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United States ex rel. Petratos v. Genentech Inc.

United States Court of Appeals, Third Circuit

May 1, 2017

UNITED STATES OF AMERICA, ex rel. GERASIMOS PETRATOS, GERASIMOS PETRATOS, ex rel. UNITED STATES OF AMERICA; STATE OF CALIFORNIA; STATE OF COLORADO; STATE OF CONNECTICUT; STATE OF DELAWARE; STATE OF FLORIDA; STATE OF GEORGIA; STATE OF HAWAII; STATE OF ILLINOIS; STATE OF INDIANA; STATE OF LOUISIANA; STATE OF MARYLAND; COMMONWEALTH OF MASSACHUSETTS; STATE OF MICHIGAN; STATE OF MINNESOTA; STATE OF MONTANA; STATE OF NEVADA; STATE OF NEW HAMPSHIRE; STATE OF NEW JERSEY; STATE OF NEW MEXICO; STATE OF NEW YORK; STATE OF NORTH CAROLINA; STATE OF OKLAHOMA; STATE OF RHODE ISLAND; STATE OF TENNESSEE; STATE OF TEXAS; COMMONWEALTH OF VIRGINIA; DISTRICT OF COLUMBIA, Appellants
v.
GENENTECH INC; ROCHE GROUP; HOFFMAN LA ROCHE, INC.; ROCHE HOLDINGS, LTD.; F HOFFMAN - LA ROCHE, LTD

          Argued November 1, 2016

         On Appeal from the United States District Court for the District of New Jersey (D.C. No. 2-11-cv-03691) District Judge: Honorable Madeline C. Arleo.

          Michael J. DeBenedictis Debenedictis & Debenedictis, LLC, Adam Gutride Seth Safier Anthony Patek Matthew T. McCrary [Argued] Gutride Safier LLP Counsel for Plaintiffs-Appellants

          Lawrence S. Lustberg Gibbons P.C. Matthew J. O'Connor Mark W. Mosier [Argued] Matthew F. Dunn David M. Zionts Covington & Burling LLP Counsel for Defendants-Appellees

          Michael S. Raab Weili J. Shaw [Argued] Counsel for United States of America as Amicus Curiae in support of neither party

          Before: HARDIMAN and SCIRICA, Circuit Judges, and ROSENTHAL, [*] District Judge.

          OPINION

          HARDIMAN, Circuit Judge.

         This appeal arising under the False Claims Act involves a multi-billion dollar cancer drug, Avastin, which was developed by Appellee Genentech. Relator Gerasimos Petratos, who was head of healthcare data analytics for Genentech, filed a qui tam action soon after leaving the company. He alleged that Genentech suppressed data that caused doctors to certify incorrectly that Avastin was "reasonable and necessary" for certain at-risk Medicare patients. The District Court dismissed Petratos's suit for failure to state a claim. Although we disagree with the District Court's grounds for dismissal, we will affirm because Petratos failed to satisfy the False Claims Act's materiality requirement.

         I

         A

         A widely prescribed cancer drug that has accounted for $1.13 billion a year in Medicare reimbursements, Avastin is approved by the FDA to treat several types of cancer. Petratos alleged that Genentech concealed information about Avastin's health risks. Specifically, he claimed the company ignored and suppressed data that would have shown that Avastin's side effects for certain patients were more common and severe than reported. According to Petratos, such analyses would have required the company to file adverse- event reports with the FDA, and could have resulted in changes to Avastin's FDA label. Genentech also allegedly suppressed information regarding Avastin's side effects for patients with renal failure despite a request to disclose that information by a "Key Opinion Leader, " a recognized industry expert who "influence[s] peers' medical practice, including but not limited to prescribing behavior." John Mack, A KOL by Any Other Name, 14-03 Pharm. Mktg. News 1, 1 (2015).

         Petratos claimed Genentech's data suppression was part of a formal campaign, dubbed "Optimizing Data Value, " during which the company avoided certain analyses and data sets that might yield negative results to mitigate its "business risk." App. 324-26. Petratos asserted that he tried to bring the safety risks inherent in this strategy to the attention of upper management, but was told "to stop any further work in [the] area, " App. 318, and had his job "threatened, " App. 314.

         As a consequence of Genentech's data-suppression strategy, Petratos claimed the company caused physicians to submit Medicare claims that were not "reasonable and necessary." In the opinion of one oncologist, if Genentech had properly disclosed Avastin's side-effects for certain at-risk patients, "the standard of care would have been to prescribe a lower dose of Avastin, a lower frequency of doses, or no dose at all." App. 341.

         B

         Initially filed in 2011, this case was heard by three judges of the United States District Court for the District of New Jersey. Soon before his retirement, Judge Cavanaugh dismissed Petratos's initial complaint in part, but granted a stay of the order so Petratos could amend his complaint. The case was reassigned to Judge Wigenton, who rejected Genentech's argument that an amendment would be futile and held that Petratos "sufficiently alleged causes of action" under the False Claims Act. App. 56. Finally, the case was transferred to Judge Arleo, who took a different tack than Judge Wigenton and reasoned that "medically 'reasonable and necessary' is a determination made by the relevant agency, not individual doctors." App. 16-17. Because Petratos's theory relied on the doctors as part of the "reasonable and necessary" determination, Judge Arleo deemed the complaint fatally deficient and dismissed all claims. App. 18-19. Petratos filed this timely appeal.

         II

         The District Court had subject-matter jurisdiction over Petratos's federal claim under 28 U.S.C. § 1331 and supplemental jurisdiction over his state-law claims under 28 U.S.C. § 1367. We have appellate jurisdiction under 28 U.S.C. § 1291. We "exercise plenary review of the District Court's order granting appellees' motion to dismiss for failure to state a claim." United States ex rel. Wilkins v. United Health Grp., Inc., 659 F.3d 295, 302 (3d Cir. 2011). We review for abuse of discretion both the District Court's decision to reconsider a predecessor judge's ruling, Fagan v. City of Vineland, 22 F.3d 1283, ...


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