Life Science Compliance Update

May 04, 2017

Genentech Beats FCA Suit, Thanks to Escobar


On Monday, May 1, 2017, the United States Court of Appeals for the Third Circuit stopped a False Claims Act suit that accused Genentech Inc. of defrauding Medicare by concealing certain side effects of its cancer drug Avastin, stating that the whistleblower did not show that failing to report such safety information was relevant to government reimbursement for medication.

Prior to filing his qui tam suit, The relator, Gerasimos Petratos, a prior global head of health care data analytics for Genentech, allegedly recommended implementing a different database that he believed would more accurately reflect the drug’s side effects. There were Genentech employees who agreed with Petratos but declined to follow his recommendations, citing “business risk.”

After Petratos brought his concerns to the heads of regulatory affairs and product development, the executives did not follow Petratos’ recommendations, and he received a “scathing email” from his supervisor. In June 2011, Petratos filed his initial complaint, arguing that Genentech based regulatory submissions off databases with inadequate information about Avastin’s risks and omitted electronic medical records that would have given better answers about the drug’s safety.

Petratos claimed Genentech concealed information about Avastin’s health risks in its reports to the United States Food and Drug Administration (FDA). Therefore, he alleged, doctors submitted more Medicare reimbursements than they would have if they had known all of the side effect risks, thereby resulting in lower prescription dosages.

District of New Jersey Decision

This follows an October 2015 decision by U.S. District Judge Madeline Cox Arleo of the District of New Jersey, dismissing the case. Petratos filed the qui tam suit on the grounds that Petratos failed to state a claim under the Act. The United States joined Petratos in the case (originally filed in U.S. District Court for the District of New Jersey) by the U.S. government, District of Columbia, and twenty-six states.

Petratos alleged that doctors prescribing Avastin made false claims when requesting reimbursement from Medicaid and Medicare because certain procedures were not “medically reasonable and necessary,” as required by law. Genentech argued that CMS makes the decision and that there are no allegations that the agency would have made a different decision about Avastin if it had additional information.

Judge Arleo held that the drug and health services agencies did not err in approving Avastin as medically reasonable and necessary for treating certain illnesses, dismissing the claim with prejudice.

Arleo noted that “Plaintiff [Petratos] cites nothing to show that the databases used violated any regulation at all, much less one which was a precondition of payment.”

Third Circuit Decision

In the opinion, Third Circuit Judge Thomas Hardiman noted that Petratos failed to prove the materiality element of a False Claims Act claim – “having a natural tendency to influence, or be capable of influencing, the payment or receipt of money.” He noted that “there are no factual allegations showing the [the Centers for Medicare and Medicaid Services] would not have reimbursed these claims had these [alleged reporting] deficiencies been cured.”

Hardiman continued, stating, “Petratos does not dispute this finding, which dooms his case. Simply put, a misrepresentation is not ‘material to the government’s payment decision,’ when the relator concedes that the government would have paid the claims with full knowledge of the alleged noncompliance.”

Attorneys for Petratos and Genentech did not respond to requests for comment.

We will be providing a full analysis of this case in the June issue of Life Science Compliance Update.

April 21, 2017

Going Back to the Roots of the False Claims Act - Baxter Settles cGMP Allegations


While False Claims Act cases are relatively common in the life science industry, FCA cases for cGMP violations are not. This article explores the most recent case involving Baxter Healthcare Corporation and some of its troubling implications.

It was the darkest hours of March 1863, and things were not going well for the Union Army. Confederate victories continued to pile up, and President Lincoln had yet to find a leader for the Army of the Potomac who could best Robert E. Lee. To make matters worse, there was a steady stream of reports coming from the front that the Union Army suffered from substandard equipment despite the mighty industrial advantage the North possessed. Wartime profiteering was at an all-time high.

A frustrated President and Congress decided to act, and on March 12, 1863, President Lincoln signed the False Claim Act (“FCA”) into law. At the heart of the new law was the concept of using rogues to catch the parasites by allowing private individuals to sue on behalf of the Government and then to share in the recovery.

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April 04, 2017

DOJ Has Third Highest Annual Recovery in FCA History


The United States Department of Justice has announced the fiscal year 2016 recoveries from civil False Claims Act. This article delves into the numbers, extracting those recoveries related to the healthcare industry, and comparing DOJ-brought suits versus whistleblower-brought suits.

The United States Department of Justice (“DOJ”) announced fiscal year (“FY”) 2016 recoveries from civil False Claims Act (“FCA”) cases mid-December 2016. The total, over $4.7 billion, includes both settlements and judgments and was the third highest annual recovery in FCA history. The 2016 recoveries brought the fiscal year average to nearly $4 billion since FY 2009, and a total of $31 billion has been recovered over the last eight fiscal years. 

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