Pharmaceutical companies CSL Behring and Perrigo both recently beat back whistle-blower lawsuits because the claims were based on publicly disclosed information. Two rulings by the U.S. Court of Appeals for the Eighth Circuit show that the False Claims Act’s public disclosure bar remains a significant hurdle for many whistle-blowers, some of whom may have observed fraud firsthand.
Private whistle-blowers accused the drugmakers of FCA violations stemming from allegations of falsely reporting drug classifications in Perrigo’s case, and reporting inflated wholesale drug prices in CSL Behring’s case. Both lawsuits were dismissed at the federal trial court level and the whistle-blowers, former employees of the defendants, appealed in hopes of reviving their lawsuits.
Though the FCA allegations against the two pharmaceutical companies differed, the legal basis behind the dismissals, and the appeals court’s affirming the dismissals, was the same: the FCA’s public disclosure bar.
The public disclosure bar generally blocks copycat litigation against a defendant on allegations of fraud against the government that are already in the public realm before a private whistle-blower files an FCA lawsuit. Public disclosure includes court cases, news reports, government reports, and actual government knowledge of the facts of the allegation that would’ve enabled the government to discover the alleged fraud.
A whistle-blower can get around the public disclosure bar if he is the original source of the allegations, which requires bringing the allegations to the attention of the government prior to any public disclosure, or has independent knowledge of the allegations that materially adds to what has been publicly disclosed.
The court said the allegations of fraud against Medicare and Medicaid programs were well known in both FCA lawsuits, and neither whistle-blower possessed the type of firsthand knowledge of alleged fraud that would confer original source status.
The allegations of inflated wholesale drug prices had been the subject of past litigation and government reports, including a government report identifying the same infusion drugs cited in the FCA lawsuit against CSL Behring. The court also pointed to prior government reports containing the substantive facts of the allegations lodged against Perrigo as triggering the FCA’s public disclosure bar.
Public disclosure remains a key stumbling point, as these cases show, for private whistle-blowers.
Read my full story on the CSL Behring decision here.
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