When Biosafety Meets the Federal False Claims Act

Abstract

A recent lawsuit potentially paves the way for whistleblowers to apply the federal False Claims Act and its vast civil remedies against research institutions for allegedly failing to adhere to federal standards for the performance of biological research in a research setting. Despite the absence of any injury alleged, if the plaintiffs prevail in a lawsuit filed on behalf of the United States, they may recover a portion of the total recovery due to the government under provisions that incentivize whistleblowers to bring such claims to combat fraud, waste, and abuse against government programs. Typically applied against health care entities for Medicare fraud and against defense contractors with procurement contracts, the application of the False Claims Act and its whistleblower provisions have become more prevalent in federally funded research over the past 2 decades. Here, 2 former biosafety officers of a major research institution claim that their former employer and others violated the False Claims Act when routinely failing to comply with the National Institutes of Health guidelines and continued to apply for federal grants with knowledge that it was not compliant. In a field that has historically relied on internal oversight, this case marks yet another potential legal cause of action that may arise.

On December 30, 2015, a reporter from the Courier-Journal based in Louisville, Kentucky, broke news of a federal lawsuit pending against the University of Louisville brought by 2 former biosafety officers terminated by the university. ¹ The lawsuit was filed under seal in March 2015 in the US District Court, Western District of Kentucky, and names the University of Louisville, the University of Louisville Foundation, 7 principal investigators, and the director of environmental health and safety as defendants. ² On behalf of the United States, the plaintiffs alleged that the University of Louisville violated the federal False Claims Act (FCA) by routinely failing to comply with terms and conditions explicitly set forth by the government and agreed on by the university in accepting National Institutes of Health (NIH), Department of Defense, and other federal agency funding for research. While the FCA is routinely employed by the government to combat fraud involving federal programs, rarely has it been invoked in the realm of biosafety.

The Department of Justice recovers billions of dollars annually from FCA settlements arising out of allegations of fraud, waste, and abuse in health care reimbursed by Medicare and defense industry contractors. ³ Over the past 20 years, trends in FCA enforcement have shifted to increasingly involve grantees of federal research dollars. ⁴ Cases brought against research institutions have historically involved allegations of whether charges made to federal awards were allowable and allocable in accordance with the cost principles set forth in the Code of Federal Regulations and the former Office of Management and Budget circulars.

False Claims Act

The plaintiffs in the Louisville lawsuit utilized the qui tam whistleblower provisions under the FCA to bring forth their allegations (the “complaint”). “Qui tam” is truncated from the phrase “qui tam pro domino rege quam pro si ipso in hac parte sequitur.” Translated from Latin, this means “he who sues on behalf of the king as well as for himself.” ⁵ In this type of civil lawsuit, the plaintiff is technically the United States, while the relator is a party other than the plaintiff who brings forth the action on behalf of the government. These provisions incentivize individuals to come forward as relators on behalf of the United States, as they afford complainants the opportunity to receive as much as 30% of the total dollars recovered by the government if the Department of Justice decides to intervene in the case. Furthermore, these provisions position the whistleblower to potentially recover attorneys’ fees, and they offer protection against retaliatory conduct by the defendants. Research institutions should not only take notice of this recent FCA action, rooted in institutional failure to comply with biosafety and occupational health requirements, but recognize the key insights that the complaint provides regarding areas of vulnerability that may be leveraged for future FCA claims.

The concept of whistleblower-type lawsuits can be traced back to English law in the 13th century. ⁶ Upon discovering fraud by government contractors during the Civil War—including gun powder barrels filled with sawdust, infantry boots with soles made of cardboard, and the same mules being sold repeatedly to army quartermasters—Congress moved quickly to include qui tam provisions to the FCA, enabling anyone to bring an action on behalf of the United States against a government contractor that has submitted false claims for payment to the government. ⁶ While effective during times of war, the FCA was abused during World War II, when lawyers used their knowledge of criminal indictments as a catalyst for a civil FCA action based on the same conduct. Known as “parasitic lawsuits,” these frivolous claims influenced Congress to nearly abolish the qui tam provisions in 1943. ⁶ The 1943 amendments significantly reduced the relator’s potential monetary recovery from 50% to 10%, precluded all such lawsuits if the government already possessed knowledge of the conduct, provided the government up to 60 days to determine whether it would intervene and prosecute the case, and required the relator to furnish all available evidence at the time of filing. ⁶

The FCA did not gain traction again until the 1980s, when President Reagan adopted an ambitious national defense spending plan, resulting in reports of fraud, waste, and abuse. Claims at that time included inflated invoices to the Department of Defense for everyday items such as hammers, toilet seats, and ashtrays. ⁶ Congress subsequently moved to revive the qui tam provisions within the FCA, leading to the passage of the 1986 FCA amendments. ⁶ With its passage, $5000 to $10 000 penalties could now be incurred for each false claim; the total sum of these claims tripled; and the relator could receive up to 30% of the total recovery. ⁶ These enticements were effective, resulting in a significant increase in qui tam whistleblower claims: between 1986 and 2010, >8000 qui tam cases have been filed and $30 billion recovered in settlements and judgments. ⁶

The 1986 amendments disproportionately affected the health care industry. Of the top 100 FCA cases on record, 65 involved hospital systems and pharmaceutical companies allegedly defrauding the Medicare and Medicaid programs. ⁷ Research institutions’ shortcomings in financial accounting and resultant FCA cases emerged in the 1990s, gradually becoming more prevalent during the last 2 decades. ⁴ Settlements involving research grant awardees shared common findings, including inflated indirect cost rate calculations, poorly executed and regulated clinical trial billing, suspicious cost transfers, inadequate documentation, and effort-reporting issues, among others. ⁴

Arguably, the successful FCA lawsuit brought against Cornell University Medical College in 2012 laid the groundwork for the present-day claim against Louisville. ⁸ The lawsuit was brought by a former research fellow, Daniel Feldman, who was selected by Cornell to participate in a T32 training grant awarded to the institution by NIH. Feldman prematurely left the program, alleging that its implementation was substantively inconsistent with the way in which Cornell represented it in the grant application. Despite the government declining to intervene, Feldman, the qui tam relator, was ultimately successful at trial, and the court awarded treble damages and attorneys’ fees. The Feldman decision serves as an example of how material false statements in grant applications and subsequent renewal applications can successfully become the basis of a FCA action leading to treble damages. Similar to the Feldman case, the qui tam relators in the Louisville lawsuit argue that the defendants submitted material false statements to federal sponsors when they agreed in grant applications to comply with the “NIH Guidelines for Research Involving Recombinant Synthetic Nucleic Acid Molecules” (the “NIH guidelines”) ⁹ and to “provide safe and healthful working conditions for their employees and foster work environments conducive to high-quality research.” ²

The Allegations

A complaint is typically the first formal document filed with a court claiming legal rights against another party. In qui tam relator cases under the FCA, the complaint is filed as a civil matter in a federal court with jurisdiction. These cases are filed “under seal,” giving the government the opportunity to review the matter internally to determine whether it will intervene. In many cases, the government elects not to intervene but still permits the plaintiffs to pursue the claims on its behalf. Beyond the FCA claims, the complaint may also outline claims for relief under employment-related causes, such as discrimination, harassment, and/or retaliation.

The complaint in the Louisville matter enumerates individual and institutional failures to comply with the “NIH Grants Policy Statement” (NIHGPS) and highlights specific examples in which university personnel were working in unsafe conditions as a result. While the complaint comprises individual allegations that the university has denied, taken collectively, the concerns depict an academic research environment that lacks a culture of compliance and employs a laissez-faire attitude toward upholding assurances made to federal sponsors regarding biosafety.

The complaint lays the groundwork for the plaintiffs’ claims by first establishing that the university’s eligibility to receive federal research dollars through the government’s grant mechanism is dependent on its agreement to comply with terms and conditions set forth in the NIHGPS and the NIH guidelines:

28. Each year researchers affiliated with and/or employed by Louisville Defendants apply for and receive millions of dollars in grants from the Government, specifically and from the United States, generally.

29. In order to receive its extensive and ongoing grant funding, Defendants submitted numerous grant applications to the Government.…

30. Prior to the receipt of any funds from the Government and/or beginning any research, Defendants submitted, or were supposed to submit, completed applications to the UL Institutional Biosafety Committee to ensure that research would be conducted in accordance with the Government’s stated terms and conditions. In their capacity as Biological Safety Specialist and Biological Safety Officer, Plaintiffs-relators served in a support role with respect to the [Institutional Biosafety Committee] and assisted with application review.

31. As part of the Government approval and award process, the Government requires that grantees and their respective grantee institutions accept specific terms and conditions prior to the receipt of grant funds. Those terms and conditions include compliance with applicable federal and state laws and regulations as well as compliance with the NIH Grant Policy Statement and NIH Guidelines. ²

Not just implied but stated in paragraph 30 is the government’s expectation that a university accepting federal funds for research subject to the NIH guidelines will ensure that its Institutional Biosafety Committee (IBC) reviews the proposed work and assesses its compliance with regulatory requirements. Analogous to the Feldman case, where the terms and conditions of the NIH T32 program became the basis for the FCA claim, the qui tam relators establish the nexus between the university’s noncompliance with NIH guidelines (among others described herein) and the allegation that the university submitted false claims to the federal sponsor.

The complaint goes on to identify specific federal grants awarded to the university and how those monies were directed to the principal investigators named as defendants, who subsequently failed to adhere to occupational and work place safety standards. One such example is described in detail:

65. On or about August 2011, the researchers for the Cardiology group, including Defendant [] were performing research under grant 2P20GM103492-06 as well as other federal grants in the cardiology lab.

66. On or about August, 2011, Defendants became aware of…and continue to allow…researchers…to collect small pipette tips in small plastic beakers and then dump the beakers in a large biohazard bag lined boxes for disposal. These items may cause leaks and the Cardiology group uses human derived material.

67. …on or about March 2013, Defendant []’s viral vector lab failed to have appropriately set up biosafety cabinets, improperly placed standing vertical pipette decontamination containers outside of biosafety cabinets, improperly disposed seropipettes in biohazard bag-lined burn boxes that could be punctured, improperly taped biohazard bags on the front of the biosafety cabinet, failed to place kill pans.…inside the biosafety cabinet, improperly used 70% ethanol as a disinfectant, and/or improperly permitted blockage of the grills that recirculate air in the cabinets.

68. In addition to the failure to comply with NIH Guidelines, this method of disposal does not comport with [Occupational Safety and Health Administration] Bloodborne Pathogen Standard 29 CFR 1910.1030, UL’s model Exposure Control Plan, NIH’s model Exposure Control Plan and/or the NIH’s Waste Disposal Procedures which the Cardiology group was required to complete due to the use of human derived material. Failure to comply with the model Exposure Control Plan was reported to UL administrative and management personnel including, but not limited to, the assistant director of Environmental Health and Safety. ² (name omitted)

A consistent theme throughout the complaint is that certain responsible parties within the university with the authority to take action were fully aware of the purported infractions but did not act.

As further evidence of the university’s FCA liability, the complaint describes how certain investigators allegedly failed to register IBC protocols for covered work, continued to engage in research following the expiration of certain protocols, and occasionally failed to appropriately amend their protocols for IBC approval when adding new genes, plasmids, or viral vectors to their projects. According to the complaint, none of these infractions was disclosed to the NIH in a timely manner, despite clear violations of NIH guidelines. One specific example includes:

75. Beginning on or about August 2011, UL responsible officials…did not require IBC committee review of modifications to IBC protocols that added genes, plasmids and/or viral vectors and UL researchers were not properly submitting modifications to IBC protocols to the IBC for approval

76. During this time period, Defendant [] began adding oncogenes with viral vectors to protocols for his research.…

77. These protocols generally fall under sections III-A to III-E of NIH Guidelines and must be fully reviewed by the IBC according to NIH guidelines. In addition, Defendant [] failed to obtain a proper risk assessment as required by NIH Guidelines II-A-3.…

78. The failure to obtain prior approval to the conduction of research involving a modification of recombinant material and/or the addition of viral vectors generally constitutes a violation of NIH guidelines and specifically constitutes a violation of Section III-D’s requirements regarding the submission of registration and/or modification documents to the IBC for IBC approval prior the conduct of any research. Failure to receive approval for the specific modification at issue is also a violation of NIH Guideline Section IV-B7-a-(1).

79. In addition to the failure to obtain prior approval to the conduction of research involving a modification of recombinant material and/or the addition of viral vectors Defendant [] routinely failed to follow proper lab safety protocols. On numerous inspections throughout the conduct of the above-referenced research projects, Defendant [] and researchers under his supervision overfilled sharps containers, failed to wear lab coats when conducting experiments, including when using the biosafety cabinet, failed to place kill pans in biosafety cabinets, improperly reused gloves, and/or failed to conduct viral vector work exclusively in the biosafety cabinet. ² (name omitted)

Animal Research

Review of animal research involving biohazardous materials by the IBC and the Institutional Animal Care and Use Committee (IACUC) is required by regulation, but the method of implementation and coordination is within the discretion of the institution to decide. The complaint addresses an alleged practice employed by the university for a span of about 5 years to “expedite animal research approvals” that fails to meet NIH guidelines for the requisite standard of review by the IACUC, violates Occupational Safety and Health Administration (OSHA) guidelines, and circumvents the institution’s own chemical safety procedures. Specifically, the complaint describes an arrangement among individuals, with express knowledge by the 2 university committees, whereby only the cover sheet generally describing the IACUC proposal would be reviewed, resulting in a failure to identify chemicals being used in the animal research. In turn, animal research was purportedly conducted in violation of the OSHA bloodborne pathogen standard, among other OSHA infractions, and certain animal research protocols were not reviewed by the IBC for years, including those belonging to some of the investigators named as defendants. ²

Other specific examples referenced in the complaint that relate to noncompliance that crosses the 2 committees’ jurisdiction include the following allegations:

A researcher transplanted transgenic pig tissue into wild-type pigs without IBC approval.

Animal work approved to be performed at biosafety level 2 (BSL-2; under NIH guideline III-D-4-b) was conducted in a space without negative air pressure, which is required under BSL-2 conditions to protect personnel.

Due to a backlog of IACUC protocols requiring IBC review, the IACUC approved certain protocols without proper safety protocols. ²

While regulatory oversight committees within research institutions appropriately seek ways to coordinate and streamline review, if true, the practices employed by the university effectively prioritized expediency over health and safety and directly violated NIH guidelines.

Select Agents

According to the complaint, the alleged failure of the IACUC and IBC to effectively coordinate requisite review resulted in IACUC approval of protocols involving 2 select agents to be used at a non–select agent registered site lacking appropriate containment. The university houses 2 BSL-3 laboratories, ¹ whereas work with risk group 4 select agents necessitates a BSL-4 facility. Moreover, the act of seeking authorization to perform select agent work at sites lacking proper containment violates both the Centers for Disease Control and Prevention’s “Select Agent Regulations” ¹⁰ and the NIH guidelines (sections I-D, III-D-4-b). Potential releases of select agents and “near-misses” are peppered throughout the complaint due to alleged repeated failures to follow established safety protocols for autoclaving and spills, culminating in a whistleblower report by one of the qui tam relators to the Federal Bureau of Investigation, the Centers for Disease Control and Prevention, and state representatives. ² According to the complaint, the qui tam relators were terminated by the university approximately 4 months after these disclosures were made.

Internal Controls

The qui tam relators argue that the university failed to implement adequate systems to monitor compliance, thereby violating a general condition under the NIHGPS stating that grantees are expected to “have systems, policies and procedures in place by which they manage funds and activities.” They further claim that the university had knowledge of the inadequacies in their policies and practices directly related to the NIH guidelines as early as 2010, following an NIH site inspection. Despite postinspection recommendations to adopt internal controls to monitor and implement additional systems, the complaint contends that the university “continued to under-staff, under-fund, and under-support the IBC and related compliance units,” leading to “near-misses and other potential violations caught just prior to the conduct of research.” This failure to adopt NIH recommendations to implement effective internal controls starting in 2010, despite awareness of systemic weaknesses in checks and balances, is cited in the complaint as corroborating the claim that from 2010 on, the university made “false certifications” in grant applications and subsequent acceptance of federal funding.

While the qui tam relators claim to have raised concerns of noncompliance with NIH guidelines “on numerous occasions” to their supervisors and other institutional authorities, their frustration appeared to peak at a meeting on July 28, 2014, during which the relators advocated for reporting the noncompliance incidents as required by regulation. Following purported denial of the qui tam relators’ attempt to attend requisite credentialing training shortly thereafter and the qui tam relators’ reports to government agencies and officials of the noncompliance incidents and health and safety concerns, they were dismissed from the university in December 2014 on the basis of structural reorganization. ¹ At the time, the community representative member of the IBC who had served for over 13 years reportedly resigned in protest, and external consultants were retained by the university to review its biosafety program. ¹

Lessons to Be Learned

Research institutions know all too well that noncompliance in the area of biosafety can occur even with the best of intentions and documented policies. The complaint against Louisville underscores federal sponsors’ expectations that grantees will implement recommendations issued as a result of site inspections, develop clear reporting channels and expectations for prompt reporting of noncompliance incidents, allocate adequate resources to regulatory compliance programs, and take seriously the representations that the institution makes when it submits a grant proposal and subsequently accepts the terms and conditions associated with a sponsored award. An organization makes itself vulnerable to a qui tam whistleblower complaint when it repeatedly suppresses reportable violations and creates an institutional culture that eschews integrity and jeopardizes health and safety to optimize efficiency. Effective internal controls mitigate exposure of an FCA action, but only when coupled with consistent enforcement of internal sanctions for noncompliance.

Public scrutiny of our biological research laboratories has never been higher and transparency more in demand. A 2015 USA Today investigation reveals that safety violations, laboratory mistakes, and near-miss incidents are commonplace in academic laboratories and that oversight is “fragmented, often secretive and largely self-policing.” ¹¹ In 2012, the Regents of the University of California entered into a prosecution enforcement agreement with the district attorney’s office following criminal charges stemming from a fatal chemistry laboratory accident that occurred in 2008. ¹² The University of Louisville case serves as yet another example of how alleged noncompliance with biosafety requirements can lead to legal action. Those in the biosafety community would be remiss if we did not follow this case to its closure; depending on the outcome, the closure of this FCA claim may open the door for other civil FCA cases in the arena of biosafety or in other overlapping regulatory areas, such as animal research. This is not a trend to which we should turn a blind eye.