United States: Lessons From Risk Minimization FCA Cases Post-Escobar

In recent years, plaintiffs in False Claims Act, 31 U.S.C. § 3729 et seq. (2006), cases have sought to expand FCA liability of pharmaceutical and medical device companies alleging that these companies caused the submission of false claims by concealing safety risk data from the U.S. Food and Drug Administration or minimizing risks or overstating benefits to the medical community. These actions, which often are an outgrowth of product liability cases these companies routinely face, present starkly different issues regarding the falsity of government claims and materiality than typical FCA cases alleging off label promotion or kickbacks. The off-label falsity theory is premised on the government's contention that claims for off label uses are not statutorily reimbursable and therefore "false or fraudulent." The kickback falsity theory is based on providers' certifications to comply with the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b (2012) ("AKS"), the government's enforcement history and a 2010 amendment to the AKS expressly providing that claims resulting from kickbacks are false.

Neither theory necessarily applies to FCA claims based on safety risk minimization or benefit overstatement, and plaintiffs have struggled to come up with a viable explanation for how such conduct results in a materially false claim to government health care programs. Plaintiffs — mostly relators thus far rather than the government — argue that claims are false because the FDA would have withdrawn approval or required a label change had the risks been properly disclosed. They also contend that risk minimization or benefit overstatement directed at providers caused those providers to write more prescriptions than they would have otherwise, thereby resulting in excessive expenditures by Medicare and other government healthcare programs.

Relators pursuing FCA suits based on these contentions have faced difficulties getting past dismissal motions, particularly after the U.S. Supreme Court's 2016 Escobar decision, which requires courts to engage in a "rigorous" and "demanding" analysis of the materiality of an alleged statutory, regulatory or contractual violation to the government's payment decision. 1 A key consideration under Escobar is whether the government continues to pay for the items at issue even after being made aware of the alleged violation, which has doomed several FCA actions claiming risk concealment or minimization. Courts have also found that such claims seek to challenge the propriety of FDA approval actions, which is not the purpose of the FCA, and have zeroed in on plaintiffs' inability to identify particular claims that are linked to the alleged misconduct.

Against this landscape, we summarize below some recent significant decisions regarding FCA actions premised on risk minimization or benefit overstatement.

Risk Minimization FCA Cases Under Escobar

In a December 2016 decision, U.S. ex rel. D'Agostino v. ev3 Inc., the First Circuit affirmed the dismissal of an FCA complaint alleging that a medical device manufacturer made fraudulent representations to the FDA, including by omitting safety information.2 The court held that plaintiff's fraud-in-the-inducement claim fell short because he did not allege that the alleged misrepresentations "actually cause[d] the FDA to grant approval it otherwise would not have granted."3 Applying Escobar's materiality standard, the court placed great emphasis on the fact that the FDA had not demanded recall or relabeling after relator brought his complaint. The court also had "serious doubt on [] materiality" because the government continued paying for the device "in the wake of" plaintiff's allegations.4

Drawing a bright line, the court stated that the lack of FDA action "precludes [relator] from resting his claims on a contention that the FDA's approval was fraudulently obtained."5 The court reasoned that jurors should not second guess FDA approval decisions applying the rationale of Buckman, which disallows state law fraud-on-the-FDA claims.6 The D'Agostino holding makes it very difficult for an FCA fraud-in-the-inducement claim to proceed based on allegations of concealment of data from the FDA — as affirmed in a recent Massachusetts district court applying D'Agostino to similar claims.7 The government seems to agree — stating that fraudulent inducement claims should lie only "in the (rare) circumstances in which the defendant's false statements masked problems that were so serious that FDA would have (for example) withheld or withdrawn its approval of the drug application for all indications had it known the truth."8

A May 2017 Third Circuit decision addressed claims of not only fraud on FDA but also claims that a drug manufacturer suppressed risk information to the medical community. In U.S. ex rel. Petratos v. Genentech, the court affirmed the dismissal of a complaint alleging that the defendant suppressed the risks of its cancer medicine, which caused the FDA not to change the label and doctors to prescribe for uses that were not reasonable and necessary.9 As in D'Agostino, the court found a lack of materiality because after relator informed the FDA and DOJ of his concerns, the FDA "continued its approval" and approved three new indications while the DOJ took no action and declined to intervene in the FCA suit.10

The relator claimed materiality was established by his allegation that the government would have paid for fewer claims because disclosure of the true risks would have deterred doctors from prescribing. The court rejected that argument noting that relator was conflating causation with materiality — a key holding because while plaintiffs may be able to allege causation as to providers there is little basis to assert that government payment decisions are premised on the contours of the discussions regarding risks and benefits between companies and providers. As the Third Circuit stated, although plaintiff's concerns and allegations regarding risk disclosure may be "well founded," "a False Claims Act suit is not the appropriate way to address them."11

Interestingly, district courts within the Third Circuit both before and after Petratos have allowed risk minimization claims to proceed under Escobar. A few weeks prior to Petratos, a Pennsylvania district court denied a motion to dismiss a claim of fraudulent inducement based on misrepresentations of study data to the FDA. In U.S. ex rel. Brown v. Pfizer, the court distinguished the First Circuit's D'Agostino decision finding that plaintiffs alleged that the FDA would not have approved the medicine if it knew of the allegedly concealed risks.12 On Escobar materiality, the court put little stock in the fact that federal and state governments continued to pay for the drug after relators came forward stating that knowledge of fraud allegations was not "actual knowledge" of fraud and was not otherwise dispositive on materiality. And just last week, a New Jersey district court allowed an FCA suit based on risk minimization and benefit overstatement to proceed past dismissal because relator pled that the government would have denied reimbursement of prescriptions as not medically necessary even though they were on label.13 Both cases could very well end up before the Third Circuit, which will then have to determine the scope and applicability of its Petratos decision.

Risk Minimization FCA Cases Under Rule 9b

Prior to Escobar, three appellate courts confronted claims based on safety risk minimization dismissing them for failure to meet Federal Rule of Civil Procedure 9(b) by not identifying false claims that resulted from the conduct.

In U.S. ex rel. Ge v. Takeda Pharm. Co., the First Circuit affirmed the dismissal of claims that the defendant failed to adequately disclose risks of four medicines to the FDA in its adverse event reports.14 The court held that plaintiff did not allege how the alleged misconduct resulted in false claims and stated that aggregate spend data was insufficient because it did not show "that some subset of claims for government payment for the four subject drugs was rendered false as a result of," the alleged misconduct. There was a similar result in U.S. ex rel. Simpson v. Bayer Healthcare, in which plaintiff claimed that the defendant downplayed risks and overstated efficacy of its product to doctors leading them to prescribe more than they would otherwise.15 The Eighth Circuit affirmed dismissal on Rule 9(b) grounds, stating that plaintiff did not show how any claim was fraudulent in and of itself, noting that the fact that the drug was prescribed to a patient for the relevant condition did not show fraud. The Fourth Circuit in U.S. ex rel. Walterspiel v. Bayer AG, 639 Fed. Appx. 164 (4th Cir. 2016), similarly dismissed FCA claims based on allegedly false study data submissions to FDA on Rule 9(b) grounds for failing to identify false claims.16 Although Escobar arguments are important, Rule 9(b) remains an key defense tool particularly where plaintiffs claim that some subgroup of on label prescriptions were medically unnecessary because of risk/benefit discussions with providers.


These cases demonstrate that while plaintiffs may be able to allege misconduct generally, perhaps armed with discovery in a mass tort products case, they will have a difficult time showing that such conduct is material to government payment decisions or finding "false" claims that resulted. Yet, although appellate courts have not been kind to risk minimization FCA claims, they have not dismissed them out-of-hand given the role of the FDA. With the potential for multimillion-dollar recoveries and lower court decisions that have permitted such claims to proceed,17 companies will likely continue to see FCA cases based on concealment or minimization of safety risks or overstatement of benefits, as relators try to open up a new front in their battles against the pharmaceutical and device industry.

Manvin S. Mayell is a partner in the New York office of Arnold & Porter Kaye Scholer LLP and a former federal prosecutor.

Adeel Wahid, a student at The University of Michigan Law School, contributed to this article.


1 Universal Health Servs., Inc. v. United States, 136 S. Ct. 1989 (2016).

2 D'Agostino v. ev3, Inc., 845 F.3d 1, 12 (1st Cir. 2016).

3 Id. at 7 (emphasis in original).

4 Id. at 7.

5 Id. at 8.

6 Buckman Co. v. Plaintiff's Legal Committee, 531 U.S. 341 (2001)

7 Elliot-Lewis v. Abbott Labs, Inc., No. 1:14-cv-13155, 2017 WL 1826627 (D. Mass. May 5, 2017) (dismissing FCA claim alleging false Premarket Approval Application for medical device).

8 Brief for the United States of America as Amici Curiae in Support of Neither Party at 26, U.S. ex rel. Petratos v. Genentech, No. 15-3805 (3rd Cir. May 23, 2016).

9 U.S. ex rel. Petratos v. Genentech Inc., 855 F.3d 481, 489 (3d Cir. 2017).

10 Id. at 490.

11 Id. at 494.

12 U.S. ex rel. Brown v. Pfizer, Inc., No. CV 05-6795, 2017 WL 1344365, at *10 (E.D. Pa. Apr. 12, 2017).

13 U.S. v. Johnson & Johnson, Civil Action 12-7758 (D.N.J. May 31, 2017)

14 U.S. ex rel. Ge v. Takeda Pharmaceutical Co., 737 F.3d 116, 129 (1st Cir. 2013).

15 In re Baycol Prod. Litig., 732 F.3d 869, 872 (8th Cir. 2013).

16 U.S. ex rel. Walterspiel v. Bayer AG, 639 F. App'x 164, 169 (4th Cir. 2016).

17 In addition to Brown and J&J, supra, other district courts have denied dismissal motions of concealment of risk data or misrepresentation of benefits. See U.S. ex rel. Krahling v. Merck & Co., 44 F. Supp. 3d 581, 609 (E.D. Pa. 2014).

Originally published in Law360

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions