SAN FRANCISCO (CN) – The Ninth Circuit has ordered Gilead Sciences back to court to defend against accusations that it made false statements about complying with federal regulations on HIV drugs.
The deception netted Gilead billions of dollars in government purchases. The company must also defend claims that it fired a senior employee who blew the whistle on its illicit conduct.
Decisively reversing a federal judge’s 2015 ruling, a three-judge appeals panel held that former Gilead employees Jeff and Sherilyn Campie had adequately pleaded that Gilead’s conduct opened it to liability under the False Claims Act (FCA).
It also found that the Campies adequately pleaded a claim for retaliation under the FCA when Gilead fired Jeff Campie from his job as Senior Director of Global Quality Assurance after he discovered and reported the violations.
“Relators adequately plead falsity under the False Claims Act. To hold otherwise would reduce FDA regulations akin to approval of the curate’s egg,” U.S. District Judge Donald W. Molloy wrote in the court’s 34-page opinion. Molloy sat on the panel by designation from the District of Montana.
U.S. drug maker Gilead produces multiple HIV drugs, including Atripla, Emtriva and Truvada. In 2008 and 2009, the government paid more than $5 billion for the drugs, according to Friday’s opinion.
The Campies claim that Gilead hid from the government that its drugs violated Food and Drug Administration regulations and knowingly made false statements regarding the company’s compliance when it sold the drugs.
To get approval to make and sell a drug in the United States, a drug maker must submit a “new drug application,” or NDA, to the FDA, stating the chemical composition of the drug, the facilities where the drug will be produced, and the methods and controls that will be used in the production process.
If the FDA deems the methods or facilities inadequate for maintaining a drug’s effectiveness, the FDA can toss an application or withdraw a previously approved one.
In the mid-2000s, Gilead submitted NDAs and won FDA approval for all three HIV drugs, which contain the active ingredient emtricitabine, commonly known as FTC.
In its NDA applications, Gilead told the FDA that it planned to get its FTC from facilities in Canada, Germany, the United States and South Korea. But the Campies claim that Gilead actually used a company called Synthetics China to produce unapproved FTC at unregistered facilities to save money.
For 16 months beginning in 2007, Gilead imported FTC from Synthetics China to use in its finished drugs, claiming that the FTC had come from its approved South Korean manufacturer, according to the Campies.
Gilead finally sought FDA approval in 2008 to use FTC made by Synthetics China, but the Campies say the company had been using ingredients from Synthetics China for at least two years before the FDA approved it in 2010.
The Campies also accuse Gilead of falsifying data that it used for its NDA so that the FDA would approve Synthetics China. According to the Campies, Gilead claimed in an application that it received three batches of FTC from Synthetics China that had passed internal testing and were equivalent to FTC batches made from approved manufacturers. But the Campies say that was a lie – two of the three batches failed testing, and one batch was found to contain arsenic, chromium and nickel, as well as microbial contamination.
Gilead issued two recalls of contaminated products in 2014. Nonetheless, it never told the FDA about the test results or contamination problems, according to the Campies.
In their lawsuit, the Campies claim that Gilead’s tainted HIV drugs weren’t eligible for FDA approval and thus never should have received payment or reimbursement from the government. That means any claims Gilead sent the government for payment or reimbursement were false under the FCA, they say.
U.S. District Judge Edward M. Chen dismissed the Campies’ lawsuit in 2015 for failing to state a claim under the FCA. The judge found that when a plaintiff brings an FCA suit against the manufacturer of an FDA-approved drug for the sale of contaminated or defective drugs, the suit can only proceed if the drugs had no value.
However, the Ninth Circuit disagreed with Chen’s finding, ruling Friday that the Campies had adequately pleaded each of the four elements of FCA liability, which requires that a false claim be made knowingly and that it affect the government’s decision to pay the claim.
Gilead expressed dissatisfaction with the ruling Friday.
“We are disappointed with today’s ruling and intend to challenge this outcome and vigorously defend against these allegations,” the company said in a statement.
Again breaking with Chen, the panel found that the Campies had also adequately pleaded a claim for retaliation under the FCA.
Though Chen had ruled that Jeff Campie failed to show either that he was engaged in a protected activity or that Gilead knew about his protected activities, Molloy countered that Campie “had an objectively reasonable, good faith belief that Gilead was possibly committing fraud against the government; that Gilead knew Campie was engaged in protected activity; and that Gilead discriminated against Campie because he engaged in protected activity.”
According to the Campies, Gilead fired Campie from his quality-control oversight position after he threatened to tell the FDA about the faulty FTC if Gilead didn’t to stop using it, and initiated a quarantine to prevent another adulterated drug from entering the market.
Tejinder Singh, an attorney with Goldstein & Russell in Bethesda, Maryland, who represents the Campies, declined to comment on the decision Friday.
Although the government declined to intervene in the case, the Justice Department submitted an amicus brief urging the panel to reverse Chen’s ruling.
The Justice Department also declined to comment on the decision Friday.
Senior U.S. Circuit Judge A. Wallace Tashima and Circuit Judge Stephen Reinhardt joined Molloy on the panel.
Ethan Posner of Covington & Burling in Washington represents Gilead.