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From Health Law Daily, June 16, 2015

Court shuts down FCA suit against HIV/AIDS drug manufacturer

By Mary Damitio, J.D.

A relator could not maintain an action under the False Claims Act (31 U.S.C. §3729(a)(1)(A)) alleging a drug manufacturer received payment from federal health care programs for HIV/AIDS drugs that were made with an active ingredient manufactured by an unregistered source, a district court ruled in dismissing the claims with prejudice. Despite the fact that the drug manufacturer allegedly failed to seek supplemental approval from the FDA prior to distributing drugs that contained an active pharmaceutical ingredient (API) produced by an unregistered manufacturer that had allegedly produced contaminated batches of the API, the court found that federal health programs only required that the drugs received FDA new drug approval, and not supplemental approval, in order to be eligible for payment (U.S. ex rel Campie v. Gilead Sciences, Inc., June 12, 2015, Chen, E.).

Background. Gilead Sciences, Inc. manufactures drugs for the treatment of HIV/AIDS. The majority of Gilead’s products are paid for by government payment programs, including Medicare and Medicaid. Some of Gilead’s drug products contain the API emtricitabine (FTC), including Emtriva®, Emtriva® Oral Powder, Truvada®, and Atripla®. Gilead obtained FDA approval for the drugs that contained the API, but there were subsequent, major changes to the drug products that required Gilead to obtain supplemental approval from the FDA prior to distribution of the products. Specifically, Gilead changed the manufacturing source of the API to an unapproved source that was not registered or inspected. Gilead allegedly started obtaining the API from the unapproved source in early 2006, and eventually sought supplemental approval from the FDA in 2008, but is alleged to have provided false information in the supplemental approval application, including concealing that the manufacturer previously produced contaminated batches of the API. Gilead attempted to correct the problem by amending the application in April 2009, and in early 2010, the FDA approved the application.

Relator. Jeff Campie was Senior Director of Global Quality Assurance of Gilead from July 2006 to July 2009. According to Campie, he was terminated becausehe raised concerns over the company’s distribution of the drugs due to the contaminated and adulterated API as early as July 2007. Additionally, he raised concerns about the fact that the API was of substandard quality and potency and that the company submitted falsified data to the FDA. Additionally, Campie says he was fired because he objected to the company receiving payments from government programs for drugs that were unapproved and were thus ineligible for payment. He further alleged that he was retaliated against through harassment, demotions, exclusion from the regulatory submission review process and by being removed from Gilead’s Quality Council. Campie met with the company’s Chief Compliance Officer and threatened to report the company’s falsified data and test results to the FDA. Campie alleged that, upon learning that the company was going to distribute another drug containing an API that was manufactured by an unregistered and unapproved source, he attempted to have the batches quarantined to no avail. After he was terminated, the company asked him to sign a severance agreement that provided that he would not file an FCA claim and he refused.

FCA suit. Jeff and Sherilyn Campie filed suit as relators against Gilead for violations of the FCA, including retaliation and for violations of various California state laws. They alleged that the drugs sold by Gilead to governmental programs or for which they were reimbursed were not approved because the manufacturer did not get supplemental approval for the changes to the manufacturing of the API.

Implied false certification. Campie failed to state a claim under the FCA based upon Gilead’s implied false certification. Manufacturers may receive payment from Medicare and Medicaid only for covered outpatient drugs that have been approved by the FDA for safety and effectiveness under the Food, Drug, and Cosmetic Act (FDC Act) (21 U.S.C. §355). However, Medicare/Medicaid payment is conditioned only upon new drug approval (NDA) and not supplemental approval. Therefore, Gilead’s failure to obtain supplemental approval did not preclude its eligibility for federal payment and could not be the basis for a claim under the FCA. If supplemental approval was needed, the court would be required to evaluate the FDC Act’s regulatory schemed and make determinations that would invoke FDA-like expertise. As a result, Campie’s claim for false certification was dismissed with prejudice.

Factually false certification. A factually false certification claim must be based on medically worthless services. While Campie pleaded that the drugs were of “reduced medical value,” he did not plead that the drugs contained no medical value at all and his claim was therefore dismissed with prejudice.

Retaliation. The court found that Campie’s actions were merely an investigation of fraud on the FDA, and that he did not allege that he was concerned about the government fraudulently paying money to Gilead. Therefore, dismissal of his claim was appropriate. Additionally, despite the fact that Gilead asked Campie to sign a severance agreement promising not to file a FCA claim, the court still found that there was no “plausible inference of knowledge of an impending FCA claim.” Additionally, Campie’s job required him to investigate and internally report FDA regulatory issues, and therefore he did not sufficiently allege that Gilead had knowledge of his FCA activities. As a result, the Campie’s last federal claim was also dismissed with prejudice.

State claims. The court declined to exercise supplemental jurisdiction over the remaining state claims.

The case is No. C-11-0941 EMC.

Attorneys: Sara Winslow, United States Attorney's Office, for United States of America. Andrew S. Friedman (Bonnett Fairbourn Friedman & Balint, PC) for Jeff Campie. Eric Dale Phelps (Covington and Burling LLP) for Gilead Sciences, Inc.

Companies: Gilead Sciences, Inc.; United States of America

MainStory: TopStory FCANews QuiTamNews FDCActNews CMSNews SafetyNews PartDNews MedicaidPaymentNews AdulterationNews CaliforniaNews

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