United States Ex Rel. Rost v. Pfizer, Inc.

United States Court of Appeals
For the First Circuit

No. 06-2627

UNITED STATES OF AMERICA EX REL. PETER ROST,

Plaintiff, Appellant,

v.

PFIZER, INC.; PHARMACIA CORPORATION,

Defendants, Appellees.

ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Joseph L. Tauro, U.S. District Judge]

Before

Torruella, Circuit Judge,
Cyr, Senior Circuit Judge,
and Lynch, Circuit Judge.

Mark I. Labaton with whom Megan Benett, Hilary B. Taylor, and
Kreindler & Kreindler LLP were on brief for appellant.
Jamie Ann Yavelberg, Attorney, with whom Peter D. Keisler,
Acting Attorney General, Michael J. Sullivan, United States
Attorney, Douglas N. Letter, Attorney, and Michael D. Granston,
Attorney, Civil Division, Department of Justice, were on brief for
United States, amicus curiae.
Ethan M. Posner with whom Carolyn F. Corwin, Tara M. Steeley,
Mark W. Mosier, and Covington & Burling LLP were on brief for
appellees.
Mary Ita Snyder, Timothy J. Hatch, James C. Dougherty, Karen
L. Manos, Minodora D. Vancea, and Gibson, Dunn & Crutcher LLP on
brief for National Defense Industrial Association, amicus curiae.
Jonathan L. Diesenhaus, Catherine E. Stetson, Jessica L.
Ellsworth, Jake M. Shields, Hogan & Hartson LLP, Diane E. Bieri,
Melinda Reid Hatton, and Maureen D. Mudron were on brief for
Pharmaceutical Research and Manufacturers of America and American
Hospital Association, amici curiae.

November 15, 2007
 LYNCH, Circuit Judge. Dr. Peter Rost filed this

whistleblower action against Pfizer, Inc. and its subsidiary

Pharmacia Corporation under the federal False Claims Act ("FCA"),

31 U.S.C. § 3729 et seq., and analogous state statutes. The suit

alleges that Pharmacia's misconduct in marketing a human growth

hormone, Genotropin, for uses unapproved by the Food and Drug

Administration led to claims for reimbursement to the United States

for unreimbursable, off-label drug prescriptions.

The district court rejected defendants' argument that the

suit be dismissed for lack of jurisdiction under 31 U.S.C.

§ 3730(e)(4), but granted the motion to dismiss on the ground that

Rost's complaint failed to meet the pleading requirements for

allegations of fraud under Federal Rule of Civil Procedure 9(b).

United States ex rel. Rost v. Pfizer Inc., 446 F. Supp. 2d 6, 28

(D. Mass. 2006).

Rost's appeal urges reversal of that holding. Pfizer,

supported by two sets of amici, agrees that Rost's complaint fails

the pleading standard of Rule 9(b) -- but claims error by the

district court in deciding the threshold issue of whether one of

the FCA's jurisdictional bars, see 31 U.S.C. § 3730(e)(4), applies

to Rost's suit. The United States, appearing as amicus, argues for

affirmance on the jurisdictional ground and notes that the Rule

9(b) ruling is consistent with the law of this circuit. The

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jurisdictional bar issue raises questions of statutory

interpretation unresolved in this circuit.

We affirm the decision of the district court that

§ 3730(e)(4) does not bar Rost's suit. We also agree that the

complaint fails to meet the heightened pleading standard for FCA

claims, but remand so that the district court may consider Rost's

request for leave to amend, which it did not address.

I.

Genotropin is a brand of synthetic human growth hormone

originally marketed by Pharmacia. The FDA has approved Genotropin

only for the treatment of three specific pediatric disorders and of

adult growth hormone deficiency. Physicians may prescribe

Genotropin for non-FDA-approved indications, but the Food, Drug &

Cosmetic Act ("FDCA"), 21 U.S.C. § 321 et seq., prohibits

pharmaceutical companies from marketing drugs for such "off-label"

uses. In addition, Medicaid generally does not reimburse patients

for off-label prescriptions. See 42 U.S.C. §§ 1396b(i)(10), 1396r-

8(k)(3), (k)(6).1 There is a wide and lucrative market for off-

label uses of human growth hormone. One such use is to slow the

effects of aging in adults. Also, some parents request the drug to

boost the growth of short children, even absent a hormonal

1
Medicaid reimbursement is available for certain off-label
uses that are medically "essential" or recognized within one of
several medical compendia. See 42 U.S.C. § 1396r-8(a)(3),
(g)(1)(B)(i), (k)(6). Such uses are not at issue in this case.

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deficiency. Sales to the domestic market for off-label uses

significantly enhance the profitability of synthetic human growth

hormone.

Rost joined Pharmacia in 2001 as Vice President of

Marketing in the company's Endocrine Care unit. Among his

responsibilities was oversight of global marketing for Genotropin.

Rost soon became concerned that subordinates in charge of marketing

Genotropin within the United States were utilizing problematic

tactics. Pharmacia sales representatives received incentive

payments for each new patient prescribed Genotropin, whether for

on- or off-label uses.

Rost also suspected Pharmacia of using a Genotropin

"study program" to funnel improper payments to doctors for

prescribing the drug. Every doctor that prescribed Genotropin

became eligible to participate in the program, which collected data

about patients with growth disorders who took Genotropin.

Participating doctors would receive a cash payment for every

patient to whom they prescribed Genotropin and enrolled in the

study. Doctors participating in the study program also received

all-expenses-paid trips to conferences at luxury resorts where,

among other Genotropin-related topics, doctors would discuss off-

label uses of the drug.

In addition, Rost discovered that Pharmacia granted

financial incentives to distributors targeting the off-label market

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for human growth hormone. These discount pricing contracts and

rebates benefitted "anti-aging" clinics, internet-based vendors,

and others unlikely to dispense Genotropin for its FDA-approved

uses. Rost feared these incentives subsidized the off-label market

for Genotropin.

The company hired physicians and others as "independent

consultants" to promote Genotropin for off-label uses. For

instance, Pharmacia retained a company in Canada to create

marketing materials touting Genotropin's anti-aging uses.

Pharmacia also made substantial payments to the director of several

anti-aging clinics in Florida.

Rost believed these practices ran afoul of the FDCA.

See, e.g., 21 U.S.C. §§ 331, 355 (prohibiting interstate

distribution of drugs that have not undergone FDA approval

process); id. § 333 (providing criminal penalties for such

distribution). Rost also believed these practices were suspect

under the anti-kickback statute, 42 U.S.C. § 1320a-7b(b), which

criminalizes the payment of kickbacks, bribes, or other inducements

to doctors in an effort to influence decisions about prescriptions

that are reimbursed by a federal health care program.

Rost reported his concerns up the chain of management at

Pharmacia. The company initiated an internal investigation and cut

back on the problematic marketing activity. Rost, however,

remained skeptical of some continuing practices.

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 In July 2002, Pfizer announced it would acquire

Pharmacia. In meetings with Pfizer personnel during October and

November of 2002, Rost and other Pharmacia employees aired their

concerns about Genotropin marketing. Rost also wrote to a Pfizer

marketing executive in early 2003 regarding Pharmacia's off-label

sale and marketing of Genotropin.

Pfizer completed its acquisition of Pharmacia on April

16, 2003. Pfizer immediately initiated an internal investigation

into the legacy marketing practices of its new subsidiary. It also

moved quickly to inform the relevant federal authorities about

potential problems.

On May 16, 2003, Pfizer contacted two separate offices

within the Department of Health and Human Services ("HHS")

regarding Pharmacia's problematic marketing practices. One was the

FDA's Division of Drug Marketing, Advertising, and Communications

("DDMAC"), to which Pfizer wished to disclose information regarding

the off-label marketing and distribution of Genotropin. Pfizer

followed up on May 19, 2003, with a confidential letter to the

DDMAC and the FDA's Office of Chief Counsel. The letter summarized

Pharmacia's past off-label sales to anti-aging doctors and clinics,

referring to the improper discount contracts and to sales

representatives who focused their marketing efforts on the off-

label market. The letter also described remedial measures taken by

Pharmacia and Pfizer.

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 Pfizer also contacted on May 16, 2003, the HHS Office of

Inspector General ("OIG"), which is charged with investigating and

preventing fraud in federal health care programs such as Medicare

and Medicaid. The OIG administers a voluntary disclosure program

to encourage health care providers to inform the office of

fraudulent conduct, and Pfizer sought to enter the program. Pfizer

representatives met with OIG officials on May 21, 2003, to discuss

the off-label marketing of Genotropin and various forms of improper

payments to prescribing physicians. The OIG officials informed

Pfizer that an investigative agent had been assigned to the matter

and invited Pfizer to submit a letter requesting admission into the

voluntary disclosure program. In another confidential letter sent

to the OIG on June 3, 2003, Pfizer identified three areas of

potential misconduct related to Pharmacia's promotion of

Genotropin: first, payments made to physicians in the form of

consulting contracts and "professional or educational" junkets;

second, payments for participating in the Genotropin study program,

which the letter acknowledged may have been motivated by "sales and

marketing concerns"; and third, Pharmacia's engagement of "outside

entities to provide product support services" for Genotropin to

physicians. Pfizer sent a copy of the letter to the Civil Fraud

Section of the Department of Justice.

Pfizer continued its internal investigation into

Pharmarcia's former marketing practices after its correspondence to

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the HHS but did not make any public announcement regarding

Genotropin at that time. Pfizer first disclosed problems with

Genotropin marketing in a publicly available document on March 10,

2004, in materials appended to a Form 10-K filed with the

Securities and Exchange Commission. That document states that

Pfizer "recently was notified that the U.S. Department of Justice

is conducting investigations relating to the marketing and sale of

Genotropin . . . . [Pfizer is] cooperating in these

investigations."

In April 2007, the U.S. Attorney's Office for

Massachusetts announced that Pfizer would plead guilty and pay a

fine in response to a criminal charge for violating the anti-

kickback statute through Genotropin-related payments to doctors.

Pfizer simultaneously entered into a Deferred Prosecution Agreement

with the government as to a criminal information charging the

company with one count of violating the FDCA for off-label

promotion and distribution of Genotropin. Pfizer paid the

government a total of $34.7 million to resolve Genotropin-related

investigations conducted over four years by the HHS, DOJ, and FBI.

Rost had begun considering a False Claims Act lawsuit in

late 2002. Rost filed his qui tam complaint on June 5, 2003, in

camera and under seal pursuant to 31 U.S.C. § 3730(b)(2). The FCA

requires a private plaintiff bringing a claim under the Act to file

a complaint under seal and serve the government with "the complaint

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and written disclosure of substantially all material evidence and

information" underlying the complaint, a procedure designed to

allow the government to decide whether to intervene in the action.

31 U.S.C. § 3730(b)(2); see also United States ex rel. Karvelas v.

Melrose-Wakefield Hosp., 360 F.3d 220, 225 (1st Cir. 2004).

The United States spent more than two years investigating

the allegations in Rost's complaint and considering whether to

intervene in the action. On November 8, 2005, the United States

notified the district court that it would not intervene. Two days

later, the court ordered Rost's complaint unsealed and served on

the defendants.

The complaint pleads claims for damages under the FCA and

the statutes of ten states and the District of Columbia.2 Rost

bases those claims on marketing practices that he previously

brought to the attention of Pharmacia and Pfizer management:

encouraging sales representatives to promote Genotropin for off-

2
Rost pleads state-law claims under the California False
Claims Act, Cal. Gov't Code § 12651(a)(1)-(2), the Delaware False
Claims and Reporting Act, 6 Del. Code Ann. tit. 6, § 1201(a)(1)-
(2), the Florida False Claims Act, Fla. Stat. Ann. § 68.082(2), the
Hawaii False Claims Act, Haw. Rev. Stat. § 661-21(a), the Illinois
Whistleblower Reward and Protection Act, 740 Ill. Comp. Stat.
§ 175/3(a)(1)-(2), the Massachusetts False Claims Law, Mass. Gen.
Laws ch. 12, § 5B(1)-(2), the Nevada False Claims Act, Nev. Rev.
Stat. Ann. § 357.040(1)(a)-(b), the Tennessee Medicaid False Claims
Act, Tenn. Code Ann. § 71-5-182(a)(1), the Texas Medicaid Fraud
Prevention Law, Tex. Hum. Res. Code Ann. § 36.002, the Virginia
Fraud Against Taxpayers Act, Va. Code Ann. § 8.01-216.3(A)(1)-(2),
and the District of Columbia Procurement Reform Amendment Act, D.C.
Code Ann. § 2-308.14(a)(1)-(2).

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label uses, making payments and other inducements to doctors

through the Genotropin research program, granting discounts and

rebates to distributors known to target the off-label market, and

hiring physicians as "independent consultants" to promote and

prescribe Genotropin for off-label uses. The complaint alleges

that Pharmacia knew a significant portion of its sales were for

off-label uses because it maintains a database containing

information on 30,000 patients prescribed Genotropin. That

information includes the identity of the prescribing doctor, the

primary and secondary diagnosis, and the dosage prescribed. The

complaint alleges that the database reveals that approximately

sixty percent of all adult and twenty-five percent of all pediatric

sales of Genotropin were for off-label uses.

The complaint does not allege Pharmacia itself ever

submitted false claims. It alleges that Pharmacia knowingly caused

the submission of fraudulent claims by others to the government in

the form of claims for reimbursement for off-label prescriptions of

Genotropin. The complaint does not identify any false claim

presented by others to any government health program or any

particular entity or person who actually submitted such a claim.

Instead, the complaint pleads that "[t]he false claims were

presented by thousands of separate entities, across the United

States, and over many years. [Rost] has no control over or

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dealings with such entities and [has] no access to the records in

their possession."

Pfizer moved to dismiss the complaint for lack of subject

matter jurisdiction and for failure to meet the Rule 9(b) pleading

requirements for allegations of fraud. On the first point, Pfizer

argued that its communications with government officials

constituted "public disclosures" triggering the jurisdictional bar

of 31 U.S.C. § 3730(e)(4)(A), and that Rost did not qualify as an

"original source" for the information in his complaint so as to

exempt him from the bar, see id. § 3730(e)(4)(B).

The district court held that Pfizer's confidential

disclosures to the HHS and DOJ were not "public disclosures" that

would trigger the FCA's jurisdictional bar but granted dismissal on

the Rule 9(b) grounds. Rost, 446 F. Supp. 2d at 18, 28.

II.

The False Claims Act prohibits the knowing submission of

false or fraudulent claims for payment, or causing the submission

of such claims, to the federal government and prescribes fines and

treble damages to penalize offenders. 31 U.S.C. § 3729(a).3

3
The Act states, in relevant part,

Any person who --
(1) knowingly presents, or causes to be
presented, to an officer or employee of the
United States Government . . . a false or
fraudulent claim for payment or approval; [or]
(2) knowingly makes, uses, or causes to
be made or used, a false record or statement

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Violations of the Act may be enforced by civil actions initiated by

either the Attorney General, id. § 3730(a), or a private person,

id. § 3730(b). In the latter category of qui tam4 actions, the Act

affords the government an opportunity to evaluate the relator's

complaint and decide whether to assume primary responsibility for

prosecuting the action. Id. § 3730(b)(2), (b)(4), (c)(1). A

private relator is entitled to a portion of any proceeds from the

suit, whether the United States intervenes as an active participant

in the action or not. If the government intervenes, the Act grants

between 15 and 25% of the government's damages (or settlement

amount) to the relator. Id. § 3730(d)(1). If the government does

not intervene, as here, the relator is entitled to between 25 and

30% of the recovery. Id. § 3730(d)(2). In either case, the Act

requires defendants to pay attorneys' fees for a successful qui tam

plaintiff. Id. § 3730(d)(1)-(2).

to get a false or fraudulent claim paid or
approved by the Government;
. . .
is liable to the United States Government for
a civil penalty of not less than $5,000 and
not more than $10,000, plus 3 times the amount
of damages which the Government sustains
because of the act of that person . . . .

31 U.S.C. § 3729(a).
4
"Qui tam" comes from the phrase "qui tam pro domino rege
quam pro se ipso in hac parte sequitur," which translates as "who
pursues this action on our Lord the King's behalf as well as his
own." Rockwell Int'l Corp. v. United States, 127 S. Ct. 1397, 1403
n.2 (2007).

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 The qui tam provisions of the FCA supplement federal law

enforcement resources by encouraging private citizens to uncover

fraud on the government. Karvelas, 360 F.3d at 224 & n.5. The qui

tam mechanism has historically been susceptible to abuse, however,

by "parasitic" relators who bring FCA damages claims based on

information within the public domain or that the relator did not

otherwise discover. See United States ex rel. S. Prawer & Co. v.

Fleet Bank of Me., 24 F.3d 320, 324-26 (1st Cir. 1994) (summarizing

history of FCA litigation and legislative amendments). Congress

has tailored the FCA to "walk a fine line between encouraging

whistle-blowing and discouraging opportunistic behavior." Id. at

326 (quoting United States ex rel. Springfield Terminal Ry. Co. v.

Quinn, 14 F.3d 645, 651 (D.C. Cir. 1994)). The current Act

contains a series of jurisdictional bars designed in part to

mediate that fine line. See 31 U.S.C. § 3730(e).

The Act does not create a cause of action against all

fraudulent conduct affecting the government. Karvelas, 360 F.3d at

225. Rather, FCA liability attaches to a "false or fraudulent

claim for payment" or to a "false record or statement [made] to get

a false or fraudulent claim paid" by the government. 31 U.S.C.

§ 3729(a)(1)-(2); see also Karvelas, 360 F.3d at 225 ("Evidence of

an actual false claim is 'the sine qua non of a False Claims Act

violation.'") (quoting United States ex rel. Clausen v. Lab. Corp.

of Am., Inc., 290 F.3d 1301, 1311 (11th Cir. 2002)). FCA liability

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does not attach to violations of federal law or regulations, such

as marketing of drugs in violation of the FDCA, that are

independent of any false claim.

A. Jurisdictional Bar

The threshold question in a False Claims Act case is

whether the statute bars jurisdiction. Rockwell Int'l Corp. v.

United States, 127 S. Ct. 1397, 1405-07 (2007). The relevant bar,

contained in 31 U.S.C. § 3730(e)(4)(A) and (B), provides:

(4)(A) No court shall have jurisdiction over
an action under this section based upon the
public disclosure of allegations or
transactions in a criminal, civil, or
administrative hearing, in a congressional,
administrative, or Government Accounting
Office report, hearing, audit, or
investigation, or from the news media, unless
the action is brought by the Attorney General
or the person bringing the action is an
original source of the information.

(B) For purposes of this paragraph, "original
source" means an individual who has direct and
independent knowledge of the information on
which the allegations are based and has
voluntarily provided the information to the
Government before filing an action under this
section which is based on the information.

Our case turns on the "public disclosure" language of

§ 3730(e)(4)(A). Pfizer asserts that its self-disclosure to HHS

and DOJ, the appropriate investigative bodies, constitutes "public

disclosure of allegations" in an appropriate government

investigation setting under § 3730(e)(4)(A) and thus bars the

action.

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 Analysis of § 3730(e)(4)(A) requires several inquiries:

(1) whether there has been public disclosure of the allegations or

transactions in the relator's complaint; (2) if so, whether the

public disclosure occurred in the manner specified in the statute;

(3) if so, whether the relator's suit is "based upon" those

publicly disclosed allegations or transactions; and (4) if the

answers to these questions are in the affirmative, whether the

relator falls within the "original source" exception as defined in

§ 3730(e)(4)(B). We reach only the first question. Our case law

has not previously defined the term "public disclosure."

The question here is whether self-disclosure made by a

private party only to government agencies, without further

disclosure, is "public disclosure."5 In our view, a "public

disclosure" requires that there be some act of disclosure to the

public outside of the government. The mere fact that the

disclosures are contained in government files someplace, or even

that the government is conducting an investigation behind the

5
It could be that disclosure in the form of a filing to a
government body such as a court (not under seal) where all records
are public could be public disclosure. See Springfield Terminal,
14 F.3d at 652; United States ex rel. Stinson, Lyons, Gerlin &
Bustamante, P.A. v. Prudential Ins. Co., 944 F.2d 1149, 1155-56 (3d
Cir. 1991). It could also be that when the government itself makes
available to the public information which has been disclosed to it,
say in response to a FOIA request, the later disclosure by the
government constitutes a public disclosure. See United States ex
rel. Schumer v. Hughes Aircraft Co., 63 F.3d 1512, 1519-20 (9th
Cir. 1995), vacated on other grounds, 520 U.S. 939 (1997). These
are not our case.

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scenes, does not itself constitute public disclosure. Our

construction of the term "public disclosure" does not turn on the

fact that Pfizer requested or assumed that its disclosures to the

investigating agencies would be held confidential. The United

States has taken the litigation position in this action that

"public disclosure" does not include the disclosure from Pfizer to

the government that occurred here.6

Pfizer's reading is inconsistent with our understanding

of the language, structure, and history of the Act. The plain

language of the statute cuts against Pfizer's interpretation of the

public disclosure bar for several reasons. This court has already

held that "the logical reading is that the [public disclosure]

subsection serves to prohibit courts from hearing qui tam actions

based on information made available to the public during the course

of a government hearing, investigation or audit or from the news

media." United States ex rel. LeBlanc v. Raytheon Co., 913 F.2d

17, 20 (1st Cir. 1990). What Pfizer did was to make confidential

disclosures to the government, which triggered an investigation.

But the statute does not bar jurisdiction over qui tam actions

based on disclosures of allegations or transactions to the

government; it does so only for actions based on qualifying

6
The United States also argues that the district court
went too far in defining "public disclosure" as requiring that
disclosure be to "all members of the community or, in other words,
the general public." Rost, 446 F. Supp. 2d at 17. We agree.

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disclosures made to the public. If providing information to the

government were enough to trigger the bar, the phrase "public

disclosure" would be superfluous.

Pfizer's reading also equates the government with the

public; this is inconsistent with the rest of the statute.

Government may be of the people, by the people, and for the people,

but that does not mean the government and the public are the same.

As the United States, in opposing Pfizer's reading, notes, the

ordinary understanding of the term "public" means "something apart

from the government itself." Br. for United States as Amicus

Curiae Supp. Appellant 12; see also Black's Law Dictionary 1264

(8th ed. 2004) (defining "public" as "1. Relating or belonging to

an entire community, state, or nation. . . . 2. Open or available

for all to use, share, or enjoy."). The statute itself uses the

term "Government" numerous times and does not once equate the

government with the public. See, e.g., 31 U.S.C. § 3730(e)(4)(B)

("'[O]riginal source' means an individual who . . . has voluntarily

provided the information to the Government . . . ." (emphasis

added)). See generally id. § 3730 (delineating rights and

responsibilities of "the Government" under the FCA). If Congress

had wished to equate self-disclosure to the government with

disclosure to the public, it easily could have done so.

To the extent there is any material ambiguity in the term

"public disclosure" on these facts, we find that Pfizer's reading

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is contrary to the structure of the statute as a whole, the

legislative history, and the policy objectives Congress articulated

at the time it enacted the language. Cf. Prawer, 24 F.3d at 327

(interpreting ambiguous provision of the FCA with reference to

legislative history and congressional intent). The legislative

history of the statute, particularly the 1986 amendments, see False

Claims Amendments Act of 1986, Pub. L. No. 99-562, 100 Stat. 3153,

shows that Pfizer's reading is contrary to the legislative intent

in several respects.

The 1986 amendments sought to achieve the two goals of

discouraging "parasitic" or "free-loading" qui tam suits while also

encouraging productive private enforcement suits. Springfield

Terminal, 14 F.3d at 651. Pfizer's reading furthers neither

purpose.

With the 1986 amendments, Congress deliberately removed

a previous provision that barred jurisdiction whenever the

government had knowledge of the allegations or transactions in the

relator's complaint. The pre-1986 version of 31 U.S.C. § 3730(d)

provided that courts had no jurisdiction over qui tam actions

"based on evidence or information the Government had when the

action was brought." See LeBlanc, 913 F.2d at 19 n.1. In

practice, the "government knowledge" bar proved too restrictive of

qui tam actions, resulting in under-enforcement of the FCA. See

Prawer, 24 F.3d at 325-26. Thus, in 1986, Congress shifted the

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examination away from the information in the government's

possession and instead looked to whether there was public

disclosure of information given to the government. "Congress thus

changed the focus of the jurisdictional bar from evidence of fraud

inside the government's overcrowded file cabinets to fraud already

exposed in the public domain." United States ex rel. Findley v.

FPC-Boron Employees' Club, 105 F.3d 675, 684 (D.C. Cir. 1997).

The effect of Pfizer's argument would be to reinstate

exactly what Congress eliminated -- the "government knowledge" bar.

It is an insufficient response to argue, as Pfizer does, that the

government knowledge bar created by its reading is a very limited

one and applies only where the government official receiving the

disclosure is the appropriate investigatory official. Only one

court has adopted such a reading. See United States ex rel.

Mathews v. Bank of Farmington, 166 F.3d 853, 861 (7th Cir. 1999).

We find no support in either the language or the history of the

statute for such a reading. Indeed, Pfizer's argument runs

directly contrary to our reasoning in Prawer, where we held that

"Congress has explicitly deemed a 'notice' regime insufficient to

protect the government against false claims (indeed it was

precisely such a regime that Congress sought to abandon in enacting

the 1986 amendments) . . . ." 24 F.3d at 329.

The 1986 amendments "broadened the universe of potential

[qui tam] plaintiffs, with only four exclusions" enumerated in

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§ 3730(e). LeBlanc, 913 F.2d at 19. Congress amended the statute

to "encourage more private enforcement suits." Id. (quoting S.

Rep. No. 93-345, at 23-24 (1986), reprinted in 1986 U.S.C.C.A.N.

5266, 5288-89) (internal quotation marks omitted). Yet Pfizer's

reading would create a new exclusion not articulated in the text.

That is inconsistent with the second goal of encouraging productive

private enforcement.

Pfizer's interpretation is also contrary to another

legislative purpose reflected in the 1986 amendments: it was the

Congressional intent, through the requirement of public disclosure,

to help keep the government honest in its investigations and

settlements with industry. Once allegations are made public, the

government can be forced to act by public pressure. See Findley,

105 F.3d at 684 n.4.

Not only would Pfizer's argument recreate problems

Congress sought to eliminate in 1986, but it fails to further

Congress's purpose of discouraging "parasitic" qui tam actions.

Prawer, 24 F.3d at 327. If information that could form the basis

of a qui tam action is kept confidential and confined to a limited

circle of government officials, there is no real danger that a

private citizen who does not have "direct and independent

knowledge" of that information, see 31 U.S.C. § 3730(e)(4)(B), will

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bring an opportunistic qui tam suit based upon the information in

the government's possession.7

Our conclusion is also consistent with the majority view

among the circuits. The Tenth Circuit has held the public

disclosure requirement "clearly contemplates that the information

be in the public domain in some capacity and the Government is not

the equivalent of the public domain." Kennard v. Comstock Res.,

Inc., 363 F.3d 1039, 1043 (10th Cir. 2004); accord United States ex

rel. Schumer v. Hughes Aircraft Co., 63 F.3d 1512, 1518 (9th Cir.

1995) ("[I]nformation that was 'disclosed in private' [between

government and defendant company] has not been publicly

disclosed."); United States ex rel. Williams v. NEC Corp., 931

F.2d 1493, 1496 n.7 (11th Cir. 1991) ("Even if a government

investigation was pending at the time [the relator] filed his qui

tam complaint, such fact would not jurisdictionally bar [the FCA

claim]."); see also Springfield Terminal, 14 F.3d at 653 (requiring

information to be "in the public eye" for bar to apply).

Only one circuit has held that mere disclosure to the

government is a public disclosure, though cabining its holding to

disclosures made to appropriate investigative officials. See

Mathews, 166 F.3d at 861. We simply disagree with Mathews for the

7
Except as noted in footnote 6, we do not reach the issue
of how many members of the public must receive or have access to
the disclosure. Cf. Kennard v. Comstock Res., Inc., 363 F.3d 1039,
1043 (10th Cir. 2004) ("There is no requirement that a certain
number of people read or receive the information.").

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reasons already stated and as lucidly set forth in the district

court's opinion. See Rost, 446 F. Supp. 2d at 16-18.

Two amici, industry groups for the pharmaceutical and

hospital industries, argue that unless Pfizer's participation in

HHS's self-disclosure program and cooperation with the government

are fully protected from qui tam suits by adopting Pfizer's reading

of "public disclosure," the FCA's objective -- to reduce fraud on

the government -- will be undercut. The argument is misplaced and

should be addressed to Congress. HHS's administrative efforts at

encouraging corporate disclosure and cooperation are a more recent

development, see Publication of the OIG's Provider Self-Disclosure

Protocol, 63 Fed. Reg. 58399 (Oct. 30, 1998), and were not the

object of Congress's concerns in adopting the 1986 amendments.

B. Rule 9(b) Requirement

The district court ultimately held that Rost failed to

plead his fraud claims with sufficient specificity under Federal

Rule of Civil Procedure 9(b). We affirm.

Rule 9(b) requires that "[i]n all averments of fraud or

mistake, the circumstances constituting fraud or mistake shall be

stated with particularity." The particularity requirement means

that a complaint must specify "the time, place, and content of an

alleged false representation." Doyle v. Hasbro, Inc., 103 F.3d

186, 194 (1st Cir. 1996) (quoting McGinty v. Beranger Volkswagen,

Inc., 633 F.2d 226, 228 (1st Cir. 1980), superseded by statute on

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other grounds, Private Securities Litigation Reform Act of 1995,

Pub. L. No. 104-67, 109 Stat. 737). Conclusory allegations and

references to "plans and schemes" are not sufficient. Id. (quoting

Hayduk v. Lanna, 775 F.2d 441, 444 (1st Cir. 1985)). Rule 9(b)

applies to FCA claims. Karvelas, 360 F.3d at 228. In the FCA

context, this court has previously held that the rule requires

relators to "provide details that identify particular false claims

for payment that were submitted to the government." Id. at 232.

Rost argues that the district court overall applied too

stringent a standard. He also argues that he asserted two

different claims -- one under 31 U.S.C. § 3729(a)(1) for false

claims, the other under § 3729(a)(2) for false statements -- and

that the court erred in not analyzing the particularity

requirements separately for the two subsections.8

In defense of the district court's ruling, Pfizer first

argues this result is required by this court's decision in

Karvelas. Pfizer, we think, over-reads Karvelas, which has more

flexibility than Pfizer posits.

Karvelas, like this case, involved allegations of

submission of false claims for medical insurance payments to

8
Rost also argues that the court should have separately
analyzed his state law claims. The heightened pleading standard of
Rule 9(b) generally applies to state law fraud claims brought in
federal court. See Universal Commc'n Sys., Inc. v. Lycos, Inc.,
478 F.3d 413, 427 (1st Cir. 2007); see also 5A Wright & Miller,
Federal Practice and Procedure § 1297 (3d ed. 2004). The district
court did not err in applying the rule to Rost's entire action.

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federal health insurance programs such as Medicare and Medicaid.

The FCA, Karvelas held, attaches liability not to the underlying

fraudulent activity or to the government's wrongful payment, but to

the claim for payment. 360 F.3d at 225. Karvelas held that "a qui

tam relator may not present general allegations in lieu of the

details of actual false claims in the hope that such details will

emerge through subsequent discovery." Id. at 231. That principle

is not at stake here.

In Karvelas, the relator worked at a hospital that

allegedly submitted false claims to government health care programs

for services that were "provided improperly or not at all." 360

F.3d at 223. In the context of a defendant that submits claims

directly to government programs, Karvelas held that relators must

provide details that identify particular false claims for payment

that were actually submitted to the government. Id. at 232.

Karvelas's claim failed because it provided no specifics, such as

the dates of claims, identification numbers, or amounts charged to

the government, that identified particular false claims. Id. at

233-35.

Nonetheless, Karvelas recognized that Rule 9(b) may be

satisfied where, although some questions remain unanswered, the

complaint as a whole is sufficiently particular to pass muster

under the FCA. Id. at 233 n.17. Giving Rost the benefit of such

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flexibility, we analyze the case with this test in mind; the claim

still fails.

The fraud alleged here is in a different category than in

Karvelas. Those differences both help and hurt Rost. The

submission of the alleged false claims here was not by defendants

Pharmacia and Pfizer; false claims were allegedly submitted by

doctors who were allegedly induced and seduced by defendants into

prescribing Genetropin for off-label uses to their patients,

including federally insured patients. According to Rost's

complaint, more than half of all adult and a quarter of all

pediatric sales of Genotropin are for off-label uses. Given that,

it is a possible but not a necessary or even strong inference that

doctors, persuaded by Pharmacia's financial and other incentives to

prescribe Genotropin for off-label uses, have written such

prescriptions even if the patient was federally insured. And it is

not irrational to infer that, given the large percentage of

children and the elderly who are insured under federal health

programs, some false claims for Genotropin reimbursement were

submitted to the government.

We also note, though, that while the April 2007 criminal

information against Pfizer covering off-label uses of Genotropin

acknowledges that "Pharmacia earned millions of dollars for [off-

label uses]," it also states that "[i]n most, if not all,

instances, patients taking Genotropin [for off-label uses] paid .

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. . out-of-pocket without reimbursement from any public or private

third-party payors." This tends to undercut the strength of the

inference that fraud on the government in fact occurred.

Rost's complaint amply describes illegal practices in

which Pfizer allegedly engaged. But those practices, while

illegal, are not a sufficient basis for an FCA action because they

do not involve claims for government reimbursement.9 Id. at 234.

As presently pled, the complaint does not sufficiently establish

that false claims were submitted for government payment in a way

that satisfies the particularity requirement. Cf. id. at 233.

Rost argues that the primary purpose of pleading fraud

with particularity is to give notice to Pfizer of the false claims,

and that his complaint accomplishes this. The argument fails on

two grounds: First, the complaint does not give notice to Pfizer

of false claims submitted by others for federal reimbursement of

off-label uses, only of illegal practices in promotion of the drug.

9
Rule 9(b)'s heightened pleading standards apply to the
allegations that false claims were submitted to the government.
There is a separate element to the cause of action. Under the FCA,
Rost must show that Pfizer "cause[d] to be presented" a false claim
for payment. 31 U.S.C. § 3729(a)(1). That there were allegedly
intervening persons who actually submitted the claims does not
itself necessarily break the causal connection when the claims are
foreseeable. See United States ex rel. Cantekin v. Univ. of
Pittsburgh, 192 F.3d 402, 416-17 (3d Cir. 1999).
In other cases, relators have pled a connecting causal
link, which strengthens the inference that false claims were
submitted. Cf. United States ex rel. Franklin v. Parke-Davis, 147
F. Supp. 2d 39, 46 (D. Mass. 2001) (describing pharmaceutical
company's efforts "to coach doctors on how to conceal the off-label
nature of the prescription"). No such allegations are made here.

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Second, notice is not the only reason for the requirement of Rule

9(b). It is a serious matter to accuse a person or company of

committing fraud, and the mere accusation often causes harm. See

Doyle, 103 F.3d at 194; 5A Wright & Miller, Federal Practice and

Procedure § 1296 (3d ed. 2004). Further, the rule discourages

plaintiffs from filing allegations of fraud merely in the hopes of

conducting embarrassing discovery and forcing settlement. See New

Eng. Data Servs., Inc. v. Becher, 829 F.2d 286, 288 (1st Cir.

1987).

At most, Rost raises facts that suggest fraud was

possible; but the complaint contained no factual or statistical

evidence to strengthen the inference of fraud beyond possibility.

It may well be that doctors who prescribed Genotropin for off-label

uses as a result of Pharmacia's illegal marketing of the drug

withstood the temptation and did not seek federal reimbursement,

and neither did their patients. It may be that physicians

prescribed Genotropin for off-label uses only where the patients

paid for it themselves or when the patients' private insurers paid

for it. Rost did not plead enough to satisfy the concerns behind

Rule 9(b).

As for Rost's § 3729(a)(2) argument, Pfizer asserts that

Rost waived the argument by not presenting it below. See Tobin v.

Liberty Mut. Ins. Co., 433 F.3d 100, 105 n.3 (1st Cir. 2005)

("Theories not raised in the district court cannot be raised for

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the first time on appeal.") We do not address the waiver issue.

Our analysis -- which recognizes the role played by third parties

other than Pfizer in submitting claims and making statements to the

government -- undermines Rost's § 3729(a)(2) argument as well. In

addition, the plain language of § 3729(a)(2) requires proof of a

"false record or statement" for liability to attach under the

section. Rost's complaint alleges that Pharmacia made statements

in violation of federal law, but does not allege that those

statements were false. Cf. Franklin, 147 F. Supp. 2d at 48-49

(describing allegations that defendant trained salespeople to

"actively deceive physicians" about off-label uses of drugs). We

affirm the Rule 9(b) ruling.

That does not end the matter. In dismissing the action,

the district court never ruled on Rost's request that he be allowed

to amend his complaint to allege fraud with particularity. If it

were obvious that leave to amend should be denied, we would affirm.

That level of certainty does not exist. This distinguishes our

decision here from the disposition of Epstein v. C.R. Bard, Inc.,

460 F.3d 183 (1st Cir. 2006).

Federal Rule of Civil Procedure 15(a) provides that leave

to amend a pleading "shall be freely given when justice so

requires," and reflects a liberal amendment policy. O'Connell v.

Hyatt Hotels of P.R., 357 F.3d 152, 154 (1st Cir. 2004). Grounds

for denial generally involve undue delay, bad faith, dilatory

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motive of the requesting party, repeated failure to cure

deficiencies, and futility of amendment. Foman v. Davis, 371 U.S.

178, 182 (1962). At this stage we cannot say amendment would be

futile, and the district court should make the initial

determination.

Pfizer says Rost has waived his opportunity to amend by

making only a "passing reference" to a request for leave to amend

in his briefs to the district court. That is not our law. This

court has treated many similar requests to be sufficient

invocations for leave to amend under Rule 15(a). See, e.g.,

Epstein, 460 F.3d at 190-91 (request for leave to amend made in

opposition to motion to dismiss treated as motion to amend pursuant

to Rule 15(a)); Rodi v. S. New Eng. Sch. of Law, 389 F.3d 5, 20

(1st Cir. 2004) (request to amend contained in motion for

reconsideration treated as Rule 15(a) motion); Invest Almaz v.

Temple-Inland Forest Prods. Corp., 243 F.3d 57, 71 (1st Cir. 2001)

(request at oral argument on motion to dismiss for leave to amend

complaint "if necessary" constituted motion to amend pursuant to

Rule 15(a)). We express no views on the outcome of this issue

before the district court.

The dismissal of the action is vacated. The case is

remanded to the district court for further proceedings consistent

with this opinion. No costs are awarded.

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