The False Claims Act (“FCA”) requires a materiality to establish a claim for liability, and defines “material” as a natural tendency or capability to influence a bribe. Earlier this year, the Third Circuit applied a stricter materiality standard in United States ex rel. Petratos v. Genentech Inc. (“Petratos“), 855 F.3d 481 (3d Cir. 2017). The Third Circuit ruled that plaintiffs failed to show that the defendant’s alleged noncompliance with the Food and Drug Act (“FDA”) regulations had an impact on the government’s payment decisions, and thus, the alleged conduct was not materially noncompliant. The Court noted that, after the plaintiffs disclosed the defendant’s alleged “campaign of disinformation” toward the FDA, the FDA still maintained its approval of the defendant’s drug, Avastin, which was at the center of the dispute. Additionally, the government did not stop reimbursement payments for prescriptions of the drug.
Medicor Associates Inc. (“Medicor”), a cardiology practice in Pennsylvania, believed that the ruling in Petratos should influence the ruling on its case. U.S. District Judge Sean J. McLaughlin denied Medicor’s motion for summary judgment March. However, after the May ruling in Petratos, Medicor argued that Judge McLaughlin’s original decision should be revisited.
Tullio Emanuele (“Emanuele”), a former cardiologist for Medicor, sued Medicor and the University of Pittsburgh’s Hamot Medical Center (“Hamot”) on behalf of the U.S. government in 2011. The government later declined to intervene in the prosecution of the case. Emanuele alleged that Medicor doctors were given paid “medical director” contracts with Hamot in exchange for referring a specified number of patients-allegations which, if proven to be true, would violate the Anti-Kickback Statute of the FCA. Emanuele also alleged that Medicor violated the Stark Act, which forbids referring Medicare patients to a practice with which a physician has a financial relationship.
In March, Judge McLaughlin denied Medicor’s motion for summary judgment, finding that a reasonable jury could conclude that Emanuele’s evidence met the materiality standard. Additionally, Judge McLaughlin granted summary judgment on some of Emanuele’s Stark Act claims.
On May 22, 2017, Medicor filed a motion asking the Court to reconsider its motion for summary judgment. Medicor argued that if the Court had the benefit of the Petratos ruling it would have granted Medicor’s summary judgment motion. Medicor further argued that the Petratos ruling would have directed the Court to factor in the government’s decision not to intervene in the issue or reverse any reimbursements to Medicor or the doctors named in the suit. Petratos shows that mere allegations of violations are not material. Instead, relators must now show that the government would not have reimbursed the defendant if it were aware of the alleged violations, and that the government routinely would not reimburse in similar situations. Because the government has taken no steps to stop reimbursements after learning of the alleged violations, Medicor believes that Emanuele’s claims should be thrown out under the new standard.
The legal team at SFMS has significant experience litigating FCA matters. If you have any questions regarding this subject or this posting, please contact Nick Lussier (firstname.lastname@example.org) or Chiharu Sekino (email@example.com). We can also be reached toll-free at (866) 540-5505.
Shepherd, Finkelman, Miller & Shah, LLP is a law firm with offices in California, Connecticut, Florida, New Jersey, New York, and Pennsylvania. SFMS is an active member of Integrated Advisory Group (www.iaginternational.org), which provides us with the ability to provide our clients with access to excellent legal and accounting resources throughout the globe. For more information about our firm, please visit us at www.sfmslaw.com.
Cueto, Emma. “Pa. Doctors Want Kickbacks Suit Nixed After 3rd Circ. Ruling.” Law 360. Last modified on May 22, 2017.
Overley, Jeff. “Escobar Ruling Helps Genentech Beat Avastin FCA Suit.” Law 360. Last modified on May 1, 2017.
Packel, Dan. “Whistleblower Gets Partial Win In Hospital Kickback Suit.” Law 360. Last modified on March 15, 2017.