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From Health Law Daily, January 3, 2014

Complaint dismissed because of failure to allege submission of claims to government

By Michelle L. Oxman, JD, LLM

qui tam action against Roche Diagnostics Corp.(Roche) was dismissed because the relator failed to allege either knowledge of falsity or the submission of actual claims to the government by Roche or its customers. Allegations that Roche was aware that its equipment generated “false positives” and reports of tests that were not performed were not sufficient to state a claim under 31 USC sec. 3729(a)(1) (United States ex rel. Siegel v Roche Diagnostics Corp., December 30, 2013, Spatt, A).

The problematic equipment. Roche manufactured the cobas6000, a fluid testing machine which was used to test bodily fluids and store the results on compact discs. The relator alleged that the administrative director of laboratory services at North General Hospital (NGH), a user of the equipment, notified Roche of the following problems with the equipment. First, the c501 module produced false positive results of tests for phencyclidinie (PCP). Second, the c601 module caused a hospital to be billed for tests it did not run. The relator alleged that each time the machine was used for “one of these inaccurate tests,” it caused a claim to be submitted to Medicare or Medicaid. Finally, in January 2009, the relator alleged, he wrote to his superiors at Roche to tell them that a “glitch in the 601 software” caused overbilling. The NGH lab director later informed Roche that the hospital was not in compliance with Joint Commission requirements because the machine did not accurately capture when the tests were performed.

Public disclosure. Roche moved to dismiss on the grounds that: (1) the allegations were the subject of prior public disclosure; and (2) the complaint failed to allege fraud with particularity as required by F.R.C.P. 9(b). The Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) amended the False Claims Act provisions governing public disclosure. Under the amendments, the issue no longer affects the court’s subject matter jurisdiction. Rather, it is a defense to the complaint if the subject matter of the complaint has previously been disclosed in a federal criminal, civil or administrative proceeding, a report by a Congressional committee or federal agency such as the Government Accountability Office, or the news media unless the plaintiff is either the Attorney General or the original source of the information. However, nothing in either the complaint or the motion supported a conclusion that the allegations had been publicly disclosed or that the relator was not an original source of the information. In addition, the burden was on Roche to establish that the issues had been publicly disclosed.

Pleading fraud with particularity. Roche’s second argument carried more weight, however. In general, allegations of fraud must include the “who, what, where, and when” of the false statements. The court observed that the Second Circuit had not adopted the more liberal interpretation that some courts have applied to allegations under the False Claims Act. Moreover, the justifications for applying a relaxed standard of pleading did not apply. The case did not involve allegations of a widespread scheme to commit fraud and it was not a foregone conclusion that false claims must have been submitted.

Scienter. The court also found that the complaint did not allege the state of mind necessary under the False Claims Act. Specifically, there were no allegations that Roche either submitted false claims to the government or knew of specific false claims presented by anyone. Although the complaint supported a conclusion that Roche failed to remedy problems with the accuracy of its machines, there were no allegations supporting a conclusion that the company acted in deliberate ignorance.

The case number is 2:11-cv-05378-ADS-AKT.

Attorneys: Robert B. Kambic with the United States Attorney’s Office for the United States of America. Raymond Nardo (Law Office of Raymond Nardo) for Alan Siegel. Roche Holding AG, no attorney listed.

Companies: Roche Holding, AG

MainStory: TopStory QuiTamNews FraudNews NewYorkNews

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