4th Cir. tosses Qui Tam Complaint alleging the repackaging and sale of contaminated penicillin for failing to adequately plead “a false claim” under the False Claims Act (FCA). While troubled with defendant Omnicare’s lax manufacturing practices, the U.S. Court of Appeals for the Fourth Circuit nevertheless affirmed dismissal of the case because the relator failed to establish that violating an FDA regulation concerning Current Good Manufacturing Practice (CGMP) regulations, in this case, packaging penicillin and non-penicillin drugs within the same facility, did not, in and of itself, also violate the False Claims Act (FCA).
Practice point 1: It is very difficult to make an FCA case where the Government declines to intervene and the affected agency (here HHS) and/or its regulations do not support the case on the “materiality” element. That is, when the relator gets no support from the Government on the assertion that violating the regulation in question would have affected the agency’s reimbursement decisions.
Practice point 2: One silver lining to this decision is that the Fourth Circuit court continues to adhere to a commonsensical interpretation of the phrase “based upon” in the public disclosure bar, 31 U.S.C. § 3730(4)(e). Unlike most other jurisdiction, the court views “based upon” to mean that the relator actually “based” his allegations “upon” a public disclosure, rather than, to mean the allegations are “substantially similar to” the publicly disclosed information regardless of whether such information ever factored into the formation of the relator’s allegations.
The case is captioned: United States ex rel. Barry Rostholder v. Omnicare, Inc., No. 12-2431, (4th Cir. Feb. 21, 2014).
