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United States ex rel. Ambrosecchia v. Paddock Laboratories, LLC

United States Court of Appeals, Eighth Circuit

May 5, 2017

United States of America ex rel. Shara Ambrosecchia, States of CA, CO, CT, DE, District of Columbia, FL, GA, HI, IL, IN, LA, MD, MS, MI, MN, MO, MT, NV, NH, NJ, NM, NY, OK, RI, TN, TX, VA and WI Plaintiff- Appellant
Paddock Laboratories, LLC, a wholly-owned subsidiary of Perrigo Co.; Perrigo Company, PLC Defendants-Appellees State of California; State of Colorado; State of Connecticut; State of Delaware; District of Columbia; State of Georgia; State of Hawaii; State of Illinois; State of Indiana; State of Louisiana; State of Massachusetts; State of Michigan; State of Montana; State of Nevada; 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; State of Virginia; State of Wisconsin Plaintiffs

          Submitted: March 7, 2017

         Appeal from United States District Court for the Eastern District of Missouri - St. Louis

          Before RILEY, Chief Judge, [1] GRUENDER, Circuit Judge, and GRITZNER, District Judge. [2]

          GRUENDER, Circuit Judge.

         Relator Shara Ambrosecchia appeals the district court's[3] dismissal of claims she brought against two pharmaceutical manufacturers under the False Claims Act ("FCA"). For the following reasons, we affirm.

         I. Background

         In November 2012, Ambrosecchia filed suit on behalf of the United States of America, twenty-seven states, and the District of Columbia against Paddock Laboratories and Perrigo Company ("Defendants") for violations of the FCA and analogous state statutes. In 1962, amendments to the Food, Drug, and Cosmetic Act required drugs previously approved by the Food and Drug Administration ("FDA") to undergo a review for effectiveness under the Drug Efficacy Study Implementation Program ("DESI"). Drugs determined to be "less than effective" and for which a notice of opportunity for a hearing was published ("DESI-LTE") are not eligible for Medicare and Medicaid reimbursement unless re-approved. Ambrosecchia, a former employee of both Defendants, alleged that the Defendants reported reimbursement- eligible classification codes to the Center for Medicare and Medicaid Services ("CMS") for certain DESI-LTE drugs, thereby causing the United States and relevant state governments to provide reimbursement for ineligible drugs.

         Defendants filed a motion to dismiss the second amended complaint under Federal Rule of Civil Procedure 12(b)(6), arguing that the public disclosure bar, 31 U.S.C. § 3730(e)(4), requires dismissal. The public disclosure bar requires an FCA claim to be dismissed where the allegations are based on information that has been publicly disclosed, unless the person making the claim "is an original source of the information." Id. § 3730(e)(4)(A). The district court granted the motion and dismissed the FCA claims, finding that the public disclosure bar applies and that Ambrosecchia does not fit within the original source exception. Additionally, the district court declined to exercise supplemental jurisdiction over the state law claims and dismissed them without prejudice. Ambrosecchia appeals, arguing that the public disclosure bar cannot be determined on a motion to dismiss and, in the alternative, that the public disclosure bar does not apply. Ambrosecchia also contends that the district court should have granted her leave to amend her complaint and that the court erred in permitting Perrigo Company, PLC to join Paddock's motion to dismiss rather than entering default judgment against it. Ambrosecchia does not challenge dismissal of her state law claims. Defendants raise as an alternative basis for affirmance the argument that Ambrosecchia's complaint does not satisfy Federal Rule of Civil Procedure 9(b).

         II. Discussion

         A. Motion to Dismiss

         First, Ambrosecchia contends that it is not appropriate to resolve whether the public disclosure bar applies on a motion to dismiss because the public disclosure bar, as amended in 2010, is no longer jurisdictional. Prior to 2010, 31 U.S.C. § 3730(e)(4) removed a court's subject matter jurisdiction where the allegations and transactions of an FCA action previously had been publicly disclosed. U.S. ex rel. Newell v. City of St. Paul, Minn., 728 F.3d 791, 794-95 (8th Cir. 2013) ("No court shall have jurisdiction over an action under this section based upon the public disclosure of [the] allegations or transactions . . . ." (citation omitted)). Accordingly, courts determined at the outset of a suit whether the public disclosure bar applied under Federal Rule of Civil Procedure 12(b)(1). See id. at 795. In 2010, Congress amended § 3730(e)(4) as part of the Patient Protection and Affordable Care Act. U.S. ex rel. Moore & Co. v. Majestic Blue Fisheries, LLC, 812 F.3d 294, 298-300 (3d Cir. 2016). The amended section 3730(e)(4) provides:

The court shall dismiss an action or claim under this section, unless opposed by the Government, if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed-
(i) in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party;
(ii) in a congressional, Government Accountability Office, or other Federal report, hearing, ...

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