United States: Fraud On The FDA? If Not Preempted, It Is Trumpery

Last Updated: October 5 2017
Article by James Beck

With Bexis having originally conceived the preemption argument that became Buckman Co. v. Plaintiffs Legal Committee, 531 U.S. 341 (2001), we are always on the lookout for ways in which plaintiffs attempt to circumvent Buckman's result and thus to pursue private litigation over fraud on the FDA.

Plaintiffs love to claim fraud on the FDA. It's their all-purpose response to any FDA action that they don't like. For over fifteen years, now, Buckman has severely cramped their style.

One group of plaintiffs thought they had found their way around Buckman – relators bring cases under a federal statute, the False Claims Act, 31 U.S.C. §3729 ("FCA"). Since the FCA is a federal statute, the preemption rationale by which the FDCA, and specifically 21 U.S.C. §337(a), prohibiting private enforcement, bars conflicting state-law theories would not apply. These plaintiffs thought they had reached the promised land.

Not so fast.

Actually, all they'd come up with were a few bits of legal trumpery. The Oxford Dictionary offers four definitions for trumpery:

  • "Attractive articles of little value or use."
  • "Practices or beliefs that are superficially or visually appealing but have little real value or worth."
  • "Showy but worthless."
  • "Delusive or shallow."

When the word fits, use it. All the definitions (the first two are nouns; the last two adjectives) fit here.

We saw the end coming, in this post, discussing United States ex rel. D'Agostino v. EV3, Inc., 153 F. Supp.3d 519 (D. Mass. 2015), and it has now drawn nigh. First, D'Agostino was affirmed. D'Agostino v. ev3, Inc., 845 F.3d 1 (1st Cir. 2016). We discussed that decision, with great glee, here. Fraud on the FDA, unless the FDA actually found fraud, didn't cut it under the FCA, because causation would be entirely speculative – plaintiffs would have to prove a counterfactual hypothesis, that the FDA would have done something other than what it in fact did:

If the representations did not actually cause the FDA to grant approval it otherwise would not have granted, [the government] would still have paid the claims. In this respect, [relator's] fraudulent inducement theory is like a kick shot in billiards where the cue ball "could have" but did not in fact bounce off the rail, much less hit the targeted ball.

Id. at 7. Where the FDA didn't act on an FCA plaintiff's allegations, those claims are mere trumpery. The materiality standard for FCA claims is tough – "[i]t is a 'demanding' standard." Id. (quoting Universal Health Services, Inc. v. United States, 136 S.Ct. 1989, 2003 (2016)). If it's not enough to impress the FDA directly under the FDCA, purported fraud on the FDA is certainly not enough to move the needle under the FCA.

D'Agostino was good, but a more recent case, United States ex rel. Nargol v. DePuy Orthopaedics, Inc., 865 F.3d 29 (1st Cir. 2017), is even better. The allegations in Nargol were practically indistinguishable from what the Bone Screw plaintiffs alleged two decades ago in Buckman itself. The plaintiff, a pair of doctors who "claim to be experts in hip-replacement techniques and devices," id. at 31, claimed that the manufacturer of a such a device "made a series of false statements to the FDA . . ., but for which the FDA would not have approved the [product] or would have withdrawn that approval." Id. at 32. Sounds like a broken record to us:

Plaintiffs say petitioner made fraudulent representations to the Food and Drug Administration (FDA or Administration) in the course of obtaining approval to market the [product]. . . . Had the representations not been made, the FDA would not have approved the devices, and plaintiffs would not have been injured.

Buckman, 531 U.S. at 343. This plaintiff-side trumpery also reminds us of an advertising "slogan" from the Onion. The only difference between Nargol and Buckman were the purported damages – while Buckman invoked fraud on the FDA to allege that every use of the device in question was automatically a tort, Nargol pushed the same theme to claim that evey such use (on Medicare and certain other patients) was automatically a false claim.

Talk about allegations "of little use or value."

Focusing on the claims, "whether direct or indirect, that rest on the allegation that [defendant] misrepresented the safety and effectiveness of the product's design in order to secure or maintain FDA approval," the panel "appl[ied and extend[ed]" D'Agostino to affirm dismissal. Id. at 31, 34. Unlike D'Agostino, which had involved a PMA medical device, Nargol involved a device that had been cleared for marketing as "substantially equivalent" under so-called "§510(k) clearance." Id. at 34. That difference didn't matter, since the claims in both cases sought to attack the integrity of the process by which the FDA allowed the products in question to be marketed.

The claim in this case is not quite on all fours with the claim we confronted in D'Agostino because the FDA does not independently assess the safety and effectiveness of a [510(k)] medical device. . . .

Nevertheless, the process constitutes the government's method of determining whether a device is safe and effective as claimed. That determination is what makes the product marketable, and Relators offer no suggestion that government reimbursement rules require government health insurance programs to rely less on section 510(k) approval than they do other forms of FDA approval.

Id. (emphasis added) (citations to Lohr and Buckman omitted). We would be remiss if we failed to note that, in this respect Nargol is congruent with what the FDA itself said earlier this year – that, yes, the 510(k) process does involve determinations of device safety and effectiveness. Lohr is anachronistic on this point, and will eventually be reconsidered.

But we digress. Back to fraud on the FDA, where Buckman, by comparison, isn't out-of-date at all.

The FDA, as Buckman observed, wields plenty of tools to protect itself from being defrauded and to punish anyone so bold as to try. 531 U.S. at 349 (listing administrative powers). Its lack of exercise of such powers in Nargol demonstrates the trumpery nature of the plaintiffs' claims:

The FDA, in turn, possesses a full array of tools for "detecting, deterring, and punishing false statements made during . . . approval processes." Its decision not to employ these tools in the wake of Relators' allegations so as to withdraw or even suspend its approval of the . . . device leaves Relators with a break in the causal chain between the alleged misstatements and the payment of any false claim.

865 F.3d at 34 (emphasis added) (Buckman citation omitted). For this reason, the FDA's decision not to act "also renders a claim of materiality implausible." Id.

Even in an ordinary situation not involving a misrepresentation of regulatory compliance made directly to the agency paying a claim, when "the Government pays a particular claim in full despite its actual knowledge that certain requirements were violated, that is very strong evidence that those requirements are not material."

Id. at 34-35 (quoting UHS, 136 S. Ct. at 2003). Such evidence is not just "strong," but "compelling" when "an agency armed with robust investigatory powers to protect public health and safety is told what Relators have to say, yet sees no reason to change its position." Id. at 35.

Thus, without an FDA finding that it was defrauded, fraud on the FDA allegations by FCA relators are both too speculative to plead causation plausibly and not material. That's not quite preemption but is satisfyingly close. Fraud on the FDA allegations, without support from the FDA itself, amount to trumpery:

[T]here is no allegation that the FDA withdrew or even suspended product approval upon learning of the alleged misrepresentations. To the contrary, the complaint alleges that Relators told the FDA about every aspect of the design of the . . . device that they felt was substandard, yet the FDA allowed the device to remain on the market. . . . Such evidence does show that the FDA was paying attention. But the lack of any further action also shows that the FDA viewed the information, including that furnished by Relators, differently than Relators do.

Id. at 35 (emphasis added). Right. The FDA considered these allegations to be fake news.

Plaintiffs had a fallback position – that even after the device was approved, its mere use could constitute a "false claim." To wit: "In theory, a product may be sufficiently 'safe' and 'effective' to secure FDA approval for a given use, yet its use might nonetheless not be sufficiently 'reasonable and necessary' for patient care to warrant Medicare reimbursement." Id. More trumpery, held Nargol. The "complaint was devoid of particularized allegations," the differences being claimed were within the "maximum failure rate provided under industry guidelines," and ultimately "simply runs Relators back into" their fraud on the FDA claims. Id. at 36. Thus, no causation and no materiality:

We see no reason, though, why such a likely and customary repetition of the statements made to the FDA renders it more plausible that a materially false statement caused the payment of a claim that would not have been made otherwise. The government, having heard what Relators had to say, was still paying claims . . . but because the government through the FDA affirmatively deemed the product safe and effective.

Id.. Yes, a 510(k) clearance means "the FDA affirmatively deemed the product safe and effective."

Ultimately D'Agostino prevailed. Plaintiffs "offer[ed] no rebuttal at all to D'Agostino's observation that six jurors should not be able to overrule the FDA." Id. Their arguments "offer[ed] no solution to the problems of proving that the FDA would have made a different approval decision in a situation where a fully informed FDA has not itself even hinted at doing anything." Id.

Between them, D'Agostino and Nargol should slam the door on plaintiffs' attempt to assert fraud on the FDA under the guise of FCA claim (unless the FDA itself has reached the same conclusion). See In re Plavix Marketing, Sales Practice & Products Liability Litigation (No. II), 2017 WL 2780744, at *21-23 (D.N.J. June 27, 2017) (rejecting similar FCA fraud on the FDA allegations against prescription drug). Moreover, the emphasis in these cases on the speculative nature of attempting proof of what the FDA might have done if presented with a different set of facts also casts doubt on the Third Circuit's terrible Fosamax decision, which, as we have pointed out, would saddle juries with the task of doing just that.

This article is presented for informational purposes only and is not intended to constitute legal advice.

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