Judge dubious of False Claims Act suit by outsider

SAN FRANCISCO -- A federal judge overseeing accusations of fraud against Valeant Pharmaceuticals said Thursday the patent attorney who initiated the legal action is a "complete outsider" with "no inside information on the conduct" of the drugmaker.

Attorneys in the lawsuit sparred over whether information allegedly revealing deceit was already publicly available and if Zachary Silbersher was an "original source" of that knowledge.

U.S. District Judge James Donato of San Francisco was skeptical.

"If anyone can file the case, it's not a [False Claims Act] case," he said during the hearing considering dismissal of the lawsuit.

In a case defense attorney Moez Kaba "credit[ed] for its novelty but is incredible in its reach," Silbersher, an unrelated third party, sued Valeant for improperly seeking the patent to lengthen its monopoly by blocking cheaper, generic versions of the drug, Apriso, for ulcerative colitis. That enabled it to charge the government inflated prices, he alleged in his suit.

The case is among the first in which the relator is seemingly not an insider with direct knowledge of misconduct by a company. Nicodemus S. Herrera, representing Silbersher, argued the Affordable Care Act expanded the definition of relator in the False Claims Act to include those with independent knowledge of a fraud.

The False Claims Act is typically used to sue doctors and health services for overcharging the government. Silbersher v. Valeant Pharmaceuticals International, Inc., 18-CV01496 (N.D. Cal., filed March 8, 2018).

Kaba argued all the information alleged in the complaint was publicly available when Silbersher filed the lawsuit last year.

"This relator has nothing to do with these companies but has mined some public records and said, 'I think I have something here,'" the Hueston Hennigan LLP partner said.

Herrera responded that Donato has to consider Congress' intent when it passed the Affordable Care Act. It now allows relators alleging violations of the False Claims Act to include "someone having just general knowledge" of the fraud, he argued.

"The purpose is stopping government fraud, not whether you work for the company," he said.

But Donato questioned why Silbersher waited to sue until the Patent Trial and Appeal board invalidated the patent in 2017.

Herrera responded, "I don't know."

"He waited because it was only when PTAB said this patent is invalidated for being obvious that he concluded that he had opportunity to file an FCA case," the judge said.

Remarking that this is "not a typical False Claims Act case" and "we're here to let the law develop," Donato added that all the materials were in place by 2007 when the U.S. Patent and Trademark Office started reviewing Valeant's application to protect its exclusivity for Apriso.

"When you have a critical mass of facts that are substantially in the public record, you don't have an admissible claim," the judge said.

Herrera said part of Congress' intent was to "incentivize outsiders" to "find health care fraud."

Donato disagreed, explaining the U.S. Supreme Court has ruled "plain as day" that the False Claims Act is "not a license to hunt general fraud."

Kaba said the requirements to be considered a relator are designed to "prevent opportunistic litigation."

Although Donato appeared to side with the defense, he said he will most likely give the plaintiff's attorneys a chance to amend.