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How Whistleblowers Can Report Fraud Related to Clinical Trials

Posted  September 4, 2020

The COVID-19 pandemic has highlighted the importance of government-funded scientific and medical research, including clinical trials of vaccines, treatments, and more.  We are all potentially at risk if there is fraud and abuse in clinical trials and other research.

Individuals with knowledge of fraud and misconduct in federal grants and clinical trials may be able to bring a whistleblower action for that research fraud, and may be eligible for a financial reward.  Fraud in federally-funded medical research wastes taxpayer dollars and can give rise to a claim under the False Claims Act.  In addition, speculation on the outcome of clinical trials is a regular basis for market manipulation, insider trading, and securities fraud, which can be reported under the SEC Whistleblower Rewards Program.

Below, we explain how whistleblowers can make a difference by reporting fraud in clinical trials and other government-funded medical and scientific research.

Federal Funding of Medical Research and Clinical Trials

The federal government spends more than $40 billion a year on medical research. Currently, it is funding for more than 9,000 clinical trials. This year, medical research spending will be even higher, as the federal government has allocated an additional $10 billion to research into potential COVID-19 vaccines.

Before any of these vaccines can be marketed or sold in the United States, the manufacturers must obtain FDA approval. Pursuant to the Food, Drug, and Cosmetic Act and related legislation, the FDA cannot approve a drug, vaccine, device, or treatment unless it determines is safe and effective. As a result, manufacturers provide proof of the safety and effectiveness of their product along their application for FDA approval. Depending on the type of product, the manufacturer may seek approval through various application processes, including New Drug Applications (NDA, for drugs), Biologic License Applications (BLA, for vaccines), New Molecular Entity applications (NME, for new active ingredients), or Premarket Approval applications (PMA, for devices).

Typically, the FDA requires substantial evidence of safety and effectiveness from adequate and well-controlled clinical studies conducted by experts qualified through scientific training and experience to evaluate the product. There are exceptions to these procedures, including Emergency Use Authorizations (EUA), which are based on evidence that it is reasonable to believe that a drug may be effective against a particular threat.  In all cases, however, the FDA relies on the accuracy of the research data manufacturers submit in their applications to decide whether to approve the product or make it available.

With health and safety at risk, and billions of dollars at stake, it is critical to detect and prevent misconduct and fraud in medical research and clinical studies.  The Department of Justice has publicly stated that it will “vigorously pursue claims against companies and executives that knowingly create or relay false or manipulated data in connection with clinical trials.”

Fraud Related to Clinical Trials

Fraud can occur in different stages of the clinical trial process, and take many different forms.  Data could be fabricated, the trial could deviate from standard practices or fail to follow established protocols, or regulations could be knowingly ignored or evaded.  Clinical trail fraud can include:

  • Grant non-compliance: misrepresenting how the funds will be used or that recipients will abide by funding rules and requirements; failing to maintain adequate accounting and documentation of the use of funds; failing to disclose transactions involving related parties (conflicts of interest); misrepresenting costs or attempting to charge unallowable costs to the government; improperly shifting costs from one project to another; stealing grant funds.
  • Design Stage: failing to properly randomize trial subjects; inadequate blinding; measuring treatment effects at inappropriate times; intentionally using an inadequate benchmark.
  • Conduct Stage: unblinding the allocation of the trial subjects; selectively withdrawing trial subjects based on knowledge of their allocation; falsifying data; changing the study protocol after data collection has commenced.
  • Analysis Stage: manipulating analysis methods to achieve the desired result; using knowledge of the trial subject’s allocations to alter results; improperly excluding patients to influence the adverse events identified; selectively excluding outliers; using inappropriate statistical methods.
  • Reporting: selectively reporting data and failing to report unfavorable results; failing to report results or excessively delaying reporting; reporting conclusions that are not supported by evidence in the report; using figures and charts that mislead or distort the study results.

Clinical trial fraud undermines the legitimacy of the FDA-approved labeling for medical products. These labels contain representations about the product and the studies supporting its approvals. If these labels are materially false or misleading, the product may be deemed misbranded. In addition, if the labels overstate the strength, purity or quality of the product, the product may also be adulterated. Misbranded and adulterated products cannot be distributed in the United States.

The False Claims Act and Clinical Trials Fraud

Companies that falsify clinical trial data, make false statements to the FDA, omit relevant data in applications for FDA approval, or otherwise misrepresent the safety or efficacy of drugs in clinical trials, can face liability under the False Claims Act.  The FCA allows whistleblowers to bring qui tam actions on behalf of the government to report fraud and misconduct in federal government contracts and programs.  If money is recovered for the government in a qui tam case, the whistleblower can be entitled to a share of that recovery – up to 30%.

False Claims Act liability can be based on fraud and misconduct related to federal funds for the research itself or for misrepresentations made in seeking those funds. In 2019, Duke University paid $112.5 million to resolve a lawsuit alleging the university submitted falsified data along with claims for hundreds of millions of dollars in NIH and EPA grants.

In addition, research fraud can result in the government approving and later, through government-funded insurance and healthcare (Medicare, Medicaid, VA, TRICARE, etc.), paying for drugs or devices with that do not do what they promise to do.  In this way, fraud in clinical trials can taint later payment for the product by the government.

Without information provided by insiders and whistleblowers, fraud in clinical trials can be very difficult to detect.  This is even more true now, with the surge in clinical trials related to COVID-19 and billions of dollars in expedited spending, with limited resources for additional oversight.  In addition, public safety orders have resulted in significant cutbacks on the ordinary FDA inspection process, and remote work presents challenges to the conduct and monitoring of trials.

False Claims Act complaints are filed “under seal,” so that the government can investigate the whistleblower’s allegations before they become public. The government can then take over the litigation (“intervene”), but if they decline to intervene, the whistleblower can continue the lawsuit on the Government’s behalf. If the lawsuit succeeds, the government may recover up to three times its damages, and the whistleblower can be eligible to receive up to 30% of that recovery.

Financial Fraud Arising from Disclosure of Non-Public Information about Clinical Trials

Approval of a new drug can change the fortunes for a pharmaceutical company and those who invest in them. The financial implications of these approvals can also create opportunities for securities fraud. For example, an insider at a pharmaceutical company may buy or sell securities based on their knowledge of promising clinical trial results that the company will report in the near future. They may also selectively disclose this information to analysts or institutional investors, “tipping” them off to an opportunity to invest. This kind of trading on the basis of “material, nonpublic information” can constitute illegal insider trading. Individuals may also misrepresent clinical trial results in an effort to manipulate pharma stock prices in pump and dump schemes.

Whistleblowers can inform the SEC of these and other SEC violations by making a submission through the SEC Whistleblower Reward Program. If represented by counsel, whistleblowers may even make these submissions anonymously. Whistleblowers who help the SEC successfully recover funds may receive up to 30% of the recovery as a reward. Experienced attorneys can be an invaluable guide for whistleblowers navigating the complex landscape of securities regulations and the SEC Whistleblower Program.

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Tagged in: COVID-19, FCA Federal, FDA Fraud, Financial and Investment Fraud, Grant and Research Fraud, Healthcare Fraud, Pharma Fraud, SEC Whistleblower Reward Program, Securities Fraud,


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