United States ex rel. Campie v. Gilead Scis., Inc.

Decision Date07 July 2017
Docket NumberNo. 15-16380,15-16380
Citation862 F.3d 890
Parties UNITED STATES of America EX REL. Jeffrey CAMPIE and Sherilyn Campie, Plaintiffs-Appellants, v. GILEAD SCIENCES, INC., Defendant-Appellee.
CourtU.S. Court of Appeals — Ninth Circuit

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, 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

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 problems. Despite being aware of manufacturing problems with Synthetics China, Gilead allegedly released 77 lots of FTC produced by Synthetics China to its contract manufacturers before the FDA approval of the Synthetics China facility. Relators allege that the drug products made with FTC affecting the quality and purity of the drug and produced at a different, uninspected manufacturing site are not FDA-approved. And, according to relators, had the FDA been aware of these issues, it would not have approved the use of the Synthetics China manufacturing facility. Relators make a similar argument for the use of unapproved sites in Alberta, Canada to produce ambrisentan

, the active ingredient in Letairis, and contamination of tenofovir disoproxil fumarate (a.k.a. Viread), another active ingredient.

Relators insist that Gilead actively concealed its use of illicit FTC products by Synthetics China in a number of ways.

First, Gilead imported the FTC through its Canadian facilities and used fraudulent labeling. Second, the labels and paperwork for the FTC were obscured or augmented to conceal where the FTC was actually produced. Third, Gilead credited its approved FTC manufacturers with the production of the Synthetics China FTC. Relators allege Gilead's false statements and fraudulent conduct resulted in government payments both directly, through programs such as the Department of Defense, Department of Veterans Affairs, Federal Bureau of Prisons, USAID, and the Public Health Service, and through reimbursement programs, such as Medicare, Medicaid, TRICARE, FEHBP, and the Ryan White Program. Payment for drugs under these programs is contingent upon FDA approval. See, e.g. , 48 C.F.R. § 46.408 (direct payment); 42 U.S.C. § 1396r-8(k)(2)(A)(i) (Medicaid); 42 U.S.C. § 1395w-102(e) (Medicare Part D). Relators allege that because the drugs paid for by the government contained FTC sourced at unregistered facilities, they were not FDA approved and therefore not eligible for payment under the government programs.

Relators further claim that these drugs were "adulterated" or "misbranded" in violation of the law. Congress expressly prohibits any person from introducing or receiving any "adulterated" or "misbranded" drugs in interstate commerce. 21 U.S.C. § 331(a), (c). A drug is "adulterated" if "the methods used in, or the facilities or controls used for, its manufacture, processing, packing, or holding do not conform to or are not operated or administered in conformity with current good manufacturing practice," or if "any substance has been (1) mixed or packed therewith so as to reduce its quality or strength or (2) substituted wholly or in part therefor." 21 U.S.C. § 351(a)(2)(B), (d). A drug is "misbranded" if, inter alia , "it is an imitation of another drug," or "it was manufactured, prepared, propagated, compounded, or processed in an establishment not duly registered" under the Food, Drug, and Cosmetic Act. 21 U.S.C. § 352(i)(2), (o). Violations of that restriction are crimes and adulterated or misbranded drugs can be seized. 21 U.S.C. §§ 333(a), 334.

Relators finally raise a retaliation claim regarding the termination of Relator Jeff Campie. See 31 U.S.C. § 3730(h). Mr. Campie worked at Gilead as its Senior Director of Global Quality Assurance from July 2006 to July 2009. His ...

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