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United States v. Gilead Sciences, Inc.

United States District Court, N.D. California

November 5, 2019

UNITED STATES OF AMERICA, et al., Plaintiffs,
v.
GILEAD SCIENCES, INC., et al., Defendants.

          ORDER GRANTING UNITED STATES' MOTION TO DISMISS DOCKET NO. 183

          EDWARD M. CHEN, UNITED STATES DISTRICT JUDGE

         Relators Jeff and Sherilyn Campie are former employees of Defendant Gilead Sciences, Inc., a pharmaceutical drug manufacturer. They have filed a qui tam action against Gilead, asserting, inter alia, a claim for violation of the federal False Claims Act (“FCA”). According to the Campies, Gilead violated the FCA by submitting or causing to be submitted false claims for payment under government payment programs such as Medicare and Medicaid. See 31 U.S.C. § 3729(a)(1)(A).

         Previously, this Court granted Gilead's motion to dismiss the Campies' second amended complaint (“SAC”). The Court dismissed not only the FCA claim but also related claims based on state law, plus claims for retaliation under both the FCA and state law. On appeal, the Ninth Circuit reversed and remanded to this Court. Currently pending before the Court is the United States' motion to dismiss. Although the government is not a party to this action (having declined to intervene), it is a real party in interest and moves to dismiss pursuant to a provision in the FCA that states as follows: “The Government may dismiss the action notwithstanding the objections of the person initiating the action if the person has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion.” 31 U.S.C. § 3730(c)(2)(A). The United States is moving to dismiss only the FCA claim, and not any related claims based on state law or any retaliation claims, whether based on the FCA or state law.

         Having considered the parties' and the United States' briefs and supporting documents, as well as the oral argument of counsel, the Court hereby GRANTS the motion.

         I. FACTUAL & PROCEDURAL BACKGROUND

         A. Operative Second Amended Complaint

         As reflected in the Ninth Circuit's decision on appeal, the gist of the Campies' SAC is as follows. Gilead, a drug manufacturer, produces anti-HIV drug therapies, including the drugs Atripla, Truvada, and Emtriva. See United States ex rel. Campie v. Gilead Scis., 862 F.3d 890, 895 (9th Cir. 2017). All three drugs contain the active ingredient embricitabine, commonly known as FTC. See Id. at 896.

         To sell the three drugs, Gilead had to obtain approval from the FDA by filing new drug applications (“NDAs”).

In its NDA applications, Gilead represented to the FDA that it would source the FTC from specific registered facilities in Canada, Germany, the United States, and South Korea. But . . . as early as 2006, Gilead contracted with Synthetics China to manufacture unapproved FTC at unregistered facilities. For a period of sixteen months beginning in December 2007, Gilead brought illicit FTC from a Synthetics China facility into the United States to use in its commercial drugs, claiming that the FTC had come from its approved South Korean manufacturer. . . .
Gilead ultimately sought approval from the FDA to use Synthetics China's FTC in October 2008, but . . . had been including products from Synthetics China in its finished drug products for at least two years before this approval was obtained in 2010.

Id.

         According to the Campies, Gilead also engaged in misconduct because it used “falsified or concealed data in support of its application to get Synthetics China approved by the FDA” - e.g., Gilead claimed in its application that “it had received three full-commercial-scale batches of FTC from Synthetics China that passed testing and were consistent with or equivalent to FTC batches made from existing, approved manufacturers” but concealed the fact that two of the three batches actually failed internal testing. Id. “One of the batches purportedly contained ‘residual solvent levels in excess of established limits' and other impurities. A second batch had ‘microbial contamination' and showed the presence of arsenic, chromium and nickel contaminants.” Id. Instead of reporting the failure to the FDA, Gilead “secured two new batches and amended its [application] to include the substitute data.” Id.

         The Campies allege that Gilead violated the FCA because it sought payment for its drugs containing FTC either directly or indirectly from government programs, but payment for drugs under these programs is contingent on FDA approval and, “because the drugs paid for by the government contained FTC sourced at unregistered facilities, they were not FDA approved and therefore not eligible for payment under the government programs.” Id. at 897.

         B. Procedural History

         In March 2015, Gilead moved to dismiss the Campies' SAC. Although the government had declined to intervene in this lawsuit, it filed a statement of interest (as the real party interest) in response to Gilead's motion, just as it did when Gilead moved to dismiss an earlier complaint filed by the Campies. See Docket No. 129 (government's statement). Although the government did not take a position on the ultimate merits of the Campies' lawsuit, it made some arguments that were favorable to the Campies - e.g., that the FCA can be violated even if the defendant did not make a “direct misrepresentation . . . to the payor agency” and that “a deviation from the drug manufacturing process approved by the [FDA] could be . . . tantamount to producing a drug that is not the same drug approved by the FDA, thereby potentially forming the basis of a FCA violation.” Docket No. 19 (St. at 2-2).

         In June 2015, this Court granted Gilead's motion to dismiss - dismissing not only the FCA claim but also all remaining claims, including those based on retaliation. See Docket No. 142 (order). The Campies appealed. On appeal, the United States filed an amicus brief. Again, the government made arguments that were favorable to the Campies (without taking a position on the ultimate merits of their case) - e.g., that “a claim can be ‘false or fraudulent' when someone represents that it has sold something different from what was actually provided - regardless of whether or not the resulting product was ‘worthless'” and that “it is possible to state an FCA claim when a defendant makes false statements to one government agency, and those false statements are material to the submission of false or fraudulent claims to another government agency.” United States ex rel. Campie v. Gilead Scis., Inc., No. 15-16380 (9th Cir.) (Docket No. 20) (Br. at 15, 22). Ultimately, the Ninth Circuit found in favor of the Campies.

         Gilead thereafter petitioned the Supreme Court for review. Apparently, the Supreme Court asked the United States for its views on petition, see Docket No. 200 (Friedman Decl. ¶ 7), and, in response, the government filed an amicus brief in November 2018. See Docket No. 200 (Friedman Decl., Ex. B) (amicus brief). In the brief, the government argued, inter alia, that the Ninth Circuit correctly held that “the government's continued payment for a product, after learning that the manufacturer has made misrepresentations to the government regarding that product, can be strong evidence that the misrepresentations were not material to the government's payment decisions” but that, “under the circumstances of this case, . . . the fact of continued government payments did not by itself require dismissal of respondents' claims at the pleading stage.” Docket No. 200 (Friedman Decl., Ex. B) (Amicus Br. at 7).

         However, in the same brief, the government also asserted for the first time that, if the case were remanded back to the district court, it would

move to dismiss [the Campies'] suit under Section 3730(c)(2)(A). That determination is based in part on the government's thorough investigation of respondents' allegations and the merits thereof. In addition, if this suit proceeded past the pleading stage, both parties might file burdensome discovery and Touhy requests for FDA documents and FDA employee discovery (and potentially trial testimony), in order to establish “exactly what the government knew and when, ” which would distract from the agency's public-health responsibilities.” Based on all those considerations, the government has concluded that allowing this suit to proceed to discovery (and potentially a trial) would impinge on agency decisionmaking and discretion and would disserve the interests of the United States.

         Docket No. 200 (Friedman Decl., Ex. B) (Amicus Br. at 15).

         II. ...


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