Luckey & USA. v. Baxter Healthcare Corp.

• Decision Date: 12 July 1999
• Docket Number: Nos. 98-2843,98-3524,s. 98-2843
• Citation: 183 F.3d 730
• Parties: (7th Cir. 1999) Joan P. Luckey and United States of America ex rel. Joan P. Luckey, Plaintiffs-Appellants, v. Baxter Healthcare Corporation, Defendant-Appellee
• Court: U.S. Court of Appeals — Seventh Circuit

Page 730

183 F.3d 730 (7th Cir. 1999)

Joan P. Luckey and United States of America ex rel. Joan P. Luckey, Plaintiffs-Appellants, v. Baxter Healthcare Corporation, Defendant-Appellee.

Nos. 98-2843, 98-3524

United States Court of Appeals, Seventh Circuit

Argued April 8, 1999

Decided July 12, 1999

Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 95 C 509--Ruben Castillo, Judge.

Before Posner, Chief Judge, and Easterbrook and Manion, Circuit Judges.

Easterbrook, Circuit Judge.

Among the products of Baxter Healthcare Corp. are blood plasma derivatives, useful to promote blood clotting and provide antibodies against disease. Federal regulations require that incoming units of plasma be tested for hepatitis and human immunodeficiency virus before it is commingled with a larger pool from which commercial blood plasma products are prepared. 21 C.F.R. sec.sec. 610.40, 610.45, 640.67. Joan P. Luckey, a former employee of Baxter Screening Laboratory (the division of Baxter Healthcare that tests plasma), filed this qui tam action in the name of the United States under the False Claims Act, 31 U.S.C. sec.sec. 3729(a)(1), 3730(b), contending that Baxter falsely represented that it had tested incoming plasma. Luckey also sought relief in her own right, claiming that she had been dismissed in violation of sec.3730(h) for exposing Baxter's false claims. The district court granted summary judgment in Baxter's favor. 2 F. Supp. 2d 1034 (N.D. Ill. 1998).

Blood plasma is clear. This tempts outside vendors to cheat--to palm off saline solution as plasma, or to dilute plasma with saline to sell a larger volume. On some occasions saline contamination is accidental, for saline solution is used to clean the machinery used to extract plasma from whole blood. Normal tests for hepatitis virus and HIV give meaningless results when applied to pure saline solution, and the presence of saline contamination in blood plasma leads to false negatives in some cases. Luckey believes that Baxter should use a total protein test to determine whether each incoming plasma unit contains saline solution. Managers at Baxter Screening Laboratory disagreed with Luckey's proposal. Testing is costly, and the managers thought that saline dilution is not a sufficiently common problem that a separate test always is justified. Blood plasma is pooled before being packaged for sale, and a total protein test is administered to the pool. Thus there is no risk that saline will cause any shipping product to defeat the tests for hepatitis virus or HIV (tests that are performed on the pool at the end of processing, just as they are performed on each unit of plasma at the outset). Baxter also applies viral inactivation processes to each pool, reducing risks to a negligible level for the final product.

None of the federal regulations requires a supplier to administer a total protein test to each incoming unit. Nonetheless, the regulations do demand testing for hepatitis and HIV; to administer ineffective tests is the same as to administer no tests, Luckey contends. A representation that blood plasma has been tested, when no (proper) tests have been performed, is fraud on the federal government, Luckey submits, and therefore is actionable in a qui tam suit. Baxter denies that it makes any representation to the United States about its testing; when it sells plasma products to federal agencies, its only relevant statements are that it holds a license from the Food and Drug Administration and that the products are free of hepatitis and HIV. But we shall assume for current purposes that Luckey could show that a representation about testing is made indirectly. The assumption does not assist her.

The principal difficulty with Luckey's position is its equation of ineffective testing with no testing, followed by the proposition that a battle of experts in litigation determines whether testing is "effective." Only in Humpty Dumpty's world of word games would anyone apply the label "fraud" to the kind of representations Baxter made. Perhaps Luckey could persuade the Food and Drug Administration to require more or different testing; but when a supplier complies with the existing regulations, it is entitled to represent to the government (and the world) that it has done so, without facing a claim of deception.

What tests to perform, and when, are difficult questions. No one doubts that, when saline contamination is a possibility, a total protein test reduces the numbers of false negatives from other tests. Similarly, however, no one believes (at least, no one should believe) that every possible test, no matter how expensive, should be administered to avoid every conceivable risk, no matter how small. Some form of cost-benefit inquiry must be carried out. See Stephen Breyer, Breaking the Vicious Circle: Toward Effective Risk Regulation (1993). Are the extra costs worth the extra expense? That depends not only on the volume of saline-contaminated plasma received, and the probability that saline will lead to false negative results from standard tests, but also on the effectiveness of the tests that are applied to the plasma after pooling. Tests performed on the pool have few if any false negatives. Thus the real cost of not using a total protein test earlier is that some plasma with hepatitis or HIV will get into a larger pool and cause the rejection of the whole pool, wasting quantities of plasma that were sound when received. Waste is regrettable, but the cost of thrown-out plasma may be measured in dollars; and if Baxter is willing to bear the expense (thinking the cost of rejected pools to be less than the cost of more comprehensive testing earlier), it is hard to see why the...