Following Escobar, the issue of materiality remains at the forefront of False Claims Act motion practice at both the pleadings and judgment stage. Escobar emphasized that the FCA materiality requirement is demanding. In the case of Gilead Sciences, Inc. v. United States Ex Rel. Jeffrey Campie, et al. the respondents, qui tam relators, learned that the United States might agree on the law, but not the merits of the claim.
In Gilead Sciences, respondents pled that petitioner misrepresented the source of certain drugs used to treat HIV by manufacturing drugs in unregistered facilities and falsely telling the Federal Drug Administration that the drugs came from an approved manufacturer. The petitioner eventually obtained approval of the unregistered facility, which respondents allege was based on falsified and concealed data. Petitioner later stopped using the facility due to contamination issues. Respondents allege that because the drugs were adulterated or misbranded, they were not FDA approved and not eligible for payments under government programs.
The district court dismissed the second amended complaint on the basis that petitioner’s alleged misrepresentation to the FDA, rather than the paying agencies, could not establish a false claim for payment. The Court of Appeals for the Ninth Circuit reversed finding that respondents adequately alleged materiality. In applying the multi-factor materiality inquiry, the Ninth Circuit held that the government’s continued payment of the petitioner, despite alleged knowledge of the misrepresentations to the FDA, was not solely dispositive on the issue of materiality at the pleading stage.