Whistleblower Qui Tam Law Blog

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.

In Pliva, Inc. v. Mensing, Nos. 09-993, 09-1039, 09-1501, 2011 WL 2472790 (June 23, 2011), the United States Supreme Court immunized generic drug companies from all state law claims brought by injured patients for failing to provide adequate warning labels. In the 5-4 decision delivered by Justice Clarence Thomas, the Court invoked the doctrine of impossibility and held that the patients' state law claims for failure to warn were preempted by federal law.

The Court's decision has far-reaching implications for all patients, as generic drugs constitute 75 percent of all prescription drugs dispensed in the country. The rise of generic drugs can be traced to the United States government's commitment through the enactment of the Hatch-Waxman Amendments to the Federal Food, Drug, and Cosmetic Act to make low cost generic drugs readily available to the public. To that end, the government has established an abbreviated approval process for generic drugs by requiring, among other things, that a generic drug have the same active ingredients as the innovator drug; that the route of administration, dosage form, and strength be the same as the innovator drug; and that the generic drug be "bioequivalent" to the innovator drug. Generic drug manufacturers need not conduct clinical trials to provide safety and efficacy of the drugs.

When it comes to labeling, generic drug manufacturers are responsible for ensuring that their warning labels are the same as the label of the innovator, and they may not independently change their generic drugs' safety labels. But that does not mean that they do not have an obligation under federal law to monitor the adequacy of their warnings. FDA regulations require generic drug manufacturers "to seek to revise their labeling and provide FDA with supporting information about risks" when they believe additional warnings are necessary.

Based on the FDA regulatory scheme, the Supreme Court held that the patients' state law failure-to-warn claims were preempted because the generic manufacturers could not independently satisfy their state duties without the Federal Government's special permission and assistance, which was dependent on the exercise of judgment by a federal agency.

The majority's decision contradicts well-established principles guiding the preemption doctrine, including that the "ultimate touchstone" in every preemption case is the purpose of Congress and the assumption that the historic police powers of the States are not to be superseded by the Federal Act unless that was the "clear and manifest purpose of Congress." Not only has Congress not expressly pre-empted state law tort actions against drug manufacturers, but the States have traditionally regulated health and safety matters, and the FDCA expressly preserved State law claims.

Continue reading "The Supreme Court Eliminates State Law Incentives for Generic Drug Manufacturers to Monitor and Disclose Safety Risks to Patients" »