Second Circuit Affirms Dismissal of Piggybacked FCA Complaint


Earlier this week, the Second Circuit in Vierczhalek v. MedImmune, Inc.[1] affirmed the dismissal of a relator’s amended complaint, finding she was not an “original source” of new allegations that piggybacked on a public disclosure.

Facts of the Case

Relator Susan Vierczhalek, M.D., filed a qui tam action in 2009 alleging that drug manufacturer MedImmune, Inc. and two health care service providers, Trinity Homecare, LLC and OptionCare, violated the False Claims Act (“FCA”) by promoting an “off-label” use of MedImmune’s drug Synagis.[2] Synagis is prescribed to prevent lung infections in premature infants. Drug manufacturers and others are generally prohibited by law from marketing their drugs for uses other than what the drug was specifically approved for by the FDA – known as off-label uses.

The United States declined intervention. The State of New York, however, in 2015 intervened in the action as against Trinity Homecare and OptionCare, ultimately settling those claims for $22.4 million—of which the relator’s share was $4 million.[3] As to MedImmune, the state continued and expanded its investigation.

Investigation Leads to New Charges

Two years later, New York state filed a complaint-in-intervention against MedImmune alleging a newly discovered kickback scheme wherein MedImmune gained access to the protected health information (“PHI”) of hospitalized infants who might be candidates for Synagis.[4] MedImmune passed that PHI to Trinity, which then used the data to identify potential patients for its Synagis-related health care services.[5]

After the state filed its complaint, the relator began her own investigation into the new charges. She filed an amended complaint against MedImmune that abandoned her previous off-label claims and instead alleged that MedImmune conducted the same kickback scheme described in New York State’s complaint in other states as well.[6] MedImmune moved to dismiss the amended complaint on grounds that the relator was not an “original source” of her new allegations. The district court and the Second Circuit agreed.

Public Disclosure Bar and Original Source Exception

FCA relators must be an “original source” of the allegations they bring on behalf of the government. In other words, they must have independent knowledge of “core information” regarding “the essential elements of the alleged fraud.”[7]

New York State’s filed complaint against MedImmune was a “public disclosure” of the fraud alleged therein, which by law operated to bar any other person from asserting the same claims—unless that person was an “original source” of such allegations.[8] Both the Southern District of New York and the Second Circuit rejected the relator’s arguments that she was an original source and could avoid the public disclosure bar. They found that her claims pertaining to fraud outside the state of New York were closely related to the claims asserted in the State’s complaint, and her allegations were not “independent of” nor did they “materially add” to the State’s complaint.[9] Based in part on the relator’s investigation beginning after and in response to the State’s filed complaint, the Second Circuit concluded that her amended complaint was impermissibly dependent on the public disclosure and merely expanded the territory of the alleged fraud.[10]

Relying on long-established Circuit precedent, the Second Circuit concluded that “[a] relator who simply ‘conducted some collateral research and investigations’ in response to public allegations, and paired the results of that research with her background information, does not qualify as an original source.”[11] The Second Circuit further affirmed the district court’s refusal to grant the relator leave to amend her complaint because this deficiency could not be cured.

Practical Takeaways

Provider-defendants in FCA actions are vulnerable to claims by the government concerning any fraudulent conduct uncovered during an investigation, and that investigation may not be limited to the specific conduct alleged by a whistleblower. Though the government has the authority to expand the action, the whistleblower’s participation will always be limited to claims for which they are an “original source” of information.