Drug Companies Escape Liability for Illegal Practices

In 2011, two former pharmaceutical sales representatives brought a qui tam False Claims Act case against pharmaceutical giant Bristol-Myers Squibb Co. and Otsuka America Pharmaceutical, Inc., alleging that these companies illegally marketed an anti-psychotic drug for use by the elderly and children, even though it had not been approved for such use. In addition, the sales representatives alleged that the pharmaceutical companies paid illegal kickbacks to psychiatrists to increase prescriptions. In March, 2015, United States District Judge William Bertelsman dismissed these False Claims Act claims, holding that the sales representatives’ allegations did not provide a strong enough inference that false claims had actually been presented as a result of Defendants’ actions. However, the Court allowed the sales representatives’ retaliation claims to proceed, holding that 2010 amendments to the False Claims Act’s whistleblower protection provision expanded the scope of such claims. United States ex rel. Ibanez, et al. v. Bristol-Myers Squibb Co., et al., No. 1:11-cv-029, 2015 U.S. Dist. LEXIS 39394 (S.D. Ohio Mar. 27, 2015).

The sales representatives then moved for leave to amend their complaint to add the detail to the False Claims Act claims that the Court believed were missing. But in a stunning turn, the Court denied the motion. The Court held that since some of the sources of information that the sales representatives relied on to get this detail constituted public disclosures, the sales representatives could not proceed with the case. United States ex rel. Ibanez, et al. v. Bristol-Myers Squibb Co., et al., No. 1:11-cv-029 (S.D. Ohio Sept. 24, 2015).

The False Claims act does contain a public disclosure bar that prohibits certain actions whose allegations are publicly disclosed in one of several specific sources, such as Federal reports or the news media. However, a qui tam relator may still proceed with the case if they qualify as an original source. Following the 2010 amendments to the False Claims Act, an original source is someone who either (1) disclosed the information to the Government prior to the public disclosure or (2) who has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions.

Because these sales representatives alleged information highly unlikely to be found in any public source, it seems that they should have been permitted to proceed with the False Claims Act case as original sources. Instead, without citation, the Court held that the sales representatives could not proceed with the case because they were not original sources of the publicly disclosed allegations.

This holding makes little sense. The point of the original source provision is to allow persons with independent knowledge to proceed even when there has been a public disclosure. In fact, the Court’s decision conflicts with a Supreme Court decision. In Rockwell Int’l Corp. v. United States, 549 U.S. 457, 470-72 (2007), the Supreme Court held that a relator qualifies has an original source when they have independent knowledge of their allegations, and that a showing of independent knowledge of the publicly disclosed allegations is not required.

Helmer, Martins, Rice, & Popham does not represent any parties to this case. Nevertheless, this decision is important to whistleblowers seeking to hold pharmaceutical companies responsible for illegally marketing their products in violation of the law. If you are aware of illegal claims to Government healthcare programs, contact us to discuss your options.