United States Ex Rel. Petratos v. Genentech Inc. , 855 F.3d 481 ( 2017 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 15-3805
___________
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
__________
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
___________
Argued November 1, 2016
Before: HARDIMAN and SCIRICA, Circuit Judges,
and ROSENTHAL,* District Judge.
(Filed: May 1, 2017)
Michael J. DeBenedictis
Debenedictis & Debenedictis, LLC
125 Kings Highway West
Haddonfield, NJ 08033
*
The Honorable Lee H. Rosenthal, United States
District Judge for the Southern District of Texas, sitting by
designation.
2
Adam Gutride
Seth Safier
Anthony Patek
Matthew T. McCrary [Argued]
Gutride Safier LLP
100 Pine Street, Suite 1250
San Francisco, CA 94111
Counsel for Plaintiffs-Appellants
Lawrence S. Lustberg
Gibbons P.C.
One Gateway Center
Newark, NJ 07102
Matthew J. O’Connor
Mark W. Mosier [Argued]
Matthew F. Dunn
David M. Zionts
Covington & Burling LLP
850 10th Street, N.W.,
One City Center
Washington, DC 20001
Counsel for Defendants-Appellees
Michael S. Raab
Weili J. Shaw [Argued]
U.S. Department of Justice
950 Pennsylvania Ave., N.W.
Washington, D.C. 20530
Counsel for United States of America as Amicus
Curiae in support of neither party
3
____________
OPINION OF THE COURT
____________
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-
4
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
5
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, 1290 (3d. Cir. 1994), and its
denial of leave to amend the complaint, United States ex rel.
Schumann v. Astrazeneca Pharms. L.P., 769 F.3d 837, 849
(3d Cir. 2014).
6
III
A
Petratos’s claims implicate three interlocking federal
schemes: the False Claims Act, Medicare reimbursement, and
FDA approval. We begin by briefly outlining each scheme.
The False Claims Act is meant “to reach all types of
fraud . . . that might result in financial loss to the
Government.” Cook Cty. v. United States ex rel. Chandler,
538 U.S. 119, 129 (2003) (quoting United States v. Neifert-
White Co., 390 U.S. 228, 232 (1968)). A False Claims Act
violation occurs when a person “knowingly presents, or
causes to be presented, a false or fraudulent claim for
payment or approval.” 31 U.S.C. § 3729(a)(1)(A). A claim is
legally false when it does not comply “with a statute or
regulation the compliance with which is a condition for
Government payment.” Wilkins, 659 F.3d at 305.1
The allegedly false claims in this case were submitted
to the Medicare program, which reimburses the health care
costs incurred by program beneficiaries. The Medicare statute
provides that “no payment may be made” for items and
services that “are not reasonable and necessary for the
1
A claim may be factually or legally false. Wilkins,
659 F.3d at 305. “A claim is factually false when the claimant
misrepresents what goods or services that it provided to the
Government.” Id. Although Petratos halfheartedly argues that
the claims at issue are factually false, he is incorrect. There is
no dispute that the physicians actually provided the claimed
good (Avastin) in the claimed doses.
7
diagnosis and treatment of illness or injury.” 42 U.S.C.
§ 1395y(a)(1)(A). Because a claim can be false if it does not
comply with statutory conditions for payment, the claims at
issue here are false if Avastin was not “reasonable and
necessary.” See id.
One important factor considered by the Centers for
Medicare and Medicaid Services (CMS) to determine whether
a prescribed drug is “reasonable and necessary” is whether it
has received FDA approval. Indeed, CMS guidance explains
that “with some exceptions, a drug must have final marketing
approval from the FDA to be considered ‘reasonable and
necessary.’” Medicare Benefit Policy Manual, CMS Pub.
100-2, ch. 1, § 30 (Part A). In most instances, the drug must
also be used for a “medically accepted indication”—meaning
that it has been deemed appropriate for the particular treated
condition. 42 U.S.C. § 1395x(t)(2). An indication is
“medically appropriate” if it has been approved by the FDA
or supported by research in certain authoritative compendia.
See id.; 42 C.F.R. § 414.930.
B
A False Claims Act violation includes four elements:
falsity, causation, knowledge, and materiality. Universal
Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct.
1989, 1996 (2016) (materiality); Wilkins, 659 F.3d at 304–05
(falsity, causation, knowledge). The District Court focused on
the falsity element, concluding that the disputed claims were
not false because they were “reasonable and necessary” as a
matter of law.
The District Court reached its conclusion by conflating
two separate standards from the Medicare statute. First, the
8
Court noted that § 1395x provides that a drug is used for a
“medically accepted indication” when it has been approved
by the FDA or listed in authoritative compendia. 42 U.S.C.
§ 1395x(t)(2)(A). It then adopted the rule from another
district court case that this “medically accepted” standard is
coterminous with the “reasonable and necessary” standard in
§ 1395y(a)(1)(A). App. 14 (citing United States ex rel.
Simpson v. Bayer Corp., 2013 WL 4710587, at *3 (D.N.J.
Aug 30, 2013)). Consequently, the District Court held that
because “Avastin is approved by the FDA and supported by
compendia listings, . . . [Petratos cannot] argue that
prescriptions [for] Avastin were not ‘reasonable and
necessary.’” App. 14 (citations omitted) (second alteration in
original). The Court explained that its decision aligns with the
principle that “‘reasonable and necessary’ is a determination
made by the relevant agency, not individual doctors.” App.
17.
We disagree with the District Court’s reading of the
statute. In our view, its analysis was premised on a false
choice, namely, that “this dispute comes down to whether
medically ‘reasonable and necessary’ is assessed by doctors
individually or is defined by the regulatory scheme.” App. 16.
But these two options do not account for all possibilities. As
Petratos and the United States argue, a third possibility exists:
that the “reasonable and necessary” determination is a process
involving the FDA, CMS, and individual doctors. Indeed,
CMS guidance, other Medicare provisions and regulations,
and canons of statutory construction lead us to conclude that
this is the best reading of the statute.
First, CMS guidance makes clear that the “reasonable
and necessary” determination does not end with FDA
approval. The claim at issue must also be “reasonable and
9
necessary for [the] individual patient” based on “accepted
standards of medical practice and the medical circumstances
of the individual case.” Medicare Benefit Policy Manual, ch.
15, § 50.4.3 (emphases added). The Manual provides
examples of when a drug treatment could be approved by the
FDA and used for a medically accepted indication, but still
not be “reasonable and necessary.” For example, a drug
treatment is not “‘reasonable and necessary’ for Medicare
Part B if standard medical practice indicates that oral
administration (as opposed to injection) ‘is effective and is an
accepted or preferred method of administration,’ or if the
administration of injections ‘exceed[s] the frequency or
duration of injections indicated by accepted standards of
medical practice.’” United States Br. 21 (quoting Medicare
Benefit Policy Manual, ch. 15, § 50.4.3).
Second, other Medicare provisions and regulations
underscore the critical role of the physician in Medicare’s
payment and reimbursement scheme. The regulations provide
that “[t]he physician has a major role in determining
utilization of health services furnished by providers. The
physician decides upon admissions, orders tests, drugs, and
treatments, and determines the length of stay.” 42 C.F.R.
§ 424.10(a). Under Medicare Parts A and B, it usually is “a
condition for Medicare payment that a physician certify the
necessity of the services and, in some instances, recertify the
continued need for those services.” Id. Indeed, physicians
prescribing Avastin often must submit CMS Form 1500 along
with a claim for reimbursement, wherein the doctor certifies
that the drug was “medically necessary and personally
furnished by me or . . . my employee under my direct
supervision.” United States Br. 29–30 (quoting CMS Form
1500). In addition, the Medicare statute contains a separate
10
section that outlines the obligations of physicians when
providing services to plan beneficiaries, including the
obligation to provide services “economically and only when,
and to the extent, medically necessary.” 42 U.S.C. § 1320c-
5(a).
Third, principles of statutory construction show that
“medically accepted” and “reasonable and necessary” are not
coterminous. “[T]he use of different words or terms within a
statute demonstrates that Congress intended to convey a
different meaning for those words.” Race Tires Am., Inc. v.
Hoosier Racing Tire Corp., 674 F.3d 158, 165 (3d Cir. 2012)
(citation omitted). And once this erroneous premise is
removed from the District Court’s decision, its analysis
falters. See App. 14 (reasoning that because “the ‘reasonable
and necessary’ standard [is] coterminous with the ‘medically
accepted’ requirement, . . . [Petratos cannot concede that]
Avastin is approved by the FDA and supported by compendia
listings” and “still argue that prescriptions [for] Avastin were
not reasonable and necessary”).
The cases cited by the District Court do not hold that
the “reasonable and necessary” decision is decided
exclusively by federal agencies. Rather, these cases show that
federal agencies retain ultimate control over the decision and
that Government approval is a necessary component of the
determination. See, e.g., United States ex rel. Bodnar v.
Secretary of Health & Human Servs., 903 F.2d 122, 125 (2d
Cir. 1990). And none of the cited cases purports to eliminate
the treating physician from the process. Indeed, other Courts
of Appeals have recognized that “Congress intends the
physician to be a key figure in determining what services are
needed and consequently reimbursable.” Goodman v.
11
Sullivan, 891 F.2d 449, 450 (2d Cir. 1989) (citing Rush v.
Parham, 625 F.2d 1150, 1157 (5th Cir. 1980)).
From a practical perspective, this multi-step
interpretation makes sense. CMS and the FDA are best
positioned to make high-level policy decisions— such as
issuing national coverage determinations and drug approvals.
These general approvals demarcate what treatments can be
considered “reasonable and necessary,” and are thus a
necessary condition for reimbursement. Meanwhile, the
doctors are best suited to evaluate each patient and determine
whether a treatment is “reasonable and necessary for [that]
individual patient.” See Medicare Benefit Policy Manual, ch.
15, § 50.4.3 (emphasis added). For example, Avastin is
approved by the FDA to treat patients with metastatic
colorectal cancer and such prescriptions are reimbursable by
CMS. But if a doctor determined that a colorectal cancer
patient had five hours to live and would best be treated with
palliative care, then prescribing Avastin in that situation may
not be “reasonable and necessary.”
C
Although we disagree with the District Court’s
reasoning, we may affirm its judgment on any ground
supported by the record. See, e.g., Guthrie v. Lady Jane
Collieries, Inc., 722 F.2d 1141, 1145 n.1 (3d Cir. 1983). Our
review of the record leads us to conclude that Petratos cannot
establish materiality, which the False Claims Act defines as
“having a natural tendency to influence, or be capable of
influencing, the payment or receipt of money.” 31 U.S.C.
§ 3729(b)(4).
12
Just last year in Universal Health Services v. United
States ex rel. Escobar, the Supreme Court confirmed that “[a]
misrepresentation about compliance with a statutory,
regulatory, or contractual requirement must be material to the
Government’s payment decision in order to be actionable
under the False Claims Act.” 136 S. Ct. 1989, 1996 (2016).
The Court described this standard as “demanding” and
“rigorous,” id. at 2002–03, and explained that a material
misrepresentation is one that goes “to the very essence of the
bargain,” id at 2003 n.5 (citations omitted). This requirement
helps ensure that the False Claims Act does not become “an
all-purpose antifraud statute or a vehicle for punishing
garden-variety breaches of contract.” Id. at 2003 (citation and
internal quotation marks omitted).
The Supreme Court also provided guidance as to how
the materiality requirement should be enforced. It explained
that a misrepresentation is not material “merely because the
Government designates compliance with a particular
statutory, regulatory, or contractual requirement as a
condition of payment . . . [or because] the Government would
have the option to decline to pay if it knew of the defendant’s
noncompliance.” Id. Materiality may be found where “the
Government consistently refuses to pay claims in the mine
run of cases based on noncompliance with the particular
statutory, regulatory, or contractual requirement.” Id. On the
other hand, it is “very strong evidence” that a requirement is
not material “if the Government pays a particular claim in full
despite its actual knowledge that certain requirements were
13
violated.” Id. Finally, materiality “cannot be found where
noncompliance is minor or insubstantial.” Id.2
Petratos’s allegations do not meet this high standard.
As the District Court noted: “there are no factual allegations
showing that CMS would not have reimbursed these claims
had these [alleged reporting] deficiencies been cured.” App.
18. Petratos does not dispute this finding, which dooms his
case. Simply put, a misrepresentation is not “material to the
Government’s payment decision,” when the relator concedes
that the Government would have paid the claims with full
knowledge of the alleged noncompliance. See Universal
Health Servs., 136 S. Ct. at 1996 (emphasis added). Similarly,
we think that where a relator does not plead that knowledge
of the violation could influence the Government’s decision to
pay, the misrepresentation likely does not “have[] a natural
tendency to influence . . . payment,” as required by the
statute. See 31 U.S.C. § 3729(b)(4). At a minimum, this
would be “very strong evidence” that the misrepresentation
was not material. Universal Health Servs., 136 S. Ct. at 2003.
The Supreme Court’s guidance in Universal Health
Services also militates against a finding of materiality. The
mere fact that § 1395y is a condition of payment, without
more, does not establish materiality. See id. In addition,
Petratos not only fails to plead that CMS “consistently refuses
to pay” claims like those alleged, see id., but essentially
concedes that CMS would consistently reimburse these
claims with full knowledge of the purported noncompliance.
2
The Court also rejected the argument that materiality
is “too fact intensive” to allow dismissal at the pleading stage,
explaining that plaintiffs must “plead[] facts to support
allegations of materiality.” Id. at 2004 n.6.
14
Nor has he cited to a single successful claim under § 1395y
involving drugs prescribed for their on-label uses or a court
decision upholding such a theory.
Petratos’s allegations are much like the sort of “minor
or insubstantial” noncompliance that the Supreme Court
explained should not be litigated under the False Claims Act.
See id. Petratos does not claim that Genentech’s safety-related
reporting violated any statute or regulation. He acknowledges
that the FDA would not “have acted differently had
Genentech told the truth.” App. 64. And as we have
explained, he does not dispute that CMS would reimburse
these claims even with full knowledge of the alleged
reporting deficiencies.
In fact, Petratos admits that he disclosed “material,
non-public evidence of Genentech’s campaign of
misinformation” to the FDA and Department of Justice in
2010 and 2011. App. 337. Since that time, the FDA has not
merely continued its approval of Avastin for the at-risk
populations that Petratos claims are adversely affected by the
undisclosed data, but has added three more approved
indications for the drug. Nor did the FDA initiate proceedings
to enforce its adverse-event reporting rules or require
Genentech to change Avastin’s FDA label, as Petratos claims
may occur. And in those six years, the Department of Justice
has taken no action against Genentech and declined to
intervene in this suit.
Since Petratos concedes that the expert agencies and
government regulators have deemed these violations
insubstantial (or at least would do so if made aware), we do
not think it appropriate for a private citizen to enforce these
regulations through the False Claims Act. See United States v.
15
Sanford-Brown, Ltd., 840 F.3d 445, 447 (7th Cir. 2016)
(dismissing False Claims Act complaint on materiality
grounds because “federal agencies in this case have already
examined [the claims] multiple times over and concluded that
neither administrative penalties nor termination was
warranted” (citations and internal quotation marks omitted)).
After all, the False Claims Act is not “a blunt instrument to
enforce compliance with all . . . regulations.” Wilkins, 659
F.3d at 307 (citation omitted).
Petratos’s arguments to the contrary are unpersuasive.
First, he claims that materiality is established because “if
physicians would have prescribed no or less Avastin, the
Government would have paid less claims.” Reply Br. 4. In
other words, Petratos argues that materiality can be
established by proving that the alleged fraud was the “but for”
cause of the submitted claim. Petratos’s argument conflates
materiality with causation, a separate element of a False
Claims Act cause of action. See Wilkins, 659 F.3d at 304–05.
Collapsing the materiality analysis into a causation inquiry
would render the materiality element “surplusage” and fail to
“give effect . . . to every clause and word of [the] statute,”
which we are loath to do. Tavarez v. Klingensmith, 372 F.3d
188, 190 (3d Cir. 2004) (citations and internal quotation
marks omitted). And even the causation element cannot be
met merely by showing “but for” causation. See United States
ex rel. Hendow v. Univ. of Phoenix, 461 F.3d 1166, 1174 (9th
Cir. 2006) (explaining that the false claim must be “integral
to a causal chain leading to payment” (citations omitted));
United States Br. 27 (“The United States does not contend
that a claim is necessarily false or fraudulent because an
antecedent fraud was a “but for” cause of the claim being
submitted.”); cf. Paroline v. United States, 134 S. Ct. 1710,
16
1720 (2014) (“Proximate cause is a standard aspect of
causation in . . . the law of torts”). If a “but for” causation
theory is insufficient to meet the causation element—where
that type of proof is more properly directed—it follows that it
should be insufficient to demonstrate materiality.
Petratos next argues that it is incorrect to focus our
materiality inquiry on the Government’s payment decision.
Rather, he claims that “the relevant question is whether
Genentech’s fraudulent misrepresentations were material to
the physicians’ determinations.” Reply Br. at 13. Petratos
points to Universal Health Services, where the Supreme
Court quoted a treatise to explain that “materiality ‘look[s] to
the effect on the likely or actual behavior of the recipient of
the alleged misrepresentation.’” Universal Health Servs., 136
S. Ct. at 2002 (quoting 26 R. Lord, Williston on Contracts
§ 69:12, p. 549 (4th ed. 2003)). Petratos reads this language to
mean that in indirect-causation cases—where the fraud is first
directed at an intermediary who then unwittingly forwards it
to the Government for payment—we look solely to the initial
recipient of the misrepresentation and not to the Government.
We disagree. The full context of the quotation shows
that when the Court wrote “the recipient of the alleged
misrepresentation,” it was referring to the Government, not
the initial recipient. See id. This makes sense because the
Government will always be the recipient of the
misrepresentation in the False Claims Act context. See
Wilkins, 659 F.3d at 304–05 (explaining that a plaintiff must
prove that “the defendant presented or caused to be presented
to an agent of the United States a claim for payment”
(emphasis added) (citation omitted)). Indeed, when the Court
turned to materiality in the False Claims Act–specific context,
it exclusively referred to the Government as the ultimate
17
recipient of the misrepresentation. Universal Health Servs.,
136 S. Ct. at 1996 (“A misrepresentation about compliance
with a statutory, regulatory, or contractual requirement must
be material to the Government’s payment decision in order to
be actionable under the False Claims Act.” (emphasis
added)).
Our sister courts have interpreted Universal Health
Services the same way. See, e.g., United States ex rel.
Garzione v. PAE Gov't Servs., Inc., 2016 WL 6518539, at *1
(4th Cir. Nov. 3, 2016) (“The relevant question is whether the
defendant knowingly violated a requirement that the
defendant knows is material to the government’s decision to
pay a claim.”); United States ex rel. Escobar v. Universal
Health Servs., Inc., 842 F.3d 103, 109 (1st Cir. 2016) (“In
order for False Claims Liability to attach, these misleading
omissions must be material to the government’s decision to
pay the claim.”); United States v. Sanford–Brown, Ltd., 840
F.3d 445, 447 (7th Cir. 2016) (dismissing claim where there
was “no evidence that the government’s decision to pay [the
claim] would likely or actually have been different had it
known of [the violation]”). Besides, it would make little
practical sense to give the doctors’ materiality determinations
dispositive weight. Because the False Claims Act was passed
to protect the federal treasury, United States v. McNinch, 356
U.S. 595, 599 (1958), and since the Government decides on
payment, Universal Health Servs., 136 S. Ct. at 1996, it is the
Government’s materiality decision that ultimately matters.
By attempting to focus our inquiry solely on the
physician’s materiality determination, Petratos again tries to
pass off restyled causation arguments as proof of materiality.
The alleged fraud’s effect on physicians is relevant to the
extent that it caused claims eventually to reach CMS. That is,
18
evidence of how the claim makes its way to the government
should be considered under the causation analysis, while the
materiality analysis begins after a claim has been submitted.
The materiality inquiry, in asking whether the government’s
payment decision is affected, assumes that the claim has in
fact reached the government. See Universal Health Servs.,
136 S. Ct. at 1996.
The Supreme Court’s treatment of indirect-causation
cases confirms this result. In United States ex rel. Marcus v.
Hess, the defendant contractors submitted fraudulent bids to
local governments for various projects funded by the federal
government. 317 U.S. 537, 542–43 (1943). Even though the
fraud was not directed at the federal government in the first
instance, the Court held the defendants liable because their
“fraud did not spend itself with the execution of the contract,”
but rather “taint[ed]” the claims paid by the United States. Id.at 543–44. In other words, if the fraud had deceived only the
initial recipients (and not the government), then the
defendants would not have been liable under the False Claims
Act. Therefore, the alleged fraud must affect the United
States’ payment decision to be actionable. Following this
logic, our focus here should not be whether the alleged fraud
deceived the prescribing physicians, but rather whether it
affected CMS’s payment decision. Because it did not,
Petratos’s claim fails.3
3
Having reached this conclusion, it follows that
Petratos’s two related claims also fail. Petratos’s state law
claims are, as he notes, dependent on the viability of his FCA
claim. See Petratos Br. 54 (arguing that because “dismissal of
the FCA claims was in error, the dismissal of the other claims
should be reversed.”). The same is true for his “reverse” FCA
19
In holding that Petratos did not sufficiently plead
materiality, we now join the many other federal courts that
have recognized the heightened materiality standard after
Universal Health Services. See, e.g., United States ex rel.
Kelly v. Serco, Inc., 2017 WL 117154, at *6–7 (9th Cir. Jan.
12, 2017); Sanford-Brown, 840 F.3d at 447; City of Chicago
v. Purdue Pharma L.P., 2016 WL 5477522, at *15 (N.D. Ill.
Sept. 29, 2016); United States ex rel. Scharff v. Camelot
Counseling, 2016 WL 5416494, at *8 (S.D.N.Y. Sept. 28,
2016); United States v. N. Adult Daily Health Care Ctr., 205
F. Supp. 3d 276, 295–96 (E.D.N.Y. 2016); Knudsen v. Sprint
Commc’ns Co., 2016 WL 4548924, at *12–13 (N.D. Cal.
Sept. 1, 2016); cf. Escobar, 842 F.3d at 111 (finding FCA
violations material where those violations were “as central to
the bargain as the United States ordering and paying for a
shipment of guns, only to later discover that the guns were
incapable of firing”).
IV
We turn next to what is essentially a procedural
challenge. Petratos claims that Judge Arleo erred by granting
Genentech’s motion to dismiss in light of Judge Wigenton’s
earlier finding that Petratos had “sufficiently alleged causes
of action.” App. 56. He alleges that Judge Arleo did not
claims. A reverse false claim occurs when a defendant acts
improperly to avoid paying an “obligation” owed to the
government. 31 U.S.C. § 3729(a)(1)(G). But Genentech did
not violate the FCA and, as the District Court noted, Petratos
“provides no other basis for reverse false claims liability.”
App. 21.
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satisfy our rule that absent “‘exceptional circumstances,’
‘judges of co-ordinate jurisdiction sitting in the same court
and in the same case should not overrule the decisions of each
other.’” Petratos Br. 22 (quoting Hayman Cash Register Co.
v. Sarokin, 669 F.2d 162, 168 (3d Cir. 1982) (citation
omitted)).
Though Petratos does not cite it by name in his
opening brief, he invokes the “law of the case” doctrine: a
judicial rule of practice meant to “maintain consistency and
avoid reconsideration of matters once decided during the
course of a single continuing lawsuit.” 18 Charles A. Wright
& Arthur R. Miller, Federal Practice and Procedure § 4478
(2d ed.). The law of the case doctrine is unhelpful to Petratos
because it “does not limit the power of trial judges to
reconsider their [own] prior decisions.” Williams v. Runyon,
130 F.3d 568, 573 (3d Cir. 1997). Therefore, “[i]nterlocutory
orders . . . remain open to trial court reconsideration, and do
not constitute the law of the case.” Perez-Ruiz v. Crespo-
Guillen, 25 F.3d 40, 42 (1st Cir. 1994). And the grant of a
leave to amend is an interlocutory order. Powers v. Southland
Corp., 4 F.3d 223, 229 (3d Cir. 1993). Therefore, Judge
Wigenton’s order granting leave to amend was not the law of
the case—and Judge Arleo was within her discretion to
disagree with it.
That this case was transferred between judges does not
change the result. Although the doctrine provides that “a
successor judge should not lightly overturn decisions of [her]
predecessors in a given case,” “it does not limit the power of
trial judges from reconsidering issues previously decided by a
predecessor judge from the same court.” Fagan, 22 F.3d at
1290; see also Rimbert v. Eli Lilly & Co., 647 F.3d 1247,
1252 (10th Cir. 2011) (explaining that the “law of the case
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doctrine has no bearing on the revisiting of interlocutory
orders, even when a case has been reassigned from one judge
to another”).
V
Finally, Petratos argues that the District Court abused
its discretion because it denied his request for leave to amend
without explanation. But there was nothing to explain.
Petratos offered no reason why leave to amend was
appropriate or what his amendment would have looked like.
His cursory request for leave was contained in the final clause
of his brief opposing Genentech’s motion to dismiss. See
App. 99 (“Relator respectfully requests that this Court deny
Genentech’s motion in its entirety or, alternatively, that
Relator be granted leave to amend.”). This threadbare recital
was insufficient. “While Federal Rule 15(a) provides that
leave to amend shall be freely given when justice so requires,
a mere request in [a brief in] opposition to a motion to
dismiss—without any indication of the particular grounds on
which amendment is sought—does not constitute a motion
within the contemplation of Rule 15(a).” U.S. ex rel. Williams
v. Martin-Baker Aircraft Co., 389 F.3d 1251, 1259 (D.C. Cir.
2004) (citation omitted). Because Petratos did not properly
seek leave to amend in the District Court, we will not
consider this argument on appeal.
* * *
Petratos’s allegations may be true and his concerns
may be well founded—but a False Claims Act suit is not the
appropriate way to address them. He concedes that Genentech
followed all pertinent statutes and regulations. If those laws
and regulations are inadequate to protect patients, it falls to
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the other branches of government to reform them. We will
affirm the judgment of the District Court.
23