DOJ Tells Supreme Court It Will Dismiss Long-Standing False Claims Act Case Against Gilead Sciences

By Matt TuretZky

December 5, 2018

On November 30, 2018, at the invitation of the Supreme Court, the government filed an amicus curiae brief in Gilead Sciences, Inc. v. United States ex rel. Campie. Certain parts of the brief were unsurprising, such as the government’s position that the Ninth Circuit’s decision below was correct. But other parts of the government’s brief were outright shocking. In an unusual and unprecedented move, the government asserted, “if this case is remanded to the district court, the government will move to dismiss respondents’ suit under Section 3730(c)(2)(A).”

This has never been done before. We are aware of no False Claims Act case in which the government filed an amicus curiae brief at the Supreme Court stating it would dismiss the case if it was remanded—and this is a case in which the government argues that the district court erred by dismissing in the first place. If the Supreme Court indulges the government and denies certiorari, it would preserve the Ninth Circuit’s ruling, but would ultimately result in a definitive “win” for Gilead Sciences in its long-standing litigation against relator Jeffrey Campie. This is especially remarkable because the case has been pending for several years and only now is the government arguing for dismissal.

Background on the Gilead Case

So how did we get here? This is a case in which Campie alleges Gilead adulterated or misbranded Truvada, Emtriva, and Atripla—drugs used to fight HIV—in violation of certain FDA regulations. Campie further alleges that compliance with those regulations is material to the government’s decision to pay claims for reimbursement of those drugs under Medicare Part D and other government programs. Claims for payment of those drugs violate the False Claims Act because compliance with FDA regulations is, in Campie’s view, material to the government’s decision to pay claims. This type of False Claims Act theory is known as an implied certification case (so-named because the person submitting the claim is impliedly certifying compliance with material statutory, regulatory, and contractual requirements). Implied certification cases are expressly authorized under the Supreme Court’s decision in Universal Health Services, Inc. v. United States ex rel. Escobar.

The case is pending certiorari from the Ninth Circuit, whose July 7, 2017 decision cemented that circuit as the lone holdout on how government knowledge plays into a district court’s Escobar materiality analysis at the motion to dismiss stage. Campie pleaded a “variety of facts that speak to the government’s knowledge,” including warning letters, inspection and noncompliance letters, and two recalls that took place in 2014. Gilead’s argument—which is quite persuasive—focused on these facts and noted that continued FDA approval of its drugs even after the agency became aware of regulatory noncompliance makes these violations immaterial to its payment decision. The district court agreed and dismissed the case.

The Ninth Circuit reversed. In the Ninth Circuit’s view, it matters not that the government continued to pay for Gilead “medications after it knew of . . . FDA violations.” The Ninth Circuit held that Gilead “read too much into the FDA’s continued approval . . . and its effect on the government’s payment decision.” The court noted that the parties dispute exactly what the government knew and when, calling into question its “actual knowledge,” a key component of Escobar’s analysis of materiality.

The Government’s Amicus Curiae Brief

The government’s brief makes two big points.

First, in its view, the Ninth Circuit got it right. Because the complaint did not indicate that the government had “actual knowledge of violations at the time of payment,” the case was purportedly distinguishable from other significant FCA cases decided since Escobar.

Second, the basis for the government’s decision to dismiss the case under section 3730(c)(2)(A) is that the case would result in “burdensome discovery and Touhy requests for FDA documents and FDA employee discovery (and potentially trial testimony), in order to establish ‘exactly what the government knew and when,’ which would distract from the agency’s public-health responsibilities.”

On the first point, the Ninth Circuit got it wrong. The Ninth Circuit’s decision treated the materiality analysis as unresolvable because of a dispute of fact. But motions to dismiss are to be decided on what is pleaded. And False Claims Act complaints must be pleaded with particularity under Rule 9(b) of the Federal Rules of Civil procedure. As stated in Escobar, “[w]e reject [the] assertion that materiality is too fact intensive for courts to dismiss False Claims Act cases on a motion to dismiss or at summary judgment. . . . And False Claims Act plaintiffs must also plead their claims with plausibility and particularity under Federal Rules of Civil Procedure 8 and 9(b) by, for instance, pleading facts to support allegations of materiality.” The Ninth Circuit’s analysis should have focused on whether the Relator’s complaint, as written, plausibly and with particularity stated why Gilead’s alleged regulatory violations were material to the government’s decision to pay. But based on our reading, the Ninth Circuit did not.

On the second point, the government’s rationale for dismissal is unpersuasive. According to the government’s amicus brief, the case should be dismissed because “burdensome discovery” requests would follow. But in any implied certification case that goes to discovery, Touhy requests, agency employee discovery, and depositions to establish “what the government knew and when” will naturally follow. It cannot be that the FDA is special among government agencies because of its public health mission. There are many agencies focused on public health. What about CMS and HHS? After all, more than half of all False Claims Act cases are Medicare cases. Is the government going to dismiss those cases because of a concern about how discovery might affect public health? Probably not.

It seems likely that something else is afoot. Perhaps the government likes the Ninth Circuit’s decision and is concerned that the Supreme Court will reverse. If that is correct, then the government’s offer to dismiss the Gilead case would protect what it perceives to be a good ruling. It would also limit the Supreme Court’s ability to clarify Escobar on what it considers “bad facts.” It also gives the Supreme Court an “out” that achieves this result without deciding the case on the merits. The government admits that this case is a “poor vehicle” for issuing an Escobar materiality ruling and notes that the Supreme Court decided Escobar after briefing had concluded in the Ninth Circuit in Gilead, rendering the facts and arguments “less developed than they would be in a case pleaded and litigated after that decision.”

Now What?

This case is not over, but the government’s brief makes it very likely that the Supreme Court will not grant certiorari. Regardless of whether the Ninth Circuit’s decision stands, there should be no doubt that government knowledge remains one of the strongest arguments for defendants in implied certification cases. Also, materiality is proper for consideration at the motion to dismiss stage. The Escobar decision expressly says so. And thus, the proper focus for a court (and a defendant drafting a motion to dismiss) is on what the complaint says, and whether it says enough with sufficient plausibility and particularity. Although the Gilead decision may survive in the Ninth Circuit for some time, the Supreme Court will eventually hear a case that involves the Escobar materiality standard. When the Supreme Court hears such a case, it may then have something to say about Gilead.

Another thing to think about going forward is how the Granston Memorandum played into the government’s announcement that it would seek dismissal. The Granston Memorandum describes several factors that the government will consider before seeking dismissal. One factor is “preserving government resources.” And that is certainly the government’s stated reason for seeking dismissal here. But it appears the government is really seeking dismissal for the purpose of “controlling litigation brought on behalf of the United States,” which is another valid reason for seeking dismissal under the Granston Memorandum. The Granston Memorandum even goes so far as to acknowledge one district court case in which “the government moved to dismiss, in part, to avoid the risk of unfavorable precedent.” Although the costs associated with discovery might have played some role in the government’s decision, the overriding rationale appears to be the government’s desire to preserve favorable precedent.

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