For the Defense - Volume 2, Issue 4 - 2017 - 13
requires that the obligation is "material" to the
government's payment decision.15 To ascertain
materiality, one "looks to the effect [of the misrepresentation] on the likely or actual behavior of the
government."16 The Court described this standard
as both "demanding" and "rigorous,"17 noting
that this inquiry is not too fact-intensive for courts
to examine on motions to dismiss.18 The Court thus
recognized that the FCA "is not 'an all-purpose
antifraud statute,' or a vehicle for punishing
garden-variety breaches of contract.'"19
Courts' Response to the
Rigorous Materiality Standard
The Third Circuit decision in Petratos is one of
the first cases to interpret Escobar's materiality
requirement. It demonstrates that courts evaluating FCA pleadings are already embracing the
full import of the requirement, to the benefit of
qui tam defendants. 20 Specifically, as the Petratos
Court explained, FCA pleadings must allege that
a defendant's false representation of compliance
with a statutory, regulatory, or contractual
obligation is material to the government's decision
to pay for the defendant's goods or services.21
As a result, a suit will not survive where "the
Government would have paid the claims with full
knowledge of the alleged noncompliance."22
The Petratos allegations involved Medicare
reimbursements for Avastin, a multi-billion dollar
cancer drug manufactured by Genentech, Inc.
("Genentech"). The FDA had approved Avastin to
treat multiple forms of the disease. The relator, a
former Genentech employee who oversaw healthcare data analytics for the company, alleged that
Genentech suppressed data on the prevalence and
severity of Avastin's side effects in certain patients.
According to the complaint, the alleged safety-reporting deficiencies caused doctors to incorrectly
certify to Medicare that Avastin prescriptions for
these patients were "reasonable and necessary,"
a required condition for payment under Medicare
regulations.23 As a result, any such claims for
reimbursement on behalf of federal Medicare
beneficiaries were, relator alleged, "false." 24
The District Court disagreed, and dismissed
with prejudice. The District Court held that any
such claims submitted by doctors were medically
reasonable and necessary because the relevant
administrative agency had determined that
Avastin was reimbursable for the FDA-approved
and compendia-supported uses25 at issue in the
complaint.26 The District Court further determined
that the relator failed to show that the company's
alleged suppression of data "violated any regulation at all, much less one which was a precondition
of payment."27 Finally, the District Court concluded
that because Petratos failed to allege that
compendia support for Avastin use would have
changed but for the alleged misconduct, he could
not proceed on a fraud-on-the-compendia theory
of liability.28 As a result of these deficiencies, the
complaint failed to "include any allegations showing any false claim for payment was ever made,"
warranting dismissal.29
The Third Circuit affirmed, though on
somewhat different grounds. With the benefit of
the Supreme Court's reasoning in Escobar (which
had not been decided at the time the matter was
before the District Court), the Court of Appeals
explicitly held that the relator's allegations
were insufficient under the Escobar materiality
standard. As the Court explained, the "mere
fact" that a regulation like the one at issue in
Petratos (precluding reimbursement for items and
services that are not "reasonable and necessary")
"is a condition of payment, without more, does
not establish materiality."30 Taking its cue from
the Supreme Court, the Third Circuit noted that
relators must plead such facts as that the government "'consistently refuses to pay' claims [for
reimbursement] like those alleged."31 The Court
went further than the Supreme Court, however,
holding that "where a relator does not plead that
knowledge of the violation could influence the
Government's decision to pay, the misrepresentation likely does not 'have ... a natural tendency to
influence ... payment,' as required by ... 31 U.S.C.
§ 3729(b)(4)."32
In Petratos, the relator conceded that,
"there are no factual allegations showing that
[the Center for Medicare and Medicaid Services
("CMS")] would not have reimbursed these claims
had these [alleged reporting] deficiencies been
Vol. 2, Issue 4 | For The Defense
13
Table of Contents for the Digital Edition of For the Defense - Volume 2, Issue 4 - 2017
Table of Contents
Commonwealth v. Jerome King and Beyond: Trial Counsel’s Obligation to Cooperate with an Ineffective Assistance of Counsel Claim
United States ex rel. Petratos v. Genentech Inc. – The Third Circuit Embraces A Rigorous Pleading Standard for Materiality In False Claims Act Suits, But Leaves Healthcare Industry Defendants Vulnerable On Medicare Claims
Changes in the DUI Landscape: Acts 33 and 30
Police Misconduct Resulting in Arrest: Weighing the Options
Dying with Dignity: Compassionate Release in Pennsylvania
Amicus Matters
Attorney Discipline
Finding the Hidden Data in Technology to Defend Your Client
For the Defense - Volume 2, Issue 4 - 2017 - 1
For the Defense - Volume 2, Issue 4 - 2017 - 2
For the Defense - Volume 2, Issue 4 - 2017 - Table of Contents
For the Defense - Volume 2, Issue 4 - 2017 - 4
For the Defense - Volume 2, Issue 4 - 2017 - Commonwealth v. Jerome King and Beyond: Trial Counsel’s Obligation to Cooperate with an Ineffective Assistance of Counsel Claim
For the Defense - Volume 2, Issue 4 - 2017 - 6
For the Defense - Volume 2, Issue 4 - 2017 - 7
For the Defense - Volume 2, Issue 4 - 2017 - 8
For the Defense - Volume 2, Issue 4 - 2017 - 9
For the Defense - Volume 2, Issue 4 - 2017 - 10
For the Defense - Volume 2, Issue 4 - 2017 - United States ex rel. Petratos v. Genentech Inc. – The Third Circuit Embraces A Rigorous Pleading Standard for Materiality In False Claims Act Suits, But Leaves Healthcare Industry Defendants Vulnerable On Medicare Claims
For the Defense - Volume 2, Issue 4 - 2017 - 12
For the Defense - Volume 2, Issue 4 - 2017 - 13
For the Defense - Volume 2, Issue 4 - 2017 - 14
For the Defense - Volume 2, Issue 4 - 2017 - 15
For the Defense - Volume 2, Issue 4 - 2017 - 16
For the Defense - Volume 2, Issue 4 - 2017 - 17
For the Defense - Volume 2, Issue 4 - 2017 - Changes in the DUI Landscape: Acts 33 and 30
For the Defense - Volume 2, Issue 4 - 2017 - 19
For the Defense - Volume 2, Issue 4 - 2017 - 20
For the Defense - Volume 2, Issue 4 - 2017 - 21
For the Defense - Volume 2, Issue 4 - 2017 - Police Misconduct Resulting in Arrest: Weighing the Options
For the Defense - Volume 2, Issue 4 - 2017 - 23
For the Defense - Volume 2, Issue 4 - 2017 - 24
For the Defense - Volume 2, Issue 4 - 2017 - 25
For the Defense - Volume 2, Issue 4 - 2017 - 26
For the Defense - Volume 2, Issue 4 - 2017 - 27
For the Defense - Volume 2, Issue 4 - 2017 - 28
For the Defense - Volume 2, Issue 4 - 2017 - Dying with Dignity: Compassionate Release in Pennsylvania
For the Defense - Volume 2, Issue 4 - 2017 - 30
For the Defense - Volume 2, Issue 4 - 2017 - 31
For the Defense - Volume 2, Issue 4 - 2017 - 32
For the Defense - Volume 2, Issue 4 - 2017 - 33
For the Defense - Volume 2, Issue 4 - 2017 - 34
For the Defense - Volume 2, Issue 4 - 2017 - Amicus Matters
For the Defense - Volume 2, Issue 4 - 2017 - 36
For the Defense - Volume 2, Issue 4 - 2017 - 37
For the Defense - Volume 2, Issue 4 - 2017 - 38
For the Defense - Volume 2, Issue 4 - 2017 - 39
For the Defense - Volume 2, Issue 4 - 2017 - Attorney Discipline
For the Defense - Volume 2, Issue 4 - 2017 - 41
For the Defense - Volume 2, Issue 4 - 2017 - 42
For the Defense - Volume 2, Issue 4 - 2017 - 43
For the Defense - Volume 2, Issue 4 - 2017 - Finding the Hidden Data in Technology to Defend Your Client
For the Defense - Volume 2, Issue 4 - 2017 - 45
For the Defense - Volume 2, Issue 4 - 2017 - 46
For the Defense - Volume 2, Issue 4 - 2017 - 47
For the Defense - Volume 2, Issue 4 - 2017 - 48
For the Defense - Volume 2, Issue 4 - 2017 - 49
For the Defense - Volume 2, Issue 4 - 2017 - 50
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