FCA Materiality Issue May Go to Supreme Court

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Attorneys Anne Walsh and Rachel Hunt (Hyman, Phelps & McNamara) say the Supreme Court is considering a Gilead petition asking it to rule on a question involving “materiality” in False Claims Act (FCA) cases. Writing in their firm’s FDA Law Blog, the attorneys say Gilead’s question arises from a case in which a whistleblower alleged that the company concealed information from FDA about contamination of certain drugs, leading to false claims being paid by the government.

The case was dismissed twice by a federal district court but the 9th Circuit Court of Appeals overturned the dismissal, holding that whether allegations are material for purposes of a FCA claim raised matters of proof that could not be resolved prior to discovery.

Gilead asked the high court to consider “whether an FCA allegation fails when the government continued to approve and pay for products after learning of alleged regulatory infractions and the pleadings offer no basis for overcoming the strong inference of immateriality that arises from the government’s response.”

The plaintiffs in the Gilead case have given the court three reasons why it should not grant the company petition to hear the case, Walsh and Hunt write. The plaintiffs say that Gilead misrepresented the 9th Circuit decision as overly restrictive. They also cite a Department of Justice memo to support their position that the case does not undermine FDA’s regulatory authority, and they argue that there is no circuit split and that this is a poor vehicle to clarify the materiality standard because it is not clear that the government actually had knowledge of the fraudulent conduct at the time it made the payments.

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