862 F.3d 890 (9th Cir. 2017), 15-16380, United States ex rel. Campie v. Gilead Sciences, Inc.

Docket Nº:15-16380
Citation:862 F.3d 890
Opinion Judge:Donald W. Molloy, District Judge
Party Name:UNITED STATES OF AMERICA EX REL. JEFFREY CAMPIE and SHERILYN CAMPIE, Plaintiffs-Appellants, v. GILEAD SCIENCES, INC., Defendant-Appellee
Attorney:Tejinder Singh (argued) and Thomas C. Goldstein, Goldstein & Russell P.C., Bethesda, Maryland; Andrew S. Friedman and Francis J. Balint, Jr., Bonnett Fairbourn Friedman & Balint P.C., Phoenix, Arizona; Ingrid M. Evans and Michael A. Levy, Evans Law Firm Inc., San Francisco, California; for Plaint...
Judge Panel:Before: Stephen Reinhardt and A. Wallace Tashima, Circuit Judges and Donald W. Molloy,[*] District Judge.
Case Date:July 07, 2017
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
SUMMARY

Relators filed suit under the False Claims Act (FCA), 31 U.S.C. 3729-33, alleging that Gilead made false statements about its compliance with FDA regulations regarding certain HIV drugs. The Ninth Circuit reversed the district court's dismissal of relators' complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). The panel held that relators stated a plausible claim by alleging factually... (see full summary)

 
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Page 890

862 F.3d 890 (9th Cir. 2017)

UNITED STATES OF AMERICA EX REL. JEFFREY CAMPIE and SHERILYN CAMPIE, Plaintiffs-Appellants,

v.

GILEAD SCIENCES, INC., Defendant-Appellee

No. 15-16380

United States Court of Appeals, Ninth Circuit

July 7, 2017

Argued and Submitted, San Francisco, California April 19, 2017

Appeal from the United States District Court for the Northern District of California. D.C. No. 3:11-cv-00941-EMC. Edward M. Chen, District Judge, Presiding.

SUMMARY [**]

False Claims Act

The panel reversed the district court's Fed.R.Civ.P. 12(b)(6) dismissal of claims under the False Claims Act by relators Jeff and Sherilyn Campie alleging that their former employer, Gilead Sciences, Inc., made false statements about its compliance with Food and Drug Administration regulations regarding certain HIV drugs, resulting in the receipt of billions of dollars from the government; and alleging retaliation against relator Jeff Campie.

The panel held that the relators stated a plausible claim that Gilead's claims seeking payment for noncompliant drugs were a basis for liability under the False Claims Act. Considering the four elements of False Claims Act liability, first, the panel held that relators alleged a " false claim" under theories of factually false certification, implied false certification, and promissory fraud. Second, relators adequately pled " scienter." Third, the relators sufficiently pled " materiality" at this stage of the case where they alleged more than the mere possibility that the government would be entitled to refuse payment if it were aware of the violations. Fourth, the relators sufficiently alleged that Gilead submitted false claims in a number of ways.

The panel held that the relators adequately pled a claim for retaliation in violation of the False Claims Act. Specifically, the panel held that the second amended complaint sufficiently alleged facts showing that Jeff Campie had an objectively reasonable, good faith belief that Gilead was possibly committing fraud against the government; that Gilead knew Campie was engaged in protected activity: and that Gilead discriminated against Campie because he engaged in protected activity.

The panel declined to decide in the first instance the question of whether relators' claims pursuant to 31 U.S.C. § 3729(a)(1)(A), (B) met the heightened pleading standard under Fed.R.Civ.P. 9(b).

Tejinder Singh (argued) and Thomas C. Goldstein, Goldstein & Russell P.C., Bethesda, Maryland; Andrew S. Friedman and Francis J. Balint, Jr., Bonnett Fairbourn Friedman & Balint P.C., Phoenix, Arizona; Ingrid M. Evans and Michael A. Levy, Evans Law Firm Inc., San Francisco, California; for Plaintiffs-Appellants.

Ethan M. Posner (argued) and Joshua N. DeBold, Washington, D.C.; Gretchen Hoff Varner, Covington & Burlington LLP, San Francisco, California; for Defendant Appellee.

Douglas N. Letter (argued ), Benjamin Schultz, and Michael S. Raab, Attorneys, Appellate Staff; Brian Stretch, Acting United States Attorney; Benjamin Mizer, Principal Deputy Assistant Attorney General; Civil Division, United States Department of Justice, Washington, D.C.; for Amicus Curiae United States.

Charles S. Siegel, Waters & Kraus LLC, Dallas, Texas, for Amicus Curiae Professor Peter Linzer.

Before: Stephen Reinhardt and A. Wallace Tashima, Circuit Judges and Donald W. Molloy,[*] District Judge.

OPINION

Donald W. Molloy, District Judge

This case involves allegations under the False Claims Act, 31 U.S.C. § § 3729-33, that Defendant-Appellee Gilead Sciences, Inc. (Gilead) made false statements about its compliance with Food and Drug Administration (FDA) regulations regarding certain HIV drugs, resulting in the receipt of billions of dollars from the government. Relators Jeff and Sherilyn Campie (relators), two former Gilead employees, allege that these noncompliant drugs were not eligible to receive payment or reimbursement and, therefore, any claims presented to the government for payment were false under the False Claims Act. Relators further allege that Gilead violated the False Claims Act when it fired relator Jeff Campie, who discovered and ultimately reported the violations. See 31 U.S.C. § 3730(h). The district court dismissed relators' claims under Federal Rule of Civil Procedure 12(b)(6). It did so before the Supreme Court decided Universal Health Servs., Inc. v. United States (Escobar), __ U.S. __, 136 S.Ct. 1989, 195 L.Ed.2d 348 (2016). We reverse.

I.

Gilead is a large drug producer, with a majority of its prescription drug product sales occurring in the United States. Relevant here, Gilead produces anti-HIV drug therapies, including the drugs Atripla, Truvada, and Emtriva. In 2008 and 2009 alone, the government spent over $5 billion on these anti-retrovirals. Relators claim that in its sale of these drugs to the government, Gilead concealed violations of FDA regulations and knowingly made false statements regarding its regulatory compliance. The facts recited in the relators' complaints, which are taken as true at this stage, Escobar, 136 S.Ct. at 1997, are as follows.

When a drug manufacturer wishes to get a drug approved for manufacture and sale in the United States, it must submit a " new drug application" (NDA) to the FDA, in which it states the chemical composition of a drug and specifies the facilities where it will be manufactured, as well as methods and controls used in the manufacturing process. 21 U.S.C. § 355(a), (b)(1); 21 C.F.R. § 314.50(d)(1). Acceptable facilities must meet federal standards, known as " good manufacturing practices." See 21 C.F.R. Parts 210, 211. The FDA may refuse an application or withdraw a previously approved application if the methods or facilities " are inadequate to preserve [the drug's] identity, strength, quality, and purity." 21 U.S.C. § 355(d), (e). Once approved, the manufacturer must obtain FDA approval to make major changes to the manufacturing process " before the distribution of the drug" by submitting an application called a Prior Approval Supplement, or PAS. 21 U.S.C. § 356a(c)(2); 21 C.F.R. § 314.70(b)(3). Both an NDA and PAS require the applicant to certify that all statements in the application are true and agree to comply with all applicable laws and regulations. See Form 356h.

In the mid-2000s, Gilead submitted NDAs and received FDA approval for Emtriva, Truvada, and Atripla. These drugs contain the active ingredient1 emtricitabine (commonly known as FTC).2 In its NDA applications, Gilead represented to the FDA that it would source the FTC from specific registered facilities in Canada, Germany, the United States, and South Korea. But, relators allege that as early as 2006, Gilead contracted with Synthetics China to manufacture unapproved FTC at unregistered facilities. For a period of sixteen months beginning in December 2007, Gilead brought illicit FTC from a Synthetics China facility into the United States to use in its commercial drugs, claiming that the FTC had come from its approved South Korean manufacturer. Gilead allegedly began using Synthetics China to save money and trigger price reduction clauses in contracts with other FTC suppliers.

Gilead ultimately sought approval from the FDA to use Synthetics China's FTC in October 2008, but according to relators, Gilead had been including products from Synthetics China in its finished drug products for at least two years before this approval was obtained in 2010. Relators also allege that Gilead falsified or concealed data in support of its application to get Synthetics China approved by the FDA. For example, Gilead claims in its application that it had received three full-commercial-scale batches of FTC from Synthetics China that passed testing and were consistent with or equivalent to FTC batches made from existing, approved manufacturers. Relators contend that this representation was false as two of three batches had failed internal testing. One of the batches purportedly contained " residual solvent levels in excess of established limits" and other impurities. A second batch had " microbial contamination" and showed the presence of arsenic, chromium and nickel contaminants. Gilead did not report this to the FDA, but rather secured two new batches from the unapproved Chinese site and amended its PAS on April 24, 2009, to include the substitute data. The FDA approved the amended PAS in May 2009 and the Synthetics China facility was registered in 2010. Gilead also began using FTC from another, unapproved Synthetics China facility, but ultimately stopped using Synthetics China as a supplier in October 2011, following continued contamination issues. Two recalls of contaminated products occurred in 2014.

Gilead never acknowledged or notified the FDA about the bad test results or the contamination and adulteration...

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