Fourth Circuit Holds That Pharmacy’s Violations of FDA Processing Regulations Do Not Cause False Claims

 

In United States ex rel. Rostholder v. Omnicare, Inc., 2014 U.S. App, LEXIS 3269 (4th Cir. Feb. 21, 2014) the Court of Appeals for the Fourth Circuit held that claims submitted to federal healthcare programs for drugs that a pharmacy re-packaged in violation of FDA processing regulations were not false claims.

Relator Rostholder worked as a pharmacist at an Omnicare drug re-packaging facility where penicillin and non-penicillin drugs were re-packaged without being isolated from one another, as is required by the FDA’s Current Good Manufacturing Practice regulations (“CGMPs”). However, FDA investigators who visited the facility were told that the facility did not repackage any penicillin drugs. Based on information provided by the relator, the FDA later discovered that penicillin drugs were in fact being repackaged at the facility. Upon making this discovery, the agency sent Omnicare a warning letter stating that Omnicare had failed to adhere to the CGMPs and explaining that this failure caused the drugs repackaged at the facility to be “adulterated.” In his FCA complaint, the relator alleged that the claims Omnicare submitted to federal healthcare programs for these “adulterated” drugs were false because the drugs were not provided in their FDA-approved form, and were thus ineligible for federal reimbursement. The district court rejected this contention and granted Omnicare’s motion to dismiss.

The Fourth Circuit affirmed, holding that to qualify for Medicare and Medicaid reimbursement, drugs need only be initially approved for safety and effectiveness by the FDA. 2014 U.S. App. LEXIS 3269 at *15–17. Thus, even though Omnicare made false statements to FDA investigators about its compliance with the FDA’s processingrequirements—the CGMPs—the court held that Omnicare’s reimbursement requests for the adulterated drugs were not “false” claims under the FCA because compliance with the CGMPs was not a condition of Medicare or Medicaid payment. Id. at *17.