Last September, we posted on the Fifth Circuit’s decision to uphold summary judgment and award of costs in favor of Solvay Pharmaceuticals, Inc. in a False Claims Act (FCA) case (see post here). The relators pursued an FCA theory against Solvay based on allegations of widespread off-label marketing and violations of the Anti-Kickback Statute. However, the Fifth Circuit agreed with the district court that relators (the government declined to intervene) had failed to establish, beyond mere speculation, that any alleged kickbacks or off-label marketing caused the submission of a false claim.
Although it appeared in dicta, the Fifth Circuit’s discussion of the FCA’s materiality element in Solvay was of particular interest to us. The court noted that, if it is true that Medicaid pays for claims “without asking whether the drugs were prescribed for off-label uses or asking for what purpose the drugs were prescribed,” then “given that it is not uncommon for physicians to make off-label prescriptions, we think it unlikely that prescribing off-label is material to Medicaid’s payment decisions under the FCA.” Slip Op. at 13 n.9. The Fifth Circuit was not required to reach the materiality element in upholding the lower court’s ruling, because it had already determined that relators failed to establish causation.
Relators filed a petition for writ of certiorari with the Supreme Court, but the Supreme Court declined to hear the case. In their petition, relators raised the Fifth Circuit’s discussion of materiality in off-label promotion FCA cases, claiming that the court’s comments constituted “sabotage of off-label enforcement” that “may well have been intentional.” Pet. Cert. at 17 n.15. Asserting that Solvay never raised this issue, relators argued that the court’s comment “suggests hostility to claims based on off-label prescriptions.” Id. Despite the charged rhetoric and accusations, the Supreme Court refused to be persuaded by the specter of a “chilling effect” on relators bringing FCA cases, id. at 17, and the argument will have to wait for another day. Until then, the Fifth Circuit’s brief analysis of materiality in off-label promotion FCA cases remains a helpful reference for companies facing such claims in a world governed by Escobar’s heightened materiality standard.