Drug companies pay $67M for Tarceva® misrepresentation, false claims allegations

Genentech, Inc. and OSI Pharmaceuticals, LLC, resolved False Claims Act (FCA) (31 U.S.C. §3729) related to the drug Tarceva® to the tune of $67 million. The Department of Justice (DOJ) alleged that between January 2006 and December 2011, the companies misled physicians regarding the effectiveness of the drug’s treatment of non-small cell lung cancer.

Approved use

Tarceva is approved to treat non-small cell lung cancer and pancreatic cancer. However, studies revealed that Tarceva was not generally effective for the treatment of non-small cell lung cancer for certain patients. Only those patients who had either never smoked or whose cancer contained a certain protein mutation were likely to respond. Despite these findings, the companies promoted Tarceva for use in patients in which the drug was not likely to be effective.

This promotion allegedly caused a loss to state and federal governments through the submission of false claims in violation of the FCA. State Medicaid programs will receive $4.4 million from the settlement, while a qui tam relator will be granted about $10 million.

Health care organizations team up to fight implied certification theory

A number of interested health care organizations have filed briefs before the U.S. Supreme Court in Universal Health Services v. U.S. ex rel. Escobar, in which the court will consider the theory of implied certification under the False Claims Act (FCA) (31 U.S.C. §3729). Under this theory, claims submitted to the government for reimbursement are tainted by failure to conform to statute, regulations, or provisions that are not considered a condition of payment (see Does fraud go without saying? Supreme Court to examine ‘implied certification’ in FCA, Health Law Daily, December 8, 2015).

Factual background

The case was brought by the parents of a patient who died at a mental health clinic following a seizure. The parents alleged that the caregivers were not supervised as required and that the clinic did not have psychiatrists and psychologists on staff with the credentials required by the state Medicaid program. They claimed that this noncompliance caused claims for payment to be false claims, even though payment was not conditioned upon meeting these particular regulations (see Appeals court takes practical approach to False Claims Act, Health Law Daily,  March 19, 2015).

Whistleblower suits

The health care organizations filing briefs in support of Universal Health Services, like the American Hospital Association, argue that the implied certification theory broadens the reach of the FCA beyond addressing truly fraudulent claims. The American Medical Association’s (AMA) brief notes the sharp increase in qui tam actions filed by relators hoping to obtain “life-changing wealth” by bringing fraud claims based on noncompliance with an underlying regulation, even when the government is satisfied with the original transaction. The organizations believe that the FCA should be used to fight fraud, and the AMA asserts that “imperfect compliance is not equivalent to fraud.”