United States Ex Rel. Petratos v. Genentech Inc.
2017 U.S. App. LEXIS 7667
3rd Cir.2017Background
- Relator Gerasimos Petratos, former head of healthcare data analytics at Genentech, alleged a corporate campaign (“Optimizing Data Value”) suppressed adverse-event data about the cancer drug Avastin, influencing physician prescribing for certain at-risk Medicare patients.
- Petratos asserted Genentech’s suppression caused physicians to submit Medicare Part B claims that were not “reasonable and necessary,” and that suppressed analyses should have triggered FDA adverse-event reports or label changes.
- He complained that a Key Opinion Leader requested relevant safety information which Genentech did not disclose and that his internal complaints were rebuffed and led to job threats.
- The District Court (Judge Arleo) dismissed the complaint for failure to state a claim, reasoning that “reasonable and necessary” is determined by agencies (FDA/CMS), not individual doctors; Petratos appealed.
- The Third Circuit rejected the District Court’s statutory interpretation but affirmed dismissal on independent grounds: Petratos failed to plead the False Claims Act’s materiality element under the Supreme Court’s decision in Universal Health Services v. Escobar.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether prescriptions for on-label Avastin could be false claims because physicians were misled by Genentech’s suppression | Petratos: Suppressed safety data caused physicians to certify claims that were not "reasonable and necessary" for certain patients | Genentech: FDA approval and compendia listings render on-label Avastin claims reasonable and necessary as a matter of law | Court: Agency approval is necessary but not dispositive; "reasonable and necessary" involves FDA/CMS and individual physicians; District Court’s narrow ruling reversed on that ground |
| Whether Petratos pleaded materiality required by the FCA post-Escobar | Petratos: If physicians would have prescribed less/no Avastin, the government would have paid less — showing materiality | Genentech: Government agencies (FDA/DOJ/CMS) continued approvals/payments despite knowledge, so misrepresentations were not material | Court: Dismissed — relator conceded CMS would have paid even with knowledge; under Escobar materiality not shown |
| Whether the successor judge improperly overruled predecessor’s grant of leave to amend (law of the case) | Petratos: Judge Arleo should not have overturned Judge Wigenton’s prior finding that amendment was permissible | Genentech: Interlocutory orders and leave-to-amend rulings are revisable; successor judge may reconsider | Court: No error — law-of-the-case does not bar reconsideration of interlocutory orders; reassignment does not change that |
| Whether dismissal without granting leave to amend was an abuse of discretion | Petratos: He requested leave to amend after dismissal | Genentech: Relator failed to properly move or describe proposed amendments | Court: No abuse — request was cursory and did not satisfy Rule 15(a) prerequisites |
Key Cases Cited
- Universal Health Servs. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016) (materiality is demanding; misrepresentation must be material to government’s payment decision)
- United States ex rel. Wilkins v. United Health Grp., Inc., 659 F.3d 295 (3d Cir. 2011) (distinguishes legal and factual falsity under the FCA)
- United States ex rel. Bodnar v. Secretary of Health & Human Servs., 903 F.2d 122 (2d Cir. 1990) (agency control important in reimbursement decisions)
- United States v. Sanford–Brown, Ltd., 840 F.3d 445 (7th Cir. 2016) (dismissing FCA claim where agencies repeatedly examined conduct and declined enforcement)
- United States v. Marcus (Marcus v. Hess), 317 U.S. 537 (1943) (indirect fraud actionable only if it taints government payment decision)
- United States v. McNinch, 356 U.S. 595 (1958) (FCA aimed to protect the federal treasury)