United States District Court, W.D. North Carolina, Statesville Division
Kenneth D. Bell United States District Judge
action under the False Claims Act (“FCA”), two
former employees of Greer Laboratories - Plaintiffs
(“Relators”) Liubov Skibo and Edward Patt -
allege that Defendant Greer Laboratories, Inc.
(“Greer”) violated the FCA by selling custom mix
allergy products to physicians who then allegedly submitted
“false claims” to the government when they sought
payment for using those products in treating patients. Now
before the Court is Greer's Motion for Summary Judgment
(Doc. No. 95). The Court has carefully considered the Motion
and the parties' extensive briefs and exhibits and heard
oral argument from the parties' counsel during a lengthy
hearing on the motion held July 25, 2019. For the reasons
discussed below, the Court has determined that there is no
genuine dispute as to any material fact and Greer is entitled
to judgment as a matter of law. Therefore, the Court will
GRANT Greer's motion and enter
SUMMARY JUDGMENT in its favor.
judgment must be granted “if the movant shows that
there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56. A factual dispute is considered genuine
“if the evidence is such that a reasonable jury could
return a verdict for the nonmoving party.” Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
“A fact is material if it might affect the outcome of
the suit under the governing law.” Vannoy v.
Federal Reserve Bank of Richmond, 827 F.3d 296, 300 (4th
Cir. 2016) (quoting Libertarian Party of Va. v.
Judd, 718 F.3d 308, 313 (4th Cir. 2013)).
party seeking summary judgment bears the initial burden of
demonstrating the absence of a genuine issue of material fact
through citations to the pleadings, depositions, answers to
interrogatories, admissions or affidavits in the record.
See Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986); Bouchat v. Baltimore Ravens Football Club,
Inc., 346 F.3d 514, 522 (4th Cir.
2003). “The burden on the moving party
may be discharged by ‘showing' ... an absence of
evidence to support the nonmoving party's case.”
Celotex, 477 U.S. at 325. Once this initial burden
is met, the burden shifts to the nonmoving party. The
nonmoving party “must set forth specific facts showing
that there is a genuine issue for trial, ” Id.
at 322 n.3. The nonmoving party may not rely upon mere
allegations or denials of allegations in his pleadings to
defeat a motion for summary judgment. Id. at 324.
ruling on a summary judgment motion, a court must view the
evidence and any inferences from the evidence in the light
most favorable to the nonmoving party. Tolan v.
Cotton, 572 U.S. 650, 657 (2014); see also
Anderson, 477 U.S. at 255. “Summary judgment
cannot be granted merely because the court believes that the
movant will prevail if the action is tried on the
merits.” Jacobs v. N.C. Admin. Office of the
Courts, 780 F.3d 562, 568-69 (4th Cir. 2015) (quoting
10A Charles Alan Wright & Arthur R. Miller et al.,
Federal Practice & Procedure § 2728 (3d ed.1998)).
“The court therefore cannot weigh the evidence or make
credibility determinations.” Id. at 569
(citing Mercantile Peninsula Bank v. French (In
re French), 499 F.3d 345, 352 (4th Cir. 2007)).
“[w]here the record taken as a whole could not lead a
rational trier of fact to find for the nonmoving party, there
is no genuine issue for trial.” Ricci v.
DeStefano, 557 U.S. 557, 586 (2009) (internal citations
omitted). “Only disputes over facts that might affect
the outcome of the suit under the governing law will properly
preclude the entry of summary judgment. Factual disputes that
are irrelevant or unnecessary will not be counted.”
Anderson, 477 U.S. at 248. Also, the mere argued
existence of a factual dispute does not defeat an otherwise
properly supported motion. Id. If the evidence is
merely colorable, or is not significantly probative, summary
judgment is appropriate. Id. at 249-50.
end, the question posed by a summary judgment motion is
whether the evidence as applied to the governing legal rules
“is so one-sided that one party must prevail as a
matter of law.” Id. at 252.
RELEVANT FACTS AND PROCEDURAL HISTORY
manufactures allergy immunotherapy treatments, which include
allergenic extracts. Immunotherapy involves the practice of
introducing small amounts of an allergen such as pet dander
or pollen into a patient in the hope that the patient
develops an immunity to the allergen. Greer produces hundreds
of different allergenic extracts under a single Biologics
License in bulk in its manufacturing facility, which FDA
regulates. Greer also compounds customized mixtures of its
licensed allergenic extracts pursuant to prescriptions
submitted by physicians for a single, identified patient
("named-patient prescriptions") in its pharmacy
operation. Mixtures prepared in the pharmacy are not at issue
in this case.
the 1970s until 2015, Greer also produced "custom
mixes" or “special mixes” of its licensed
bulk allergenic extracts in response to orders submitted by
physicians for multiple patients requiring the same mixture
of extracts. For example, a doctor might order a mixture of
pet dander, tree mold and other allergens in a specific
formula. While custom mixes are made according to a
doctor's orders, they are not made pursuant to an
individual named-patient prescription because the doctor
intends to use the same mixture for multiple patients.
Although physicians can purchase the individual extracts and
prepare the mixture themselves in their office, they
requested custom mixes from Greer because it was more
efficient and reduced the chance of error, as well as the
cost and work of preparation. Greer produced its custom mixes
in the manufacturing facility where it produced the bulk
individual allergenic extracts, which are the components for
the custom mixes. Greer's Regulatory Affairs group,
including Relator Patt for several years, approved every
custom mix specification sheet prior to the mix being
mixes comprised a relatively small portion of Greer's
business; the mixes totaled less than 3% of Greer's total
revenue during the period. In fact, Greer testified that it
could have earned more revenue by selling the individual
extracts but opted to provide custom mixes as a convenience
to its customers.
Greer's Preparation of Custom Mixes under FDA
did not have and did not seek separate licenses for each
doctor ordered custom mix because it believed such mixes were
within the scope of its license for the allergenic extracts
that make up the custom mixes. The relevant FDA regulation,
21 C.F.R. § 610.17, was enacted in 1947. Section 610.17
states that "[l]icensed products may not be combined
with other licensed products . . . except as a license is
obtained for the combined product. Licensed products may not
be combined with nonlicensable . . . substances except as a
license is obtained for such combination." At the time
the regulation was enacted, FDA issued product licenses (now
referred to as BLAs) which defined the "product" by
the category of biologic (e.g., "Allergenic
Extracts"), not by the individual biologics within each
category. All of Greer's allergens - the components of
the custom mixes - were defined as the same
"product" under the license issued by FDA;
therefore, Greer believed that the combination of the
individual allergens did not reflect a combination of
different licensed products and did not require a separate
with its belief and understanding that each custom mix
ordered by a physician fell within its existing BLA, Greer
openly advertised its custom mix service. Over the course of
twenty years, Greer provided FDA with copies of its product
catalog which referenced the custom mix service and Greer
posted the catalogs on its website. In reviewing Greer's
catalogs, FDA did not raise concerns about Greer's custom
mixes or express confusion over the distinction between
Greer's custom mix and prescription services. Relator
Skibo approved the product catalog language describing the
custom mix service in her role as the head of Greer's
regulatory group and did not raise concerns about the
licensing of custom mixes or the potential
"confusion" between Greer's custom mix service
and its prescription service during her tenure at Greer.
also made proactive disclosures regarding custom mixes in
correspondence with FDA that reflects their openness about
the practice. In a 1992 letter to Greer denying Greer's
request for additional time to convert from using
non-standardized to standardized cat hair extracts, the FDA
appeared to recognize the difference between an individual
patient prescription and a “special mixture”:
"[Greer's] request to allow nonstandardized cat
extracts that have already been incorporated into a
prescription mixture for a specific patient or into a special
mixture for use in a specific physician's practice to
continue to be sold in interstate commerce after September
17, 1992, cannot be granted." Additional examples of
Greer's affirmative disclosures regarding custom mixes
In a letter to FDA regarding Antigen E, Greer
"A survey of our records shows that we have .
. . the following . . . mixes in stock. A.
Approximately 1193 sets (a set is 1x10 ml or 2x5
ml) of maintenance vials of patient prescription
material. (Vials made up per doctor's orders
for individual patients.)
B. Approximately 82 vials (of various sizes -
mostly 30 and 50 ml) of doctor's special mixes.
These are mixes prepared on a doctor's orders
for his use in diagnosis and/or therapy of his
C. Approximately 19 storage bottles of special
mixes as in B (above) not yet vialed" (Ex. RR
at GRLT-00104219) (emphasis added).
Responding to FDA's request for a list of
inventory containing short ragweed, Greer wrote:
"[W]e have in stock numerous patient
prescription vials and special mixes (prepared on a
doctor's request) . . . ." (Ex. SS at
GRLT-00002754) (emphasis added).
In a letter to FDA regarding Antigen E, Greer
wrote: "Even more problematic will be the
impact on the very large percentage of custom mixes
and individual patient prescriptions which contain
Ragweed products" (Ex. TT at GRLT-00002760)
In a letter to FDA regarding the standardization of
extracts, Greer wrote: "A majority of Greer .
. . accounts purchase special physician mixes which
they utilize to formulate prescription
immunotherapy mixtures (build-up sets and
maintenance vials) for their patients . . . . A
minority of Greer . . . accounts utilize our
services to compound prescription immunotherapy
mixtures (build-up sets and maintenance vials) for
patients" (Ex. UU at GRLT-00002752-53)
1969 and 2013, FDA inspected Greer at least fifty-seven
times. During inspections, Greer gave FDA full access to its
facilities and provided FDA with requested documents,
including Greer's catalog, production records, and Annual
Product Reviews, which explicitly referenced custom mixes.
Post-inspection correspondence confirms that FDA specifically
reviewed custom mixes prior to 2013 and made observations
relating to custom mixes but did not raise concerns about
custom mixes not being separately licensed. Examples include:
FDA reviewed "'special order' RX Grass
Mix, PO865-X" and issued an observation
because "no temperature record was available
for the refrigerator" used to hold it. (Ex. YY
at GRLT-00132300) (emphasis added).
FDA reviewed a custom mix during its inspection:
"An exception was weed mix . . . . Ms. White
stated this was a custom order and the stock
mixture labels do specify components The weed mix
order did not specify any details, but the order
number corresponded to a detailed formula which was
shown to us." (Ex. ZZ at GRLT-00134775-76)
Greer's response to FDA's Form 483 states:
"plans are underway to update all our mix
cards, copies of which will be enclosed with all
shipments of mixed extracts (excluding Greer Stock
mixes) . These cards are taken from the original
order of the doctor." (Ex. AAA at
GRLT-00136507) (emphasis added).
FDA reviewed lot history records (containing sample
labels) for five custom mixes (PMG SJ 7 Tree Mix,
Schultz Tree Mix #1, Shulhafer Weed Mix, PMG SJ 5
Weed Mix, and AASC Mold-4 Mix) and issued an
observation relating to Greer's investigations.
(Ex. HH GRLT-00048713-14, -18).
FDA reviewed AASC Weed Mix (a custom mix) during
the inspection. (Ex. TT at GRLT-00107709). FDA also
questioned Greer's retention sample practices
during this inspection and did so with specific
reference to custom mixes. (Ex. M at 197:1-198:5);
(Ex. BBB at GRLT-00031149).
immunotherapy manufacturers also made "custom
mixes" pursuant to doctors' orders (but not
individual patient prescriptions) without obtaining a
separate FDA license. See e.g., Amended Complaint,
Doc. No. 10 at ¶¶ 93-96 (accusing several other
manufacturers of similarly selling "unlicensed"
custom mixes); infra, at II D. There is no evidence
that the FDA was not aware of the long standing industry
practice to market custom mixes that were not based upon
named-patient prescriptions and were not separately licensed,
or that § 610.17 was ever interpreted by the FDA to
apply to immunotherapy custom mixes at any time during the
over 65 years from 1947 until 2013.
The FDA Raises Questions then Issues Guidance Regarding
course of a routine inspection of Greer's manufacturing
facility in November 2013, an FDA inspector issued a Form 483
to Greer in which the FDA “observed” that each
custom mix required a separate license. Greer was open with
the FDA about the custom mixes during the inspection,
explaining that custom mixes were “a mixture of
licensed products prepared to a doctor's order” but
different from individual prescriptions because prescriptions
“are for named patients and custom mixes were for
general use by the requesting practitioner.”
See Greer November 14, 2013 FDA CBER Summary, Doc.
No. 131-25, at p.12. Greer subsequently received a follow up
Warning Letter stating FDA's view that a separate license
was required for each custom mix, as such mixes were not
within the scope of Greer's existing licenses. Neither
the Form 483 Report or the FDA Warning Letter suggested that
the FDA had previously been misled about Greer's
manufacturing of custom mixes.
Form 483 report and the FDA Warning Letter did not reflect a
final agency determination and did not commit the FDA to
enforcement action. After receiving the Form 483 and Warning
Letter and making written requests for clarification, Greer
and its counsel met with FDA in June 2014. When Greer asked
for guidance regarding custom mixes, FDA stated they were
"not in a position to discuss custom mixes." FDA
also said it could not answer Greer's question whether
"the preparation of custom mixes was no longer an
option," but said it hoped to address the issue that
summer. FDA also told Greer that custom mixes were "an
issue that is a focus industry wide and that the other
manufacturers would be notified as well." Based on these
conversations, Greer continued manufacturing custom mixes
based on FDA's statements that it was still formulating
2015, the FDA issued formal “guidance” that
custom mixes needed to be separately licensed under 610.17.
Greer ceased manufacturing custom mixes as soon as FDA
released draft guidance in February 2015. Once Greer stopped
making custom mixes, physicians ordered the individual
extracts and mixed them in their offices to make the custom
mixes. There is no evidence that Greer has sought separate
licenses for the custom mixes after the FDA's 2015
The Industry's Reaction to the FDA's 2015
Position Regarding Manufacturing Custom
Mixes Without a Separate License.
Greer, the Allergen Product Manufacturers' Association
("APMA") sought guidance from FDA on its apparent
change in position regarding the licensure of custom mixes.
In an April 2014 letter, the APMA wrote:
It has become apparent to the representative companies of the
APMA that a focus during recent FDA inspections is the
historical practice of manufacturing "Custom Mixes"
. . . and whether or not this activity is within the scope of
the manufacturer's licenses . . . . This practice of
manufacturing Custom Mixes by each APMA member company has
been documented in various correspondences with FDA, and
includes recognition and acknowledgement of this practice,
without objection, during facility inspections over the
years. (Greer Ex. R (Doc. 98-16) at GRLT- 00044443).
APMA reiterated these statements in a July 2014 letter to