United States: On Prevention Of Federal Fraud On The FDA Claims That Avoid Buckman

Last Updated: November 1 2018
Article by James Beck

Private plaintiffs love to scream "fraud on the FDA"! Agency fraud is their magic potion for dissolving any FDA action that they don't like. Just assert that the FDA was bamboozled and invite some jury somewhere to ignore what the FDA actually did. Unfortunately for the other side, Buckman Co. v. Plaintiffs Legal Committee, 531 U.S. 341 (2001), precludes private plaintiffs from bringing such allegations bases on state tort law. The FDCA is quite clear, in 21 U.S.C. §337(a), that only the government – not private plaintiffs – may seek to enforce the Act.

In Buckman, the Court held (unanimously), first, that "fraud-on-the-FDA claims inevitably conflict with the FDA's responsibility to police fraud consistently with the Administration's judgment and objectives." Id. at 350. That's rather obvious, because the logic of any agency fraud claim is that "fraud" allows a factfinder to conclude that, if not defrauded, the agency wouldn't have done what it did. That presents a rather raw conflict with whatever the agency actually did, which (unless revoked by the affected agency) is a federal decision presumably still in effect.

Second, in the context of the FDCA specifically, the Court recognized that Congress did not want private individuals running around purporting to enforce any of the many requirements imposed by the FDA under the Act. That's the §337(a) aspect: "The FDCA leaves no doubt that it is the Federal Government rather than private litigants who are authorized to file suit for noncompliance with the medical device provisions: '[A]ll such proceedings for the enforcement, or to restrain violations, of this chapter shall be by and in the name of the United States.'" 531 U.S. at 349 n.4 (quoting §337(a)). "[W]e have clear evidence that Congress intended that the MDA be enforced exclusively by the Federal Government." Id. at 352 (again citing §337(a)).

But Buckman involved only state-law claims and thus preemption was easily invoked to prevent both the inherent conflict and the private enforcement problems identified by the Court. So Buckman does not directly prohibit private litigants from using a federal statute to assert purported fraud-on-the-FDA claims. One federal statute does not preempt another. POM Wonderful LLC v. Coca-Cola Co., 573 U.S. 102, ___, 134 S. Ct. 2228, 2236 (2014) ("the alleged preclusion of a cause of action under one federal statute by the provisions of another federal statute" "is not a pre-emption case"). There are at least four types of federal statutes that we expect plaintiffs to use to attempt private enforcement of fraud-on-the-FDA claims: the False Claims Act ("FCA"), the Lanham Act, RICO, and antitrust statutes. Most of the action, particularly recently, has involved the FCA.

There are other types of wanna-be private FDCA enforcement than fraud on the FDA – that's what POM Wonderful was about (FDA-permitted food labels that allegedly deceived the public, not the FDA) – but we're more interested in Buckman than anything else, so we wanted to see how fraud-on-the-FDA claims specifically have fared, when asserted under these other federal statutes.

Most recently, in a FCA decision that we discussed here, the First Circuit rejected allegations that were little different, substantively, from those that had produced Buckman itself. Plaintiff alleged that the defendant "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." United States ex rel. Nargol v. DePuy Orthopaedics, Inc., 865 F.3d 29, 31 (1st Cir. 2017). Based on those allegations, the Nargol plaintiffs claimed the every use of the product was as false claim – without the FDA's (allegedly fraudulently obtained) approval, "doctors would not have certified the devices for government reimbursement." Id. The First Circuit held, in effect, "hell, no." The FDA was aware of all the mud the plaintiffs threw against the wall and did not rescind its decision:

Such very strong evidence [of immateriality] becomes 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. In such a case, it is not plausible that the conduct of the manufacturer in securing FDA approval constituted a material falsehood capable of proximately causing the payment of a claim by the government. Ruling otherwise would "turn the FCA into a tool with which a jury of six people could retroactively eliminate the value of FDA approval and effectively require that a product largely be withdrawn from the market even when the FDA itself sees no reason to do so." [T]here is no allegation that the FDA withdrew or even suspended product approval upon learning of the alleged misrepresentations.

Id. at 35 (citations omitted). Thus, "the FDA was paying attention," but the Agency "viewed the information . . . differently than [plaintiffs] do." Id.

The government, having heard what [plaintiffs] had to say, was still paying claims not because of what was said to or by the doctors, but because the government through the FDA affirmatively deemed the product safe and effective. And, absent some action by the FDA, we can see no plausible way to prove to a jury that FDA approval was fraudulently procured.

Id. at 36. So, rather than preemption, Nargol disposed of fraud on the FDA-based FCA claims on materiality grounds, as long as the FDA (as is 95%+ the case) did not act on the purported fraud. That's basically Buckman modified by that decision's two-justice concurrence that a different result might occur had the FDA itself found fraud. 531 U.S. at 353-55 (Stevens & Thomas, JJ. concurring).

The omitted citations in our quote from Nargol were to an earlier First Circuit decision that reached a similar result, D'Agostino v. ev3, Inc., 845 F.3d 1 (1st Cir. 2016). In D'Agostino (which we previously discussed here), the First Circuit saw FCA-based fraud-on-the-FDA claims for what they really were, an attempt to hijack the FCA and turn it into a vehicle for second-guessing FDA decisions:

To rule otherwise would be to turn the FCA into a tool with which a jury of six people could retroactively eliminate the value of FDA approval and effectively require that a product largely be withdrawn from the market even when the FDA itself sees no reason to do so. The FCA exists to protect the government from paying fraudulent claims, not to second-guess agencies' judgments about whether to rescind regulatory rulings.

Id. at 8 (citation omitted). Thus, the same policy reasons the Supreme Court gave for preemption in Buckman all counseled against recognizing agency fraud claims under a federal statute:

The collateral effects of allowing juries in qui tam actions to find causation by determining the judgment of the FDA when the FDA itself has not spoken are akin to those practical effects that counsel in favor of not allowing state-law fraud-on-the-FDA claims. See Buckman Co. v. Plaintiffs' Legal Committee, 531 U.S. 341, 349-51 (2001). If jurors in a single qui tam case could determine precisely what representations were essential to approval, which experts to believe, and how the FDA interpreted submissions made to it, some potential applicants who would otherwise seek approval for new products might be deterred, others might swamp the FDA with more data than it wants, and the "FDA's responsibility to police fraud consistently with the Administration's judgment and objectives" might be undercut. Id. at 350.

Id. at 8-9.

Additionally, as already mentioned in connection with Nargol, the D'Agostino decision also relied upon the "demanding" materiality standard for "implied certification" FCA claims. Id. at 7. That agency fraud supposedly "could have" influenced FDA approval wasn't enough. "[C]ould have . . . falls short of pleading a causal link between the representations made to the FDA and the [false claim] payments." Id.

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. Moreover, the D'Agostino fraud-on-the-FDA allegations failed for lack of causation. If the FDA's response to the fraud allegations is "doesn't impress me much," and the FDA thus doesn't rescind its decision, then causation is impossible – and that's what happened in D'Agostino:

In the six years since [relator] surfaced the alleged fraud, the FDA has apparently demanded neither recall nor relabeling of [the product] − this notwithstanding the agency's [list of enforcement options]. The FDA's failure actually to withdraw its approval . . . in the face of [plaintiff's] allegations precludes [plaintiff] from resting his claims on a contention that the FDA's approval was fraudulently obtained.

Id. at 8. "[C]ausation is an element of the fraudulent inducement claims [plaintiff] alleges and . . . the absence of official action by the FDA establishing such causation leaves a fatal gap." Id. at 9.

In Southeast Laborers Health & Welfare Fund v. Bayer Corp., 444 F. Appx. 401, 410 n.2 (11th Cir. 2011), the court held that plaintiffs could not pursue a fraud on the FDA-based RICO causation theory. However, the court's discussion of RICO simply referred back to its prior discussion of why a similar state-law claim could not survive:

A theory of causation relying solely on an allegation that the medication in question would not have been on the market absent the alleged fraudulent conduct is no more than a state law "fraud on the FDA" theory, a theory that has been specifically rejected by the Supreme Court. . . . Accordingly, [our prior decision] could not have implicitly approved of a state law "fraud on the FDA" theory of causation . . . whereby a third-party payor is permitted to state a causal nexus between the alleged fraudulent conduct and the payor's ascertainable loss by simply asserting that absent the allegedly fraudulent conduct, the FDA would not have approved the medication to be on the market.

Id. at 407 (Buckman discussion omitted).

Those are all the appellate cases having anything to do with agency fraud that cite Buckman in the same paragraph as one of the four federal statutes we earlier identified. As for district courts, United States ex rel. v. Medtronic, Inc., 2017 WL 4023092 (C.D. Cal. Sept. 11, 2017), likewise rejected a fraud on the FDA-based FCA claim:

[C]laims of fraud are disfavored if made by third parties who seek to second guess a decision by the FDA to certify a device. Relator's claims are in effect such a challenge as to the decision of the FDA to grant §510(k) clearance for the Subject Devices. Alleged fraudulent conduct directed to the FDA, without more, is inadequate to support an FCA claim. [discussion of Buckman omitted]

Given the resources available to the FDA to investigate and approve medical devices, and to pursue remedies for alleged violations that arise in connection with the process, the policy concerns expressed in [Buckman] are material here. The premise of the alleged fraud in the FAC is that Defendants misled the FDA during the §510(k) certification process. However, an FCA action is not the proper way to bring such a claim.

Id. at *7 (citing inter alia the district court opinion in D'Agostino, 153 F. Supp.3d 519).

On the other side, we have also found a couple of district court FCA cases that have allowed the sort of fraud on the FDA-based allegations that Nargol and D'Agostino reject. See United States ex rel. Brown v. Pfizer, Inc., 2016 WL 807363, at *9 (E.D. Pa. March 1, 2016) ("The claims in Buckman were state law tort claims, not claims brought under the FCA. Defendant has provided no authority, and we are aware of none, that has extended the holding in Buckman to FCA claims."); United States ex rel. Krahling v. Merck & Co., 44 F. Supp. 3d 581, 593 (E.D. Pa. 2014) ("alleg[ations] that Defendant consistently and deliberately withheld pertinent information as to the safety and efficacy of a medication from the government . . . is [a] grounds for FCA liability."). Neither of these cases had the benefit of Nargol or D'Agostino, and neither addressed causation/materiality, so it is questionable whether they would be decided in the same fashion today.

Beyond the FCA, we found a magistrate's opinion, Meijer, Inc. v. Ranbaxy Inc., 2016 WL 4697331 (Mag. D. Mass. Sept. 7, 2016), that the case "present[ed] an issue of apparent first impression: whether Sherman Act claims . . . may be predicated on an underlying fraud on the [FDA]." The Magistrate effectively gave antitrust plaintiffs free rein to assert fraud-on-the-FDA claims:

The FDA's enabling statute does not entrust it with policing antitrust or RICO; therefore, Plaintiffs' claims do not usurp the agency's statutory right to... calibrate a measured response to alleged fraud committed against it. The question of whether or not particular acts of regulatory gaming harm competition is and should be an antitrust question

Id. at *11 (citations and quotation marks omitted). See Id. at *19 ("these claims sound in antitrust, not violations of the FDCA"). We note that Meijer evidently differs from the vast majority fraud-on-the-FDA pleadings, in that the plaintiffs allege that the FDA actually did determine that it had been misled and took affirmative corrective action. Id. at *5, 13. Perhaps that is the reason that Meijer nowhere cited the otherwise extremely pertinent D'Agostino district court decision. Also of interest, permission for an interlocutory appeal has been granted, Meijer, Inc. v. Ranbaxy Inc., 245 F. Supp.3d 312 (D. Mass. 2017), and that appeal in pending in the First Circuit. In the interim, of course, the First Circuit has decided both Nargol and D'Agostino since the district court originally decided Meijer.

Finally, we expected to find agency fraud claims brought under the Lanham Act, but didn't. There are certainly enough other types of attempted private FDCA enforcement that have been asserted under the Lanham Act. But our search (which required the term "Lanham" to appear in the same paragraph as "Buckman" or several variants of "fraud on the FDA") didn't produce anything directly on point. The closest approximation was Intra-Lock International, Inc. v. Choukroun, 2015 WL 11422285 (S.D. Fla. May 4, 2015), which alleged the sale of a "medical device" without getting any form of FDA pedigree. There was no fraud on the FDA, because there were no interactions with the FDA at all. The Lanham Act claim in Intra-Lock was dismissed because plaintiff's theory of selling a medical device without a license was purely a violation of the FDCA. Id. at *7. But the case wasn't – at least overtly – a true agency fraud claim. Cf. Organ Recovery Systems, Inc. v. Preservation Solutions, Inc., 2012 WL 116041, at *7-8 (N.D. Ill. Jan. 16, 2012) (allowing non-FDA-related Lanham Act claims while making clear that plaintiff's preempted agency fraud claims were not based on the federal statute).

So far, there hasn't been an appellate court in the country that has allowed a private plaintiff to avoid Buckman by bringing a fraud-on-the-FDA claim disguised as a federal statutory claim. While we're not out of the woods, yet, the current trend can be described as favorable.

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

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