The Rabbit Hole Runs Deep; CDRH “Whistleblower” Scandal Involves a Once-Secret qui tam Lawsuit

August 26, 2012

By James R. Phelps

According to recent reports concerning the widely reported “whistleblower” scandal at FDA’s Center for Devices and Radiological Health (“CDRH”), in 2009, the CDRH dissidents involved in the affair, while still employed at FDA, filed a “secret” Federal False Claims Act suit against 15 medical device manufacturers.  (Under the Federal False Claims Act, defendants are not immediately apprised of the existence of the “whistleblower” suits, which are not made public during the pendency of an investigation by Department of Justice officials, who decide whether the suits are to be prosecuted by the government or the individuals themselves.)  In this kind of suit, called a qui tam action, there are allegations that false claims were made in the delivery of services or products, resulting in damages when the government made payments for their use.  Because CDRH employees brought this suit while working as reviewers at the agency, it must be assumed that data submitted to the FDA form a part of the allegations made in the lawsuit. 

These qui tam suits can make a “whistleblowing” plaintiff very wealthy; the idea is that, while the government will recover penalties for purchases when there have been “false claims,” the “whistleblower” who brings the suit will take a cut of the money recovered.  It appears that the suit filed by the FDA dissidents would, if successful, bring them a rich reward.  According to the unsealed Complaint filed in the U.S. District Court for the District of Colorado back in 2009, “Defendant Manufacturers are each liable to the United States for treble the United States’ damages, and an additional amount of $5,500- $11,000 for each false claim.”  That means quite a potential jackpot for the “whistleblowers.”  Indeed, plaintiffs in successful qui tam lawsuits have often received millions of dollars each for serving as plaintiffs in the lawsuits, and, occasionally, tens of millions of dollars.

There was a time, before Hatch-Waxman, and before FDA began collecting fees for its activities, when FDA personnel were not so close to matters of money.  To be sure, they were aware that the regulated companies were paid for their products and services, but the agency was not so directly involved in the financial aspects of the healthcare business, and FDA personnel had no reason to see themselves as participants in financial matters.  That has certainly changed, and it appears that this may have contributed to an environment in which FDA’s review personnel are being distracted from their primary mission.

Within recent memory, an FDA reviewer was convicted of trading stock based on confidential, FDA-sourced information.  And this reported qui tam lawsuit, filed by FDA personnel working inside the agency’s review process, powerfully signals that data submitted for approvals are not being held confidential, as they should be. 

Although the qui tam lawsuit was dismissed after the government declined to intervene, the fact that it could happen undoubtedly does much to erode confidence that submissions are being handled properly.  If such a suit were to proceed, then confidence in FDA’s ability to manage valuable and confidential information will be greatly compromised.

The lawsuit suggests that FDA’s management might well have had reason to believe that the reviewers who filed the qui tam lawsuit were not respecting the law as regards confidentiality, which could serve as justification to be monitoring their e-mails.  However, under the circumstances, it is incumbent upon FDA to advise the public fully concerning the steps it is taking to preserve the statutory framework, within which submissions are made and evaluated, by protecting confidential information. 

Hat tips to BioCentury (Steve Usdin), Forbes (Jon Entine), and The New York Times (Erc Lichtblau & Scott Shane) who first reported on the qui tam lawsuit.