States ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., 151 F.3d 1139 (9th Cir. 1998). Under the Sequoia Orange test, the government’s dismissal of an FCA case may be justified based on “(1) identification of a valid government purpose; and (2) a rational relation between dismissal and accomplishment of the purpose.” If the government satisfies the two-step test, the burden switches to the relators “to demonstrate that dismissal is fraudulent, arbitrary and capricious, or illegal.”
In its motion to dismiss, the DOJ identified two government purposes to support dismissal of the relators’ suit: (1) to prevent undermining the decisions made by FDA and CMS about how to address the conduct at issue, and (2) to avoid the additional expenditure of government resources on a case that it fully investigated and decided not to pursue. The relators acknowledged that these purposes have previously been identified by the DOJ as relevant considerations (see our post about the Granston memo), but argued that there was an insufficient factual basis to support the asserted government purposes.
The District Court did not agree with the relators’ assessment, in part due to the “substantial evidence” the DOJ presented about its investigation which included interviews with the relators and other witnesses, consultations with experts from FDA, meetings with Gilead, collection of over 600,000 pages of documents, and review of the history of multiple manufacturing lots identified by the relators as having problems. The Court also looked at FDA’s oversight of Gilead and noted that history included a Warning Letter, Field Alert Reports, and multiple inspections. Based on this history, the Court concluded that there was a “concrete factual basis” for the government to argue that allowing the case to proceed would undermine the decisions made by FDA and CMS.
The relators also argued that the DOJ did not provide a factual basis for the second identified government purpose, the cost of continued litigation. Although the Court noted that the DOJ could have provided a more specific and robust cost analysis, the Court ultimately determined that the DOJ had considered the cost and benefit such that its decision to seek dismissal was supported by a rational basis. The Court also acknowledged that the facts of this case would likely entail extensive discovery of government witnesses and documents due to the unresolved issue of whether Gilead’s alleged false statements were material. The Court reasoned that discovery into what the government knew and when could not be avoided if the case continued.
After determining that the DOJ had met the two-step Sequoia Orange test, the Court then concluded that the DOJ’s decision to dismiss this case was not arbitrary and capricious. As such, the Court granted the DOJ’s motion to dismiss, but noted that the relators could still proceed with their remaining claims.
After almost ten years of investigation and litigation, this may be the end of this saga. Although this case once seemed destined to provide clarity on the materiality standard established in Universal Health Services. Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016), it appears that we may need to continue to wait for that clarity. However, this case does reveal how the DOJ is implementing the Granston memo and the factors and evidence that may be used to support the dismissal of FCA claims when the government declines to intervene in a qui tam case.
On November 5, 2019, the U.S. District Court for the Northern District of California added another entry in the long running saga United States ex rel. Campie v. Gilead Sciences, Inc. when it granted the DOJ’s motion to dismiss. We have extensively covered this case (see here, here, here, here, here, here, here, and here), but an overview is helpful to understand the latest development.
This case results from a qui tam complaint filed in 2010 by two former employees alleging that Gilead made false statements to the FDA about the company’s anti-HIV drugs. According to the relators, if the FDA had been aware of the false statements it would not have permitted Gilead to market the drugs. Because the drugs were reimbursed by federal healthcare programs, the relators contended that Gilead’s actions resulted in the submission of false claims in violation of the False Claims Act (FCA). The DOJ declined to intervene in the case, but the relators chose to proceed with the litigation. The District Court dismissed the relators’ complaint twice for failure to state a claim under the FCA. However, in July 2017, the Ninth Circuit Court of Appeals reversed the District Court and found that the relators had alleged sufficient facts to state a claim for relief. Gilead’s petition for rehearing before the Ninth Circuit was denied, so the company filed a petition for certiorari with the Supreme Court in December 2017. In April 2018, the Supreme Court invited the U.S. Solicitor General to file a brief expressing the views of the United States on Gilead’s petition. The DOJ’s Statement of Interest, filed in November 2018, generally agreed with the Ninth Circuit decision but also disclosed that the government would affirmatively seek dismissal of the case if it was remanded. The Supreme Court denied Gilead’s petition for certiorari in January 2019, and the case returned to the District Court. The DOJ filed its motion to dismiss in March 2019.
The District Court evaluated the DOJ’s motion to dismiss using the two-step analysis established in United States ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., 151 F.3d 1139 (9th Cir. 1998). Under the Sequoia Orange test, the government’s dismissal of an FCA case may be justified based on “(1) identification of a valid government purpose; and (2) a rational relation between dismissal and accomplishment of the purpose.” If the government satisfies the two-step test, the burden switches to the relators “to demonstrate that dismissal is fraudulent, arbitrary and capricious, or illegal.”
In its motion to dismiss, the DOJ identified two government purposes to support dismissal of the relators’ suit: (1) to prevent undermining the decisions made by FDA and CMS about how to address the conduct at issue, and (2) to avoid the additional expenditure of government resources on a case that it fully investigated and decided not to pursue. The relators acknowledged that these purposes have previously been identified by the DOJ as relevant considerations (see our post about the Granston memo), but argued that there was an insufficient factual basis to support the asserted government purposes.
The District Court did not agree with the relators’ assessment, in part due to the “substantial evidence” the DOJ presented about its investigation which included interviews with the relators and other witnesses, consultations with experts from FDA, meetings with Gilead, collection of over 600,000 pages of documents, and review of the history of multiple manufacturing lots identified by the relators as having problems. The Court also looked at FDA’s oversight of Gilead and noted that history included a Warning Letter, Field Alert Reports, and multiple inspections. Based on this history, the Court concluded that there was a “concrete factual basis” for the government to argue that allowing the case to proceed would undermine the decisions made by FDA and CMS.
The relators also argued that the DOJ did not provide a factual basis for the second identified government purpose, the cost of continued litigation. Although the Court noted that the DOJ could have provided a more specific and robust cost analysis, the Court ultimately determined that the DOJ had considered the cost and benefit such that its decision to seek dismissal was supported by a rational basis. The Court also acknowledged that the facts of this case would likely entail extensive discovery of government witnesses and documents due to the unresolved issue of whether Gilead’s alleged false statements were material. The Court reasoned that discovery into what the government knew and when could not be avoided if the case continued.
After determining that the DOJ had met the two-step Sequoia Orange test, the Court then concluded that the DOJ’s decision to dismiss this case was not arbitrary and capricious. As such, the Court granted the DOJ’s motion to dismiss, but noted that the relators could still proceed with their remaining claims.
After almost ten years of investigation and litigation, this may be the end of this saga. Although this case once seemed destined to provide clarity on the materiality standard established in Universal Health Services. Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016), it appears that we may need to continue to wait for that clarity. However, this case does reveal how the DOJ is implementing the Granston memo and the factors and evidence that may be used to support the dismissal of FCA claims when the government declines to intervene in a qui tam case.
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