United States District Court, N.D. California
UNITED STATES OF AMERICA, ex. rel. CAMPIE et al., Plaintiffs,
GILEAD SCIENCES, INC., et al., Defendants.
ORDER GRANTING DEFENDANTS' MOTION TO DISMISS
EDWARD M. CHEN, District Judge.
Pending before the Court is Defendants Gilead Sciences, Inc. and Gilead Sciences ULC's (collectively "Gilead") motion to dismiss Relators Jeff Campie and Sherilyn Campie's ("Relators") first amended complaint ("FAC") for failure to state a claim. Docket No. 58. Relators are current and former employees of Gilead. Gilead is a pharmaceutical company who, inter alia, supplies federal and state sponsored Medicaid and Medicare programs with drugs for the treatment of HIV/AIDS, cystic fibrosis, and hepatitis, among other serious illnesses. The first amended complaint alleges that Relators discovered, and reported to Gilead officials, numerous serious violations of Federal Food and Drug Administration ("FDA") regulations. Relators allege that Gilead failed to correct these violations, but rather concealed them and that the resulting sale of misbranded, adulterated drugs render each sale of the affected drugs "false" for purposes of the federal False Claims Act and related state laws. Relators further allege that Gilead retaliated against Relator Jeff Campie for his reporting the various FDA violations. Gilead has moved to dismiss Relators' FAC in full. For the foregoing reasons, Gilead's motion will be GRANTED, but Relators will be afforded leave to amend.
II. FACTUAL & PROCEDURAL BACKGROUND
Plaintiff-Relator Jeff-Campie is a former Senior Director of Global Quality Assurance for Defendant Gilead Sciences, Inc. FAC ¶ 5. Mr. Campie was employed by Gilead between 2006 and mid-2009. Id. While employed with Gilead, Mr. Campie had quality control oversight of (1) all commercially released drug products released by Gilead; (2) Gilead's polices, practices and Good Manufacturing Practices ("GMP") compliance; and (3) the development of quality systems. Id. Plaintiff-Relator Sherilyn Campie began working for Gilead in March 2007 as a Senior Research Associate. Id. ¶ 6. She still works for Gilead and is Associate Manager, Quality Control where she oversees the stability program for drug products in development in clinical phase trials. Id.
Defendant Gilead is a California corporation that develops, manufacturers, promotes, and sells prescription drugs, with a focus on drug products for patients with life threatening diseases, such as HIV/AIDS, Hepatitis, cystic fibrosis, and cardio-pulmonary conditions. Id. ¶ 12. Gilead contracts with numerous companies for the manufacture of "active pharmaceutical ingredients" ("APIs") and other products that go into the pharmaceutical products Gilead manufactures and sells. Id. The majority of prescriptions for Gilead's drugs are paid for by the federal and state governments through the various health care programs. Id.
B. Summary of Relators' Allegations Regarding Gilead's Alleged FDA Violations
Notwithstanding Federal Rule of Civil Procedure 8's command that a complaint contain only a "short and plain statement of the claim, " Relators' FAC is a sprawling 191 page, 747 paragraph document that consists largely of a laundry list of alleged FDA violations in immense detail. See Fed.R.Civ.P. 8(a). Given the nature of Gilead's challenge to the FAC, the Court need not walk through all of the alleged FDA violations in detail. Rather, the Court provides the following examples of Relators' allegations.
1. Alleged Use of Unregistered Manufacturing Facilities
Relators allege that in or around 2008, Gilead contracted with Synthetics China, LTD to manufacture the API "emtricitabine, " (commonly known as "FTC"). Id. ¶ 51. FTC is the active ingredient in many of Gilead's HIV/AIDs drugs, such as Emtriva, Truvada, and Atripla as well as several clinical trial drugs. Id. Synthetics China produced FTC at roughly half the cost as Gilead's existing suppliers and Gilead allegedly began using Synthetics China to save money and to trigger price reduction clauses in contracts with other FTC suppliers. Id. Gilead ultimately received approval from the FDA to use Synthetics China as an API manufacturer, but according to Relators, Gilead had been including products from Synthetics China in its finished drug products for at least two years before this approval was obtained. Id. ¶ 53.
Relators also allege that Gilead falsified or concealed data in support of its application to use Synthetics China as an API manufacturer. For example, in this application, Gilead claimed that it had received three full-commercial-scale batches of FTC from Synthetics China that had passed testing and were consistent with/equivalent to FTC batches made from existing manufacturers. Id. Relators contend that this representation was false and that two of the three batches had failed internal testing. Id. ¶ 57. One of the batches purportedly contained "residual solvent levels in excess of established limits" and other impurities. Id. A second batch had "microbial contamination" and showed the presence of "arsenic, chromium and nickel contaminants." Id. Relators allege, nonetheless, that this batch was released for final drug processing and commercial sale. Id. Despite being aware of manufacturing problems at Synthetics China, Gilead allegedly released 77 lots of FTC produced by Synthetics China to its contract manufacturers well before FDA approval of the Synthetics China facility. Id. ¶ 62, 65.
Relators allege that Gilead actively concealed its use of FTC produced by Synthetics China in a number of ways. First, Gilead imported the FTC at issue through its Canadian facilities (Gilead Alberta) and represented through fraudulent labeling that it was "API supporting Investigational New Drug... activities" rather than its true use - API for commercial sales. Id. ¶ 70. Second the labels and paperwork for the API was obscured/augmented by the Gilead Alberta shipping paperwork to conceal where the FTC was actually produced. Id. ¶ 71. Third, Gilead credited its approved FTC manufacturer Yuhan with the production of the FTC - rather than the true producer, Synthetics China. Id. ¶ 72. During this time, Yuhan actually produced no FTC. Id.
Relators contend that Gilead's false and misleading statements made in connection with the application to use Synthetics China as an API manufacturer - specifically, failing to disclose its prior use of Synthetics China and its labeling fraud - "infects each and every batch of final drug product in which Synthetics China's API was included" and thus makes every sale of such final drug to federal or state governments a violation of the False Claims Act and related state laws. Id. ¶¶ 76, 77.
Similar to the allegations regarding Synthetics China, Relators allege that Gilead used its Gilead Alberta facilities to produce the API ambrisentan two years before the Gilead Alberta facilities were approved by the FDA. Id. ¶ 78. Gilead was aware of quality issues with the API produced in this facility - including through patients complaints - but "revised" purity values in the applicable Certificate of Analysis ("COA") to hide these issues. Id. ¶¶ 98, 99, 101. Relators contend that every sale by Gilead to a government that incorporated ambrisentan manufactured at Gilead Alberta prior to FDA approval violated the False Claims Act and related state law.
2. Adulteration or Contamination in Gilead's Commercial Drug Products
Relators' FAC alleges numerous instances of Gilead API or final drug products used in commercial sales being adulterated or contaminated. The following are two examples emblematic of Gilead's conduct as alleged by Relators.
a. Allegations Regarding FTC Contamination
As mentioned above, FTC is the API used in Gilead's drugs branded as Emtriva, Truvada, and Atripla (as well as combination drugs based on these three products). Id. ¶ 105. Prior to these drugs being approved, Gilead submitted New Drug Applications ("NDA") which listed FTC as an active ingredient and also listed a number of inactive ingredients. Id. ¶ 107. The FDA requires that every batch of final drug product contain identical active and inactive ingredients as those listed in the NDA. Id. Were a subsequent batch to contain ingredients not listed in the NDA, that product would be "misbranded" in violation of federal law. Id. For this reason, Relators contend that the sale of contaminated or adulterated drugs violate federal law. The FAC contains allegations of a number of instances of Gilead's FTC being contaminated.
For instance, Relators contend that Gilead was aware of an impurity known as "cyclic-FTU" that manifested in FTC when FTC was exposed to elevated humidity or temperatures. Id. ¶ 109, 110. Starting in mid-2003, Gilead began to observe "black specks" (or "charred and degraded particles") in its FTC. Id. ¶ 110. Relators allege that Gilead failed to disclose the presence of cyclic-FTU - or the fact that its FTC were failing internal testing - to the FDA. Id. ¶¶ 113, 114. They further contend that Gilead failed to "assess the long-term health consequences of the contamination and failed to establish a testing method for measuring the level of cyclic-FTU impurities." Id. ¶ 118. Relators thus allege that by no later than 2003, most if not all of the FTC batches used to manufacturer Gilead's drug products were "adulterated" with a variety of unapproved contaminants, including cyclic FTU. Id. ¶ 112. Despite the fact that the affected FTC lots were adulterated and had failed potency and purity testing, Relators contend that Gilead approved them for use in manufacture without further investigation, considering the black specks to be no more than aesthetic defects. Id. ¶ 122-23, 26. While Gilead finally fully disclosed the cyclic-FTU contamination to the FDA in 2010,  id. ¶ 128, Relators allege that Gilead assured the FDA, that "no field alert report or recall was warranted" despite the fact that the presence of cyclic-FTU altered the chemical composition of its products and no changes had been made to its manufacturing processes to fix the issue. Id. ¶ 129.
Similarly, in 2010, Relator Sherilyn Campie allegedly observed three "unknown impurities" in additional FTC lots, and yet Gilead instructed its technicians to ignore the impurities. Id. ¶ 132. As a result, they were never identified, quantified, or reported to the FDA. Id. ¶ 135. Further, Relators allege that in November 2011, Gilead became aware that FTC lots used to validate Synthetic China's new, larger facility (known as "Plant 203") were "grossly contaminated" with "pinkish-orange particles, " brown paper strips, blue colored glass, cement and fibrous building materials, and metal shards. Id. ¶¶ 156, 160. Relators allege that at least two of the validation lots from Plant 203 had already been released in the United States for commercial sale. Id. ¶ 154. While Gilead allegedly issued an "FDA field alert" about these lots, they "did not make any effort to recall them." Id. ¶ 155. Gilead began sieving and reprocessing those lots of contaminated API which it still had from the Synthetics China plant in question, resulting in kilograms of material being filtered. Id. ¶ 161. The API was then utilized in commercial production - Relators allege that Gilead failed to destroy any of the API after sieving. Id. ¶ 162. Relators further allege that Gilead took steps to alter the affected API's identification numbers to "give the appearance that they originated at the Gilead Alberta facility rather than the Synthetics China location under scrutiny." Id. ¶ 163.
Relators assert in their FAC that all of the NDAs for drugs which incorporate FTC contained "false statements and material omissions, in that they listed ingredients" that did not include cyclic-FTU, methylene-bridged impurities, or the other impurities and contaminants as referenced throughout the complaint. Id. ¶ 138. They allege that had the FDA known of these false statements and material omissions (or had it been aware of the adulteration), the FDA would not have approved the drugs or would have withdrawn approval. Id. ¶ 140. Relators further assert that the sale of the drugs containing the contaminated FTC would have been illegal under federal law as the drugs were "misbranded." Id. ¶ 144. Accordingly, Relators assert that all claims presented to the federal or state governments are "false claims" in violation of the False Claims Act and related state law claims. Id. ¶ 142.
Similarly, the Relators contend that Gilead certified in its certificate of analysis ("COA") for drugs which incorporated the Plant 203-produced FTC that the API was "in compliance with cGMP [current good manufacturing practice] and manufactured according to specifications in the NDA." Id. ¶ 174. However, as discussed above, it is alleged that Gilead knew this FTC was, in fact, contaminated by 2011. Id. They allege that had the FDA been notified of these false and material statements in the COA, it would not have approved Plant 203, or would have withdrawn approval. Id. ¶ 175. Accordingly, relators contend that all sales of drugs containing FTC from Plant 203 were "false claims" within the meaning of the False Claims Act and related state law claims. Id. ¶ 176.
b. Allegations Regarding TDF Contamination
In April 2001, Gilead submitted an NDA to the FDA for approval of its drug "Viread" - a drug used to treat HIV and Hepatitis B. Id. ¶ 179. The FDA approved Viread for commercial sale and clinical use in October 2011. Id. The active ingredient of Viread is tenofovir disoproxil fumarate ("TDF"). Id. ¶ 181.
While the NDA for Viread was pending, Gilead was aware that black particles had been discovered in numerous Viread tablets manufactured at by its contractor Patheon. Id. ¶ 180. These batches showed "clear adulteration and contamination" insofar as none of the active or inactive ingredients was black - TDF is a "white to off-white crystalline powder." Id. ¶ 181. Later testing eventually showed that the specks in question consisted of teflon, charred TDF, acetaminophen, metal shavings, and other materials. Id. ¶ 185. Gilead used the contaminated TDF lots to validate its NDA submission for Viread and eventually sold the affected Viread tablets into the commercial market without ever disclosing the existence of the black particles. Id. ¶ 180, 184. Affected lots of TDF were also incorporated into validation batches of Gilead's drug Truvada and Atripla that were produced in connection with the filing of the NDAs for those drugs. Id. ¶ 187.
Gilead allegedly justified internally its failure to disclose the black particles to the FDA (or to list them as additional ingredients) by referring to them as "aesthetic defects." Id. ¶ 188. In 2008, Relator Jeff Campie had an independent forensic lab analyze samples from 8 batches of commercially released Viread and Truvada tablets which showed black particles in the tablets. Id. ¶ 191. The results showed that one particle was steel swarf, another particle was identified as steel wire, and the remaining particles were "composed of chromium nickel, stainless steel, titanium, chromium, iron, and cobalt." Id. ¶ 192. Despite the result of this test, Gilead found that the black particles occurred at a sufficiently low frequency so as to constitute only an "aesthetic defect." Id. ¶ 193. Relators allege that in September 2010, the FDA issued a warning letter to Gilead regarding visible contaminants in the company's drugs manufactured in one of Gilead's facilities. Id. ¶ 194.
Relators contend that because Gilead's NDAs for drugs using TDF did not list the black specks as an "ingredient, " (1) the NDAs were false and fraudulent; (2) the FDA would not have approved the drugs (or would have withdrawn its approval) had it known about them, and therefore all claims presented to federal and state government relating to these drugs constitute "false claims." Id. ¶ 199.
3. Adulteration or Contamination in Gilead's Clinical Drug Products
In addition to the above contamination issues involving Gilead's commercially sold drugs, Relators allege a number of instances of contamination in Gilead's drug products used in clinical trials. The following are two examples.
a. Contamination in Viread Used During Pediatric Clinical Trials
As part of its approval of Viread, the FDA required that Gilead conduct clinical trials regarding the efficacy of Viread and TDF on pediatric patients infected with HIV. Id. ¶ 248. Beginning in 2002, Gilead began conducting this clinical trial. Id. ¶ 250. During the clinical trial, Relators contend that the Viread was made with TDF that contained "black particles, foreign matter, gross contamination, and visible filth" from unknown origins. Id. Gilead never reported this to the FDA, and instead certified the results of multiple studies. Id. Relators contend that Gilead was motivated to ensure that it obtain an NDA for pediatric use of Viread as well as a 6 month extension of patent exclusivity on the TDF molecule from the FDA (worth approximately $3 billion in sales). Id. ¶ 270.
The "black and brown specks" were first observed in several lots of TDF in November 2002. Id. ¶ 252. Even though Gilead was unable to locate the source of the particles or how it was introduced into the manufacturing process, it nevertheless decided to go forward with manufacturing and only instructed its contractor to continue "appearance inspections" and sampling. Id. Eventually, Gilead suspended even these superficial inspections and sampling. Id. ¶ 254. TDF lots containing these contaminants were used in a number of clinical trials, such as a Phase III trial entitled "Safety and Efficacy of Switching from Savudine or Zidovudine to Tenofovir DF in HIV-1 infected children." Id. ¶ 257. The TDF lots used in this study were, according to internal chemistry memos, contaminated with "small black and reddish-brown particles" that Gilead believed to probably (though not definitively) be Teflon. Id. ¶ 258. Gilead concluded the particles were "cosmetic defects" that had no impact on the efficacy of the drug. Id. ¶ 259. Later testing of TDF manufactured from a contractor showed that the TDF API in this lot was also contaminated with acetaminophen ("APAP") - a drug that Eurand manufacturers in the same facility. Id. ¶ 262, 263. This lot was released for clinical use in July 2008. Id. ¶ 269.
Relators allege that Gilead never notified the FDA of the contamination issues (either the black/brown specks, the presence of Teflon, or the presence of APAP) and in January 2012, the FDA approved the NDA for pediatric use of Viread. Id. ¶ 272. Relators contend that had the FDA known of these issues, it would not have approved the drug formulation. Id. ¶ 275. Because of this, and because the presence of the contaminants rendered the Viread misbranded, Relators ...