United States: A Guide To FCA Cooperation Credit For Life Sciences Companies

On May 7, 2019, the U.S. Department of Justice issued guidelines describing when and under what circumstances it will award cooperation credit in False Claims Act matters.1 Above all else, the new guidelines prioritize the voluntary, proactive and timely self-disclosure of "false claims."2 The guidelines provide little detail, however, about what kind of information a company should disclose to earn cooperation credit. Nor do they offer any real world examples of actions taken by companies to earn such credit. This kind of detail is especially important when there is a significant disconnect between what the government and a company believe is a legally sound basis for a false claims action.

The False Claims Act imposes civil liability on those who cause the presentation of false or fraudulent claims for payment to the government, provided that such persons have actual knowledge of information that renders such claims false or act in deliberate ignorance or reckless disregard of the nature of such information.3 Claims can be factually false, meaning that "the party submitting the claim supplies an incorrect description of goods or services provided or a request for reimbursement for goods or services never provided;" in essence, the party "bills for something it did not provide."4 Such factually false claims are easy to identify and voluntarily disclose, if they exist.

More often than not, however, the government tries to build a False Claims Act case on arguments that claims are legally rather than factually false, based on an express or implied "false certification" theory.5 In this context, the government must demonstrate that claims presented for payment involved express or implicit representations about a product's compliance with applicable law, without disclosing that the product was out of compliance with material statutory and regulatory requirements.6 To do so, the government must prove that:

  • A person knowingly made or caused to be made a claim for payment for a product or service to the government;
  • The claim included an express or implied representation of compliance with statutory or regulatory requirements;
  • The product or service did not comply with those statutory or regulatory requirements, rendering representations in the claim misleading;7 and
  • Compliance with the statutory or regulatory requirements was material to the government's decision to pay.8

The last of the foregoing elements, whether noncompliance with statutory or regulatory requirements is material to the government's decision to pay a claim, is often a matter of contention. With the U.S. Supreme Court having determined that the FCA is not intended as "a vehicle for punishing garden-variety breaches of ... regulatory violations,"9 there can often be significant daylight between how a company sees evidence of regulatory noncompliance and how the government views that very same evidence.

What is a life sciences company to do when it seeks cooperation credit but fundamentally disagrees with the government regarding whether the evidence the government seeks actually makes out a false claim?

In the context of investigations into payment of claims for off-label uses of drugs or devices, of which we have seen many in recent years, the government often asserts that evidence of a firm's marketing a product for unapproved uses proves that a company knowingly caused the submission of a false claim. In the drug context, a common corollary argument is that, if the unapproved use is not supported by certain statutorily identified medical compendia, the payment sought was not for a "covered outpatient drug."10

But more recently, the DOJ has begun to look at potential regulatory violations that are not directly tied to claims for payment and that are more traditionally enforced by the U.S. Food and Drug Administration, which has primary jurisdiction for ensuring the safety and efficacy of drugs and devices. Take, for example, an investigation into a firm's compliance with the FDA's current good manufacturing practice or reporting regulations.

Rare is the FDA cGMP inspection where the FDA does not find some fault and opportunity for improved compliance. But is every observation in an FDA inspection report (a "Form 483") evidence of a false claim? What if the noncompliance identified by the FDA has no causal link to any material product quality defect for a particular drug or device sold to the government? In such a situation, should a company volunteer to the DOJ all instances of potential cGMP noncompliance that could serve as a basis of FCA liability in order to obtain cooperation credit, even when the company does not view the information as evidence of a false claim?

Similarly, what should a company do in the context of an investigation into whether a company properly reported a drug or device adverse event or drug recall information to the FDA, when the firm does not believe that certain information was reportable? Or, if the company believes that, even assuming that it should have reported the information, the regulatory violation would not have been material to payment, but the government disagrees?

These are some of the crucial questions that the DOJ's new guidelines do not answer. Additionally, the guidelines neglect to mention the possibility that the DOJ can decline to conduct additional investigation of a case based on the information provided by a company. One way to interpret this omission is that any misconduct disclosed will necessarily lead to a DOJ investigation and possibly to further enforcement. While the guidelines encourage entities to disclose conduct that could serve as the basis for FCA liability, there may be little incentive for a company to make such a disclosure if doing so guarantees a costly and time-consuming DOJ investigation, followed most likely by some further action.

Despite these gaps in the DOJ guidance, life sciences companies may be relieved to know that admission of liability is not mandatory for receiving cooperation credit. The guidelines also describe many other forms of cooperation, such as by:

  • Disclosing relevant facts and identifying opportunities for the government to obtain evidence relevant to the government's investigation that is not in the possession of the entity or individual or not otherwise known to the government;
  • Preserving, collecting and disclosing relevant documents and information relating to their provenance beyond existing business practices or legal requirements;
  • Identifying individuals who are aware of relevant information or conduct, including an entity's operations, policies and procedures;
  • Making available for meetings, interviews, examinations or depositions, an entity's officers and employees who possess relevant information;
  • Disclosing facts relevant to the government's investigation gathered during the entity's independent investigation (not to include information subject to attorney-client privilege or work product protection), including attribution of facts to specific sources rather than a general narrative of facts, and providing timely updates on the organization's internal investigation into the government's concerns, including rolling disclosures of relevant information;
  • Providing facts relevant to potential misconduct by third-party entities and third-party individuals;
  • Providing information in native format, and facilitating review and evaluation of that information if it requires special or proprietary technologies so that the information can be evaluated;
  • Admitting liability or accepting responsibility for the wrongdoing or relevant conduct; and
  • Assisting in the determination or recovery of the losses caused by the organization's misconduct.11

In light of the novelty and tenuousness of many of the theories by which the government has attempted to turn FDA regulatory violations into False Claims Act violations in recent years, life sciences companies that find themselves on the receiving end of a civil investigative demand or Health Insurance Portability and Accountability Act subpoena exploring possible FDA regulatory violations, and that wish to obtain cooperation credit, should consider voluntarily disclosing conduct they believe to be within the scope of the government's inquiry (reasonably construed), without admitting liability, and using the voluntary disclosure process as an opportunity to frame the narrative of the case.

In such circumstances, the focus will be on building the argument for why the conduct, even if it were to constitute a regulatory violation, would not be material to government payment decisions and therefore would not render any claims for payment legally false.

To the extent a company has good factual and legal arguments that the conduct the government views as the predicate for a FCA violation is not violative, providing the government with the types of information and assistance it seeks above, without admitting liability, should not detract from a company's ability to mount an effective defense. Indeed, in a cGMP or other regulatory investigation where facts can be complicated and nuanced, providing such information can be essential to ensuring that the government understands the circumstances completely and accurately. At the same time, it will better position the company to obtain cooperation credit in the event a settlement becomes the preferred outcome of the investigation.

The DOJ guidelines also note that DOJ attorneys will consider whether an entity has taken appropriate remedial actions in response to the FCA violation. The remedial actions referenced in the guidelines as examples include:

  • Demonstrating a thorough analysis of the cause of the underlying conduct and, where appropriate, remediation to address the root cause;
  • Implementing or improving an effective compliance program designed to ensure the misconduct or a similar problem does not occur again;
  • Appropriately disciplining or replacing those identified by the entity as responsible for the misconduct either through direct participation or failure in oversight, as well as those with supervisory authority over the area where the misconduct occurred; and
  • Any additional steps demonstrating recognition of the seriousness of the entity's misconduct, acceptance of responsibility for it, and the implementation of measures to reduce the risk of repetition or such misconduct, including measures to identify future risks.

Any FDA-regulated entity will need to have expertise in, and a commitment to, investigating and remediating instances of potential regulatory noncompliance. Even if a company disagrees with the government as to whether a particular instance of regulatory noncompliance constitutes a False Claims Act violation, when regulatory noncompliance is discovered it should be documented, investigated and remediated.

In the cGMP context, factual investigations and implementation of corrective and preventive actions will generally be mandated by FDA regulations. In other circumstances, such as in the context of marketing a drug or device for an unapproved use or failing to report required information to the agency, there may not be regulations requiring investigation and corrective action, yet a failure to investigate and follow up appropriately could itself be powerful evidence against the company.

A company that is subject to potential False Claims Act enforcement predicated on regulatory violations and that wishes to obtain cooperation credit should be willing to share with the DOJ its root cause analyses, investigations and remediation plans. By doing so, a company can improve its case for cooperation credit while providing the DOJ with information it could easily demand, or that might already be covered by the previously issued CID or subpoena. Additionally, the company should ordinarily have documented such information as part of its routine compliance program.

If a company will be providing the DOJ with information about possible FDA regulatory violations and remediation efforts, the firm should consider making a similar disclosure to the FDA at or around the same time, assuming the FDA is not already aware of the information. There are several reasons why doing so may be prudent. First, the FDA may be considering taking enforcement action based on the same or similar regulatory violations, and voluntary self-disclosure could earn the company cooperation points with the FDA, as well as the DOJ.

Though FDA lacks a formal self-disclosure and cooperation credit program, voluntary disclosure builds credibility and good will with the agency. Further, because the FDA (not the DOJ) is the regulator tasked with protecting the public health, the FDA will likely want to evaluate whether further action is necessary from a public health perspective, and a company might lose credibility with the FDA if the agency has to learn the information first from the DOJ.

Additionally, in some cases the FDA may believe that the DOJ is impinging on its regulatory authority, for example, by acting as a parallel regulator in complex areas such as cGMP compliance. In those situations, notifying the FDA may benefit the company both by building goodwill with the FDA and possibly by causing the FDA to become more involved in an investigation, which a company may prefer to interacting with prosecutors who are not regulatory experts. Beyond these particular considerations, common sense should dictate that "lack of transparency" with the FDA in such situations is likely to do more harm than good, and might have literally zero upside given the likelihood that the DOJ would eventually provide the information to the FDA anyway.

In addition, while a company may be concerned that disclosing regulatory violations proactively to the DOJ could trigger or expand an FCA investigation, the company may want to consider proactively disclosing such violations to FDA to get out ahead of a potential FDCA enforcement action. Disclosure in this context would involve a different analysis and should be carefully assessed with competent counsel. Where the circumstances present themselves, a company might provide such information in the context of an FDA establishment inspection or other ongoing FDA communications relating to the product or conduct.

In the absence of such a "natural" communication channel, the company will need to consider the particular circumstances, including the type of product, the conduct at issue, and, in many cases, the geographic location of the company. Such decisions require sufficient knowledge of the FDA's internal structure and procedures.

While life sciences companies may disagree with DOJ regarding what kinds of regulatory violations can constitute false claims, the DOJ's guidance on cooperation credit provides an opening and framework for firms to educate the DOJ and frame the narrative for any cGMP, reporting or other case based on FDA regulatory violations. In the context of ongoing FCA investigations, firms can obtain cooperation credit and build out their defenses at the same time. When making such disclosures, companies also should consider whether, when and how to share the same information with the FDA.


  1. See Justice Manual Section 4-4.112-Guidelines for Taking Disclosure, Cooperation, and remediation into Account in False Claims Act matters. (https://www.justice.gov/jm/jm-4-4000-commercial-litigation#4-4.112)
  2. Notably, in the civil false claims act context, the guidelines do not require the provision of information about all involved individuals in misconduct as a prerequisite to cooperation, as first proposed in the Yates Memo of 2015. Rather, the new guidelines take their lead from comments made by Former Deputy Attorney General Rod Rosenstein in November 2018 that "the idea that a company engaged in a pattern of wrongdoing should always be required to admit the civil liability of every individual employee as well as the company is attractive in theory, but it proved to be inefficient and pointless in practice." (https://www.justice.gov/opa/speech/deputy-attorney-general-rod-j-rosenstein-delivers-remarks-american-conference-institute-0) Thus, while identifying individuals substantially involved in or responsible for misconduct is the first of a number of "other forms of cooperation" that DOJ will consider when determining whether to award cooperation credit, it is not a prerequisite to obtaining such credit. That being said, the guidelines note that any entity or individual that seeks to earn "maximum credit" in a False Claims Act case should, among other steps, undertake "a timely self-disclosure that includes identifying all individuals substantially involved in or responsible for the misconduct."
  3. 31 U.S.C. §3729(a)(1)(A), (b)(1)(A).
  4. U.S. ex rel. Kester v. Novartis Pharmaceuticals Corp., 43 F. Supp. 3d 332, 360 (SDNY 2014) (internal quotations and citations omitted).
  5. Courts categorize FCA cases as involving either "factually false" claims (involving the failure to provide promised goods or services) and "legally false" claims (misrepresenting compliance with applicable rules or contractual requirements). See, e.g., United States v. Kellogg Brown & Root Servs., Inc., 800 F. Supp. 2d 143, 154 (D.D.C. 2011). Legally false claims further subdivide into "express false certification" and "implied false certification" cases (depending on whether the certification was made expressly in, or may be implied from, the claim for payment). Id. It is possible that a claim could satisfy the requirements of both factual and legal falsity. For instance, the same claim could arguably be legally false because the product delivered does not conform to a material contractual requirement as well as factually false because the product delivered is not the product that was purchased.
  6. See Universal Health Servs., Inc. v. U.S. ex rel. Escobar, 136 S. Ct. 1989, 2001 (2016).
  7. Escobar makes clear that in the context of implied certification cases, the claim presented must also make specific representations about the product or service that are rendered misleading by the failure to disclose violations of statutory, regulatory or contractual requirements. See id. at 1999.
  8. See Escobar, 136 S. Ct. at 1999-2001; Kellogg Brown & Root Servs., Inc., 800 F. Supp. at 154.
  9. Id. at 2003.
  10. Prescription drugs that lack FDA approval are generally not reimbursable under Medicare Part D and, thus, a claim for payment for an unapproved drug would be false under the FCA. Claims for payment for unapproved uses of approved drugs that are not compendia supported are also considered non-reimbursable for not being "covered outpatient drugs." See 42 U.S.C. §§1395w-102(e)(1)(A), 1396r-8(k)(2), (3).
  11. See Justice Manual Section 4-4.112 at p. 2. (https://www.justice.gov/jm/jm-4-4000-commercial-litigation#4-4.112)

Originally published by Law360

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions