ARTICLE
16 January 2025

Athira Pharma Inc. Agrees To Settle False Claims Act Allegations

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Bass, Berry & Sims

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On January 6, the Department of Justice (DOJ) announced that Athira Pharma Inc., a Washington-based biopharmaceutical company, agreed to pay over $4 million to settle allegations it violated the False Claims Act (FCA).
United States Washington Government, Public Sector

On January 6, the Department of Justice (DOJ) announced that Athira Pharma Inc., a Washington-based biopharmaceutical company, agreed to pay over $4 million to settle allegations it violated the False Claims Act (FCA). The DOJ alleges Athira failed to report allegations of research misconduct in its grant applications, award progress reports, and assurances. The settlement serves as a reminder to companies performing on grants that the Department of Health and Human Services (HHS) takes allegations of research misconduct seriously and grantees must closely adhere to regulatory requirements related to disclosing such allegations.

The Misconduct

Between April and July 2016, Dr. Andrew Mallon, the plaintiff relator and a PhD scientist, detected what he believed to be falsified data in several research papers published by Leen Kawas, Athira's former CEO while serving as an expert reviewer on Emerging Technologies and Training in Neurosciences IRG – ETTN. Dr. Mallon disclosed his discovery to National Institutes of Health (NIH) administrative officers, the University of Washington, Athira, and their investors. In addition, Dr. Mallon relayed his concerns to the authors of the research papers via the "Pubpeer" internet system.

Athira subsequently referenced the research papers and the falsified data in grant applications submitted to NIH. For example, in December 2020, Athira was awarded an NIH grant for Alzheimer's research in the amount of $15.2 million based on an application that explicitly and implicitly referenced the falsified data.

The misconduct was ultimately disclosed once the full board of directors learned of it, and the belated disclosure helped "Athira mitigate its damages and demonstrated its resolve towards coming into compliance with the relevant law and regulations." However, following the initial receipt of Dr. Mallon's disclosure, the government maintained that Athira's failure to report the allegations sooner was in violation of its regulatory responsibilities and therefore resulted in the $4 million penalty.

Regulatory Requirements

Grantees must be aware of the regulatory requirements that are implicated in grant awards. For example, 42 CFR § 93.309 requires institutions to notify the HHS Office of Research Integrity (ORI) when "HHS resources or interests are threatened." In addition, the regulations require research institutions report to ORI any decision to initiate an investigation within 30 days of finding that one is warranted, and to provide ORI with the findings and inquiry report.

Contractor Considerations

Whether it be through a whistleblower hotline submission or an anonymous email from a reviewer, contractors must take these types of allegations seriously. By its nature, the FCA incentivizes whistleblowing as the law allows relators to bring claims that can result in substantial financial penalties for the company and entitle the whistleblower to a portion of the recovered penalty. These types of allegations should be reviewed for their credibility, disclosed, and investigated, if necessary. For one, prompt disclosure may help mitigate penalties.

Companies should consider establishing confidential whistleblower hotlines to receive tips if such a mechanism has not yet been implemented. An internal tipline enables a company to gather allegations of misconduct, after which it is imperative to quickly assess the credibility of the tip and, if necessary, put in place remedial measures to prevent further misconduct and evaluate whether disclosure to the relevant authorities is necessary or, if not necessary, advisable. As this settlement highlights, the receipt of allegations by a grant recipient may trigger certain regulatory obligations. Companies should thoroughly understand the requirements associated with their grants to ensure they can comply with their obligations and avoid substantial penalties.

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