Health Law Daily Wrap Up, FALSE CLAIMS ACT—3rd Cir.: Merck’s representations to CDC about mumps vaccine were not material even if false, (Aug 15, 2024)

By Sara Cracau, J.D.

Relators qui tam action against Merck pertaining to allegedly false representations about mumps vaccine were not material to CDC’s purchasing decision and, therefore, there was no violation of the False Claims Act.

The United States Court of Appeals for the 3rd Circuit has affirmed the decision of the district court granting summary judgment in favor of Merck in a qui tam action brought by former employees alleging that Merck made false representations to the CDC regarding its mumps vaccine finding that, even if the representations were false, they were not material to the CDC’s purchasing decision. Therefore, the court concluded that there was no violation of the False Claims Act as no reasonable jury could conclude that Merck’s alleged misrepresentations were material to the CDC’s purchasing decision. The government had actual knowledge of the facts regarding the shelf-life and potency of the vaccine; it was satisfied as to the effectiveness of the vaccine based on real world studies; it entered into contracts with Merck that required the vaccine to have a twelve-month shelf life only; and it continued to purchase the vaccine even when another option was available (U.S. ex rel. Krahling v. Merck & Co. Inc., No. 23-2553 (3d Cir. Aug. 6, 2024)).

Background. Two relators who had been employed as virologists in Merck laboratories brought a quitam action against Merck alleging that the company violated the False Claims Act because Merck purposefully engaged in testing of its M-MR®II and Proquad®Mumps Vaccinations (mumps vaccines) that concealed testing results that revealed diminished efficacy, instead making representations of inflamed efficacy. They claimed that Merck violated the False Claims Act because the company billed the CDC for the vaccine even though it had diminished efficacy and, as such, was mislabeled. CBER told Merck that, going forward, the labeled potency should reflect the end-expiry potency, i.e. the level of live virus in the vaccine at the end of the labeled shelf-life, and told Merck to increase the potency of its mumps vaccine. Subsequently, the FDA cited Merck for failing to report that certain vaccine lots that were manufactured prior to the increase in potency, failed to satisfy the potency requirement. Although the FDA issued a warning letter to Merck, it subsequently closed the warning letter without requiring withdrawal of the non-compliant lots. Internal Merck documents suggested that the company was concerned that it could not ensure that the potency would remain at the required level for more than twelve months even though its label continued to reflect a shelf-life of 24 months.

In the mid-1990s, the FDA began to review vaccine labels, including the MMR-II label, pursuant to the National Childhood Vaccine Injury Act (NCVIA). As a result of this review, the CBER determined that potency should be measured at end-expiry but, at the time Merck defined potency based on the time the vaccine was released.

The CDC purchases vaccines through the Vaccines for Children entitlement program under which vaccines are provided to children whose parents or guardians may not be able to afford them. The CDC considers vaccines only if they are licensed by the FDA , compliant with applicable current Good Manufacturing Practices and recommended by the CDC’s Advisory Committee on Immunization practices (ACIP). The ACIP’s purchasing recommendations are based on its review of a number of factors, including vaccine efficacy. Since the 1990s, the CDC and Merck have negotiated annual contracts to purchase the mumps vaccine and continue doing so today. According to these contracts, the mumps vaccine was required to have a twelve-month shelf life. In 2022, The FDA approved competitor GlaxoSmithKline’s plc’s (GSK) mumps vaccine and the ACIP thereafter recommended it to the CDC, concluding that the vaccines of both manufacturers were interchangeable.

In April 2010, Relators filed a complaint alleging the Merck misled the CDC by concealing, omitting, and misrepresenting material information regarding the mumps vaccine in violation of the False Claims Act (See Merck can’t inoculate relator claims and antitrust accusations over mumps vaccine, Sept. 8, 2014). Two years later, the United States declined to intervene and Realtors filed an amended complaint. After discovery, the parties cross-moved for summary judgment. The district court denied the Relators’ motion and granted summary judgment in favor of Merck. The Relators appealed.

False claims. The district court reasoned that Merck did not violate a condition of payment relating to effectiveness of the vaccine because the CDC conducted its own effectiveness studies, acknowledged that effectiveness in field studies was lower than what Merck originally reported in its clinical studies, and, nevertheless, continued to represent that two doses of the mumps vaccine were 88 percent effective. Furthermore, it concluded that the misrepresentation did not go to the essence of the bargain and effectiveness was central to the bargain, but the CDC continued to recommend the vaccine notwithstanding a decade-long litigation and evidence that the government had actual knowledge of the facts and, nevertheless, continued to recommend the vaccines.

The appeals court examined the issue of materiality based on the Supreme Court decision of Universal Health Services, Inc. v. U.S. and Massachusetts, ex rel. Escobar, 579 U.S. 176 (2016). It evaluated materiality based on a three-pronged test and concluded that no reasonable jury could find that the representations were material to the CDC ‘c purchasing decisions. Each condition of payment was met. There was no dispute that the FDA licensed the vaccine. The ACIP recommended the vaccine knowing that its own studies showed a lower effectiveness in the real worked than in the pre-licensure clinical trials. The contract required a twelve-month shelf life and there was no evidence that the shelf-life was ever below twelve months. There was also no evidence that the vaccine was not fit for its purpose. Furthermore, the record did not show that violations of cGMP regulations were material to the CDC’s purchasing decision. Merck’s misrepresentations as to potency were minor with respect to CDC’s purchasing decisions, and therefore, not material to such decisions. Finally, the government had actual knowledge of the facts.

The case is No. 23-2553.

Judge: Kenney, C.

Attorneys: Robert L. Begleiter (Constantine Cannon LLP) for Stephen A. Krahling and Joan A. Wlochowski. Sally W. Bryan (Venable LLP) for Merck & Co., Inc.

Companies: Merck & Co., Inc.

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