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From Health Law Daily, October 17, 2018

12-year FCA litigation against Bayer continues, relator an original source

By David Yucht, J.D.

A Minnesota district court found that a former Bayer Healthcare (Bayer) market analyst demonstrated that she had direct knowledge of the "true state of the facts" that her former employer allegedly possessed evidence to know that its cholesterol medication, Baycol®, was not as effective or safe as represented, and accordingly she was an original source of information for purposes of the False Claims Act (FCA) (31 U.S.C. §3729 et seq.). Moreover, the allegations in her second amended complaint concerning fraudulent inducements made to the Department of Defense (DoD) related back to her original complaint and therefore came within the six-year statute of limitations. Consequently, the court denied Bayer’s motion to dismiss (U.S. ex rel. Simpson v. Bayer Healthcare, October 16, 2018, Davis, M.).

FCA suit. A former market analyst for Bayer alleged that the DoD and a number of other government agencies had multi-million-dollar contracts with Bayer for its cholesterol medication, Baycol. The ex-employee claimed, among other things, that through illegal kickbacks and misbranding, Bayer caused false claims to be filed with the government. She originally filed an FCA suit in 2006, and over the years, she litigated several dismissal motions and two appeals to the Eighth Circuit Court of Appeals. Her surviving claims, relevant here, involved allegations that the DoD was fraudulently induced to enter into two contracts, both in 2001, based on misrepresentations of the drug’s effectiveness and safety.

On a remand from the Eighth Circuit, the district court in this matter was required to determine whether the ex-employee had "direct and Independent" knowledge of Bayer’s alleged fraud, whether or not she forwarded this information to the government prior to filing suit and whether or not her suit was timely.

Direct and independent knowledge. Following remand, the district court determined that the former employee had "direct and Independent" knowledge of Bayer’s alleged fraud, and had, in fact, forwarded this information to the government prior to filing suit. According to the district court, she demonstrated direct and independent knowledge that her former employer allegedly possessed evidence to know that its cholesterol medication, Baycol, was not as effective or safe as represented. An FCA claim of fraudulent inducement requires proof that there was a knowingly fraudulent material statement that caused the government to pay out money. In order for a court to have subject matter jurisdiction over such a claim when disclosures of fraud become public information, the action must be brought by either the government or an original source of the information. An "original source" is a person who has direct and independent knowledge of the allegations and forwarded this information to the government prior to filing suit.

In this matter, the Eighth Circuit instructed the district court that the ex-employee could demonstrate "direct and Independent" knowledge if she could show that she had direct knowledge of the "true state of the facts" that her Bayer allegedly possessed evidence to know that its medication was not as effective as represented and it caused increased risks of rhabdomyolysis. Here, the former employee met her burden. She allegedly participated in Baycol team meetings where the enhanced risk of rhabdomyolysis was discussed. She twice issued reports to Bayer management, based on her research of FDA data, suggesting that the company release information concerning the rhabdomyolysis risk and both times Bayer allegedly down played these concerns. Moreover, Bayer’s CEO allegedly directed marketing to overstate its product’s efficacy, by marketing its drug as being as effective as Lipitor although data did not support that claim. Shealso alleged a number of specific instances of misrepresentation, including a letter from Bayer to the DoD assuring the department that there was no evidence to suggest that Baycol caused more cases of rhabdomyolysis than similar drugs. In ruling that the ex-employee notified the government prior to filing suit, the court noted that the present suit related back to the ex-employee’s original 2006 suit and that she filed a declaration indicating that she first approached the government with her disclosures in 2005.

Limitations. The district court also found that the ex-employee’s suit was timely. The court noted that the present suit related back to the ex-employee’s original 2006 suit. An amended complaint relates back to a former complaint for purposes of the statute of limitations, when the amendment asserts a claim that arose from the conduct set forth in the original complaint. The court found that the new allegations supporting the fraudulent inducement claim arose from the same conduct that was described in the original complaint. The original complaint contained allegations that Bayer contracted with DoD, and that Bayer fraudulently misrepresented the effectiveness and safety of its product. Because the amended claim arose from the same conduct described in the original complaint, Bayer had fair notice of the claim.

The case is No. 0:08-cv-05758 (MJD/SER).

Attorneys: Asher Alavi (Kessler Topaz Meltzer & Check, LLP) for Laurie Simpson. Adam L. Hoeflich (Bartlit Beck Herman Palenchar & Scott LLP) and Alex P. Hontos (Dorsey & Whitney LLP) for Bayer Corp., Bayer A.G. and Bayer Healthcare Pharmaceuticals Inc.

Companies: Bayer Corp.; Bayer A.G.; Bayer Healthcare Pharmaceuticals Inc.

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