United States Ex Rel. Petratos v. Genentech Inc.

855 F.3d 481, 2017 WL 1541919, 2017 U.S. App. LEXIS 7667
CourtCourt of Appeals for the Third Circuit
DecidedMay 1, 2017
Docket15-3805
StatusPublished
Cited by126 cases

This text of 855 F.3d 481 (United States Ex Rel. Petratos v. Genentech Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Third Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States Ex Rel. Petratos v. Genentech Inc., 855 F.3d 481, 2017 WL 1541919, 2017 U.S. App. LEXIS 7667 (3d Cir. 2017).

Opinion

OPINION OF THE COURT

HARDIMAN, Circuit Judge.

This appeal arising under the False Claims Act involves a multi-billion dollar cancer drug, Avastin, which was developed by Appellee Genentech. Relator Gerasimos Petratos, who was head of healthcare data analytics for Genentech, filed a qui tam action soon after leaving the company. He alleged that Genentech suppressed data that caused doctors to certify incorrectly that Avastin was “reasonable and necessary” for certain at-risk Medicare patients. The District Court dismissed Petratos’s suit for failure to state a claim. Although we disagree with the District Court’s grounds for dismissal, we will affirm because Petratos failed to satisfy the False Claims Act’s materiality requirement.

I

A

A widely prescribed cancer drug that has accounted for $1.13 billion a year in Medicare reimbursements, Avastin is approved by the FDA to treat several types of cancer. Petratos alleged that Genentech concealed information about Avastin’s health risks. Specifically, he claimed the company ignored and suppressed data that would have shown that Avastin’s side effects for certain patients were more common and severe than reported. According to Petratos, such analyses would have required the company to file adverse-event reports with the FDA, and could have resulted in changes to Avastin’s FDA label. Genentech also allegedly suppressed information regarding Avastin’s side effects for patients with renal failure despite a request to disclose that information by a “Key Opinion Leader,” a recognized industry expert who “influence[s] peers’ medical practice, including but not limited to prescribing behavior.” John Mack, A KOL by Any Other Name, 14-03 Pharm. Mktg. News 1, 1 (2015).

Petratos claimed Genentech’s data suppression was part of a formal campaign, dubbed “Optimizing Data Value,” during which the company avoided certain analy-ses and data sets that might yield negative results to mitigate its “business risk.” App. 324-26. Petratos asserted that he tried to bring the safety risks inherent in this strategy to the attention of upper management, but was told “to stop any further work in [the] area,” App. 318, and had his job “threatened,” App. 314.

As a consequence of Genentech’s data-suppression strategy, Petratos claimed the company caused physicians to submit Medicare claims that were not “reasonable and necessary.” In the opinion of one oncologist, if Genentech had properly dis *486 closed Avastin’s side-effects for certain at-risk patients, “the standard of care would have been to prescribe a lower dose of Avastin, a lower frequency of doses, or no dose at all.” App. 341.

B

Initially filed in 2011, this case was heard by three judges of the United States District Court for the District of New Jersey. Soon before his retirement, Judge Cavanaugh dismissed Petratos’s initial complaint in part, but granted a stay of the order so Petratos could amend his complaint. The case was reassigned to Judge Wigenton, who rejected Genentech’s argument that an amendment would be futile and held that Petratos “sufficiently alleged causes of action” under the False Claims Act. App. 56. Finally, the case was transferred to Judge Arleo, who took a different tack than Judge Wigenton and reasoned that “medically ‘reasonable and necessary’ is a determination made by the relevant agency, not individual doctors.” App. 16-17. Because Petratos’s theory relied on the doctors as part of the “reasonable and necessary” determination, Judge Arleo deemed the complaint fatally deficient and dismissed all claims. App. 18-19. Petratos filed this timely appeal.

II

The. District Court had subject-matter jurisdiction over Petratos’s federal claim under 28 U.S.C. § 1881 and supplemental jurisdiction over his state-law claims under 28 U.S.C. § 1367. We have appellate jurisdiction under 28 U.S.C. § 1291. We “exercise plenary review of the District Court’s order granting appellees’ motion to dismiss for failure to state a claim.” United States ex rel. Wilkins v. United Health Grp., Inc., 659 F.3d 295, 302 (3d Cir. 2011). We review for abuse of discretion both the District Court’s decision to reconsider a predecessor judge’s ruling, Fagan v. City of Vineland, 22 F.3d 1283, 1290 (3d. Cir. 1994), and its denial of leave to amend the complaint, United States ex rel. Schumann v. Astrazeneca Pharms. L.P., 769 F.3d 837, 849 (3d Cir. 2014).

Ill

Petratos’s claims implicate three interlocking federal schemes: the False Claims Act, Medicare reimbursement, and FDA approval. We begin- by briefly outlining each scheme.

The False Claims Act is meant “to reach all types of fraud ... that might result in financial loss to the Government.” Cook Cty. v. United States ex rel. Chandler, 538 U.S. 119, 129, 123 S.Ct. 1239, 155 L.Ed.2d 247 (2003) (quoting United States v. Neifert-White Co., 390 U.S. 228, 232, 88 S.Ct. 959, 19 L.Ed.2d 1061 (1968)). A False Claims Act violation occurs when a person “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval.” 31 U.S.C. § 3729(a)(1)(A). A claim is legally false when it does not comply “with a statute or regulation the compliance with which is a condition for Government payment.” Wilkins, 659 F.3d at 305. 1

The allegedly false claims in this case were submitted to the Medicare program, *487 which reimburses the health care costs incurred by program beneficiaries. The Medicare statute provides that “no payment may be made” for items and services that “are not reasonable and necessary for the diagnosis and treatment of illness or injury.” 42 U.S.C. § 1395y(a)(l)(A). Because a claim can be false if it does not comply with statutory conditions for payment, the claims at issue here are false if Avastin was not “reasonable and necessary.” See id.

One important factor considered by the Centers for Medicare and Medicaid Services (CMS) to determine whether a prescribed drug is “reasonable and necessary” is whether it has received FDA approval.

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855 F.3d 481, 2017 WL 1541919, 2017 U.S. App. LEXIS 7667, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-ex-rel-petratos-v-genentech-inc-ca3-2017.