Whistleblower Qui Tam Law Blog

Just over a year ago, GlaxoSmithKline paid $750 million to resolve a False Claims Act lawsuit arising out of significant violations of current Good Manufacturing Practice (cGMP) regulations at its plant located in Cidra, Puerto Rico. The adulterated drugs manufactured at that plant were sold to government healthcare programs for use by patients.

Recently, the United States Attorney's Office for the District of Maryland filed a Statement of Interest in United States ex rel. Barry Rostholder et al. v. Omnicare, Inc. et al., Civ. Action No. 1:07 cv 01283. Rostholder's complaint alleges that Omnicare violated the False Claims Act by failing to comply with the cGMP regulations prohibiting manufacturers from packaging penicillin in the same facility as non-penicillin drugs.
In its Statement of Interest, the United States took the position that violations of cGMP regulations may be material to the government decision whether to pay for the affected products, and thus are relevant in FCA cases. The government made clear that violations of cGMP regulations may be relevant in FCA cases where the violations are "significant, substantial, and give rise to actual discrepancies in the composition or functioning of the product." Such is the case when, for example, "the affected drug's strength materially differed from, or the purity or quality fell below, the strength, purity, or quality specified in the drug's FDA-approved New Drug Application, the drug's labeling, and/or the standards set forth in official compendium."

In addition, "manufacturing deficiencies may affect the strength, purity and/or quality of the affected drug such that the drug is essentially 'worthless' and not eligible for payment by the government." Submitting claims, or causing claims to be submitted, to government healthcare programs for drugs that are so deficient as to be worthless may, according to the government, give rise to FCA liability.

In rejecting Omnicare's argument that this is a false certification case, the government argued that "when a claim is false because it is for a non-reimbursable item (e.g., a tainted drug), analysis under a 'certification theory' is inapposite." The government clarified that "the core issue for 'falsity' under the FCA is whether the government received the benefit of its bargain."

Manufacturing problems result in substandard products and directly affect the health and safety of patients who use the adulterated drug or device. If you have information regarding significant and substantial cGMP violations by a drug or device manufacturer, contact Andrew M. Beato, a experienced whistleblower attorney at the law firm of Stein, Mitchell & Muse in Washington, D.C. The False Claims Act provides significant protections for employees who step forward and report fraud.

Congress and Abraham Lincoln enacted the False Claims Act in 1863 in response to widespread corruption and fraud by defense contractors in selling supplies and provisions to the Union Army during and after the Civil War. After being weakened by Congress during World War II, the FCA was revived in 1986 after congressional hearings and GAO reports exposed rampant fraud in the defense industry. Senator Charles Grassley and Congressman Howard Berman pushed the amendments through Congress, and Ronald Reagan signed them into law, thus enhancing the Government's ability to combat fraud and recover losses.

For the past 25 years, the False Claims Act has been the single most effective tool for combating fraud against the government. The law owes much of its success to the courage of whistleblowers, who not only alert the government to fraud, but also provide invaluable assistance by uncovering evidence and explaining highly complex fraudulent schemes. The False Claims Act's qui tam provisions allow whistleblowers with evidence of fraud against the government to sue on behalf of the government, and receive 15 to 30 percent of the amount recovered.

In Fiscal Year 2010, the government recovered over $3 billion under the False Claims Act, 80 percent of which was recovered as a direct result of whistleblower lawsuits. Since the 1986 amendments to the False Claims Act, the government has recovered over $30 billion in judgments and settlements.

Taxpayers Against Fraud, a nonprofit, public interest organization dedicated to combating fraud against government, chronicles the False Claims Act's remarkable success over the last 25 years and highlights the pivotal role of whistleblowers in The 1986 False Claims Act Amendments, A Look At Twenty-Five Years of Effective Fraud Fighting in America.

GlaxoSmithKline (GSK) has agreed to pay $750 million to settle Federal and State criminal and civil charges that it sold adulterated drugs (Bactroban, Kytril, Paxil CR, and Avandamet) to government health plans for subsequent ingestion by patients. The settlement resolves a qui tam lawsuit by a former GSK manager of global quality assurance, Cheryl Eckard, who alleged major violations of commercial good manufacturing practices (cGMP) by GSK at a plant located in Cidra, Puerto Rico. Ms. Eckard will be paid $96 million by the Federal government for her part in blowing the whistle on GSK's fraud, in addition to an undetermined additional amount from State recoveries. A criminal fine and forfeiture in the amount of $150 million was also levied against GSK.

FDA inspections of GSK's plant in 2001 and 2002 uncovered significant cGMP violations, resulting in a warning letter. GSK sent Ms. Eckard to the plant to investigate the manufacturing practices, and she discovered serious cGMP compliance issues. Her recommendations to GSK to stop shipping all products from the plant and to notify the FDA were ignored by GSK managers and senior executives. In her suit, Ms. Eckard alleged that GSK caused false claims to be submitted for the adulterated drugs because the drugs made and sold by GSK did not match the drug specifications approved by the FDA. This case demonstrates that cGMP deviations by drug or medical device companies can result in false claims for payment in violation of the False Claims Act.

The settlement underscores the importance of not allowing manufacturing problems for drugs and devices to result in substandard products with uncertain health and safety risks for patients. cGMP requirements are a safety net designed to prevent this outcome. Applicable standards are violated to the detriment of patients if a company cuts corners to increase profitability and then fraudulently conceals major deviations. Given the risk to patients, reporting this type of fraud is important if you are aware of such improper conduct. The False Claims Act affords significant protection of employees who step forward. The case is United States ex rel. Eckard v. SmithklineBeecham Corp., C.A. No: 04 CV10375 (JLT) filed in the U.S. District Court for the District of Massachusetts.