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A federal district court recently curtailed whistleblowers’ ability to bring successful False Claims Act claims by expanding the scope of the public disclosure bar and the parameters of voluntary disclosure.1
On March 3, 2015, a federal district court in Texas granted a defendant pharmaceutical company’s motion to dismiss certain claims of Medicaid fraud brought against it under the False Claims Act based on the fact that the general basis of the allegations had previously been reported in a magazine article. Specifically, The New Yorker published an article in 2002 that raised questions regarding a testosterone gel, AndroGel. The article, entitled “Hormones for Men: Is Male Menopause a Question of Medicine or of Marketing?” analyzed the advertisements promoting the drug, questioned whether the pharmaceutical industry was “inventing” diseases and highlighted that male menopause was not an approved use of the drug. Two former sales managers of the company that at the time manufactured AndroGel brought allegations of fraud to the Food and Drug Administration (FDA) on June 9, 2003 and then filed a qui tam action the following day.
The decision in this case is notable for its interpretation of both the public disclosure bar and voluntary disclosure requirement of the False Claims Act. Importantly, The New Yorker article did not specifically discuss an alleged scheme involving kickbacks paid to physicians and off-label marketing of the drug, which served as the basis for the whistleblowers’ claims. The court, however, found that the article was sufficiently related to serve as a public disclosure of the allegations underlying the claims. This is a broader view of the public disclosure jurisdictional bar of the False Claims Act in that the court did not require perfect congruence between the news article and the whistleblowers’ claims. The court further elucidated that, “it is not necessary for the disclosure to connect all the dots or reach legal conclusions, it just has to set the government on the trail of fraud.” This type of argument could be used in the future to similarly defeat qui tam claims that had been generally disclosed.
Some predicted that even if the court was prepared to reject the whistleblowers’ claims on the theory that their allegations regarding the drug had been publicly disclosed, the court would nonetheless allow the claims to proceed because the whistleblowers had direct knowledge of the scheme and were therefore “original sources” entitled to bring such claims. Although such predictions were certainly reasonably, the court ultimately found that the plaintiffs could not qualify as original sources largely because they had disclosed their claims to the FDA only one day before filing their complaint. While the court did not specify what length of time between a voluntary disclosure and the filing of a complaint would be deemed acceptable, it cited a number of cases standing for the general proposition that the disclosure must be made sufficiently in advance of the filing of a complaint so as to allow the government time to investigate the merits of the potential claims.
1United States ex rel. King v. Solvay S.A., S.D. Tex., No. 4:06-cv-02662, March 3, 2015.