Court Opinion

ID: 2654099
Source: CourtListenerOpinion
Date Created: 2014-02-22 01:00:49.087621+00
Date Added: 2024-06-11T09:11:32.653454
License: Public Domain

PUBLISHED

                   UNITED STATES COURT OF APPEALS
                       FOR THE FOURTH CIRCUIT

                               No. 12-2431

UNITED STATES ex rel. BARRY ROSTHOLDER; BARRY ROSTHOLDER,
individually,

                 Plaintiffs - Appellants,

           and

STATE OF CALIFORNIA; STATE OF DELAWARE; STATE OF FLORIDA;
STATE OF HAWAII; STATE OF ILLINOIS; STATE OF INDIANA; STATE
OF LOUISIANA; STATE OF MASSACHUSETTS; STATE OF MICHIGAN;
STATE OF MONTANA; STATE OF NEW HAMPSHIRE; STATE OF NEW
MEXICO; STATE OF NEW YORK; STATE OF NEVADA; STATE OF
TENNESSEE; STATE OF TEXAS; STATE OF VIRGINIA; COOK COUNTY,
ILLINOIS; DISTRICT OF COLUMBIA; CITIES OF CHICAGO AND NEW
YORK; STATE OF GEORGIA; STATE OF NEW JERSEY; STATE OF
OKLAHOMA; STATE OF RHODE ISLAND; STATE OF WISCONSIN,

                 Plaintiffs,

           v.

OMNICARE, INCORPORATED, a Delaware Corporation; OMNICARE
DISTRIBUTION CENTER, LLC, f/k/a Heartland Repack Services,
LLC, a Delaware Limited Liability Company, jointly and
severally,

                 Defendants – Appellees.

Appeal from the United States District Court for the District of
Maryland, at Baltimore.    Catherine C. Blake, District Judge.
(1:07-cv-01283-CCB)

Argued:   December 10, 2013                  Decided:   February 21, 2014
Before NIEMEYER, SHEDD, and KEENAN, Circuit Judges.

Affirmed by published opinion. Judge Keenan wrote the opinion,
in which Judge Niemeyer and Judge Shedd joined.

ARGUED: Gerald C. Robinson, GERALD ROBINSON LAW FIRM PLLC,
Minneapolis, Minnesota, for Appellants.       James Christopher
Martin, REED SMITH LLP, Pittsburgh, Pennsylvania, for Appellees.
ON BRIEF:    Jay P. Holland, JOSEPH, GREENWALD & LAAKE, PA,
Greenbelt, Maryland, for Appellants.        Colin E. Wrabley,
Pittsburgh, Pennsylvania, Eric A. Dubelier, Lawrence S. Sher,
Katherine J. Seikaly, REED SMITH LLP, Washington, D.C., for
Appellees.

                                2
BARBARA MILANO KEENAN, Circuit Judge:

       Relator      Barry        Rostholder    (relator)           filed    this     qui    tam

action      under    the    False    Claims       Act   (FCA),       31    U.S.C.    §§     3729

through 3733, against his former employer, Omnicare, Inc., and

its affiliated companies.               Relator alleged that the defendants

violated a series of Food and Drug Administration (FDA) safety

regulations requiring that penicillin and non-penicillin drugs

be   packaged        in    complete     isolation        from       one    another,        which

violations resulted in a legal presumption of penicillin cross-

contamination.            According to relator, these contaminated drugs

were not eligible for reimbursement by Medicare and Medicaid

and,   therefore,          any    claims   presented          to     the   government        for

reimbursement for these drugs were false under the FCA.

       The district court granted Omnicare’s motion to dismiss the

complaint       under      Federal     Rule       of    Civil      Procedure        12(b)(6).

Because relator already had filed two amended complaints, the

court denied any further leave to amend.                           Upon our review, we

hold     that    relator’s         complaint       failed       to     allege       that    the

defendants made a false statement or that they acted with the

necessary scienter.               We also conclude that the district court

did not abuse its discretion in denying relator’s request to

file    a    third     amended       complaint.          We     therefore       affirm      the

district court’s judgment.

                                              3
                                       I.

       Omnicare provides certain pharmaceutical services to senior

citizens through its drug repackaging and pharmacy facilities.

As alleged in relator’s second amended complaint, Omnicare owned

Heartland Repack Services, LLC (Heartland), the drug repackaging

operation at issue in this case located in Toledo, Ohio (the

Toledo building).         Heartland repackaged drugs into convenient

units    for   patient    use.      Omnicare      also    operated    hundreds    of

pharmacies     nationwide,       including   a    pharmacy    that    shared     the

Toledo   building     with   Heartland.          Such    pharmacies   “primarily”

served nursing homes owned by Omnicare’s partner, Health Care

Resources.

       Although     Heartland     repackaged       non-penicillin      drugs     for

distribution,       the   Omnicare    pharmacy      that    shared    the   Toledo

building processed penicillin products.                   The pharmacy and the

repackaging operations were located in the Toledo building, and

were    separated    by   “rolling”    garage-type         doors.     Within     the

building, employees of both the repackaging and pharmacy units

shared “break” areas, entrances, and exits.                 The Toledo building

also had a single ventilation and heating/cooling system.

       From 1997 until 2006, relator, a licensed pharmacist, was

employed at Heartland.           Relator’s job responsibilities included

“overseeing repackaging, quality assurance, regulatory affairs,

and wholesale and distribution.”               In 2004, Omnicare executive

                                        4
and relator’s supervisor, Denis Holmes, suggested that Heartland

begin repackaging penicillin products.                        Relator informed Holmes

that    any    repackaging        of    penicillin         drugs    would    constitute      a

violation of FDA regulations requiring the separate processing

of penicillin and non-penicillin products.

       Relator       conducted       further       research        regarding      the    FDA’s

penicillin isolation requirements and stated his conclusions in

a memorandum that he provided to Holmes.                          Relator also contacted

the    pharmacy       manager      in    the   Toledo        building,       who    informed

relator       for     the    first      time       that     the     pharmacy       frequently

repackaged          penicillin,        despite       sharing        the    building       with

Heartland’s          non-penicillin        drug           packaging       operation       (the

Heartland facility).             At Holmes’ request, relator researched and

recommended ways in which Heartland could repackage penicillin

in compliance with FDA regulations.

       In February 2006, relator resigned from Heartland due to

his    concerns       about      the    facility’s         quality     control      efforts.

Several months after his resignation, relator notified the FDA

of Heartland’s “improper repackaging practices.”                            Based on this

information,         FDA    investigators      visited        the    Heartland      facility

and    were    advised      by    employees        that    “no    penicillin       was   being

repackaged       in    the       Repackaging        Division.”            Based    on    these

representations, the investigators left the Heartland facility.

                                               5
      Relator        later     participated         in     an     interview       with       FDA

officials, during which “[h]e described the specific details of

the   penicillin       exposure”      at    the    Heartland          facility.         In   the

summer   of    2006,    the     FDA    conducted         another      inspection        of   the

Heartland     facility        and   discovered          that    penicillin        was    being

repackaged      in    the     Toledo       building.           Testing     “revealed         the

presence of penicillin throughout the building,” including in

the Heartland facility.               As a result, the FDA issued a warning

letter   to    Omnicare        (the    warning      letter),          outlining    numerous

violations of FDA regulations, both related and unrelated to

Omnicare’s practices of handling penicillin.                          The warning letter

explained that Omnicare’s failure to adhere to the FDA’s Current

Good Manufacturing Practice regulations (the CGMPs) caused the

drugs to be “adulterated.”

      Rather     than        quarantining         and    conducting       tests     on       its

products,     Omnicare        disposed      of     nearly       $19    million    worth       of

inventory.      According to the complaint, Omnicare at that time

had not recalled any of its drugs due to suspected penicillin

contamination, nor had Omnicare reimbursed the government for

amounts already paid for the contaminated drugs.

                                              6
       In May 2007, relator filed this action under the FCA, 31

U.S.C.      § 3729(a)(1),        (a)(2),   and    (a)(7)    (2006), 1      and    similar

state statutes, against Omnicare and its affiliated companies

(collectively,         Omnicare). 2         Relator       alleged     that       Omnicare

“knowingly      and/or     recklessly      repackaged      drugs     at    [the    Toledo

building]       in   violation       of    applicable      laws,     including       [the

CGMPs], which rendered [the drugs] presumptively unsafe under

[the       CGMPs],   and      therefore    adulterated      and     misbranded,       and

therefore not in their FDA-approved form, and thus ineligible

for     coverage     under       government      programs.”          The     government

declined to intervene in the action.

       The district court granted Omnicare’s motion to dismiss,

holding that relator had failed to allege that Omnicare made a

false      statement     to    the   government      or    engaged    in     fraudulent

conduct.       The court also held that relator had not adequately

alleged the details of any false claims that had been submitted

to the government for reimbursement.                      After the court denied

relator’s      motion      for    leave    to    amend    his   complaint,        relator

timely appealed.

       1
       The 2009 amendments to the FCA resulted in a renumbering
of these sections.    See Fraud Enforcement and Recovery Act of
2009, Pub. L. No. 111-21, 123 Stat. 1617. We refer to the pre-
amendment numbering system as cited in the complaint.
       2
           The second amended complaint was filed in October 2010.

                                            7
                                      II.

                                       A.

      Before    addressing    the    merits    of    relator’s    arguments    on

appeal, we first consider Omnicare’s assertion that the district

court lacked subject matter jurisdiction over this action due to

the   “public    disclosure    bar”    in     the    FCA.    We    review    this

jurisdictional     question    de     novo,    and     examine    the   district

court’s jurisdictional findings of fact for clear error.                     U.S.

ex rel. Vuyyuru v. Jadhav, 555 F.3d 337, 350 (4th Cir. 2009);

U.S. ex rel. Grayson v. Advanced Mgmt. Tech., Inc., 221 F.3d
580, 582 (4th Cir. 2000);           see also Gaines Motor Lines, Inc. v.

Klaussner Furniture Indus., 734 F.3d 296, 301 (4th Cir. 2013)

(noting    our     “obligation        to      assure     ourselves      of    our

jurisdiction”).

      The version of the public disclosure bar in place at the

time of the relevant events 3 provided:

      3
       The public disclosure bar provision was amended in 2010.
See Patient Protection and Affordable Care Act, Pub. L. No. 111-
148, 124 Stat. 119 (2010).    The disclosures at issue in this
case occurred in 2006, and relator filed the original complaint
in 2007.   The amendments to the public disclosure bar are not
retroactive, and neither party argues that the amended statute
should apply. See Graham Cnty. Soil & Water Conservation Dist.
v. U.S. ex rel. Wilson, 559 U.S. 280, 283 n.1 (2010).
Accordingly, like the district court, we apply the pre-amendment
version of the statute and our precedent interpreting that
version.

                                       8
       (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 [General] 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.

31 U.S.C. § 3730(e)(4) (2006) (emphasis added).                     Omnicare argues

that the public disclosure bar divested the district court of

jurisdiction      because    relator’s        complaint   is   “based      upon”   the

warning      letter    and   Omnicare’s       “Form   10-Ks”    filed      with    the

Securities and Exchange Commission (SEC). 4               Omnicare also asserts

that relator is not an “original source” of the information in

the complaint.        We disagree with Omnicare’s arguments.

       Under this Court’s precedent, “a qui tam action is based

upon       publicly   disclosed   allegations         only     if    the    qui    tam

plaintiff’s allegations were actually derived from the public

       4
       Publicly traded companies must submit to the SEC a “Form
10-K” annually. The form “provides a comprehensive overview of
the company’s business and financial condition and includes
audited financial statements.”     U.S. Securities and Exchange
Commission,         Form        10-K,        available       at
http://www.sec.gov/answers/form10k.htm (last accessed Feb. 20,
2014).

                                          9
disclosure itself.”                U.S. ex rel. Wilson v. Graham Cnty. Soil &

Water Conservation Dist., 528 F.3d 292, 308 (4th Cir. 2008),

rev’d      on    other      grounds       by    559 U.S. 280    (2010)    (emphasis        in

original).              A   qui     tam      action       will    “not    be    barred        if   the

plaintiff’s claims are similar or even identical to the publicly

disclosed allegations, so long as the plaintiff had independent

knowledge of the facts and did not derive his allegations from

the public disclosure itself.” 5                      Id.

       We conclude that relator’s FCA complaint was not “based

upon”      the     warning        letter       or    SEC    filings,      despite        Omnicare’s

objection          to       the     “substantial            similarities”          between         the

allegations in the complaint and the public disclosures.                                           The

complaint makes clear that relator discovered the penicillin-

related         violations         of     the       CGMPs    during       his     employment        at

Heartland.          Relator’s knowledge was based on his conversations

with       other    employees           in     the    Toledo       building,       his    personal

familiarity         with          the     repackaging         operations,         and     his      own

independent         research.              Relator         also    alleged      that     he     twice

informed the FDA of the penicillin exposure issues at Heartland,

       5
       We note that under the amended version of the statute, the
public disclosure bar applies “if substantially the same
allegations or transactions as alleged in the action or claim
were publicly disclosed,” unless the plaintiff was an original
source. 31 U.S.C. § 3730(e)(4).

                                                     10
which precipitated the FDA investigations and resulted in the

FDA’s issuance of the warning letter.

      Also     in     his    complaint,          relator       alleged        that     Omnicare

supplied drugs to patients residing in nursing care facilities

who primarily were insured by government health care programs.

These      allegations       illustrate      relator’s            independent        knowledge,

apart from the SEC filings regarding Omnicare’s revenue, that

Omnicare caused claims to be submitted to the government for

payment.      See Vuyyuru, 555 F.3d at 353.

      For     the     same     reasons,         we        conclude     that     relator       has

sufficiently         alleged       that    he        had     “direct     and     independent

knowledge      of    the     information         on       which    the   allegations          are

based,” thereby entitling him to original source status.                                See 31

U.S.C. § 3730(e)(4)(B) (2006).                       Accordingly, we hold that the

public     disclosure        bar    did   not     divest       the     district       court    of

jurisdiction over relator’s FCA claims.

                                             B.

      We     next    consider       relator’s         primary        argument    on     appeal,

namely, that the district court erred in dismissing relator’s

complaint on the ground that he did not adequately allege a

false statement or a fraudulent course of conduct as required

for   an    FCA     claim.         We   review       de    novo    the   district       court’s

dismissal of relator’s complaint under Rule 12(b)(6).                                  U.S. ex

                                             11
rel. Nathan v. Takeda Pharms. N. Am., Inc., 707 F.3d 451, 455

(4th Cir. 2013).

     The FCA is designed to prevent fraud and reflects Congress’

broad    goal     “to    protect          the    funds     and       property     of     the

government.”      U.S. ex rel. Owens v. First Kuwaiti Gen. Trading &

Contracting Co., 612 F.3d 724, 728 (4th Cir. 2010) (citation and

quotation     marks     omitted).          Under      31   U.S.C.      § 3729(a)(1),       a

person   is     liable    to        the    United     States     government        if     he

“knowingly      presents,      or    causes      to   be   presented,        a   false    or

fraudulent claim for payment or approval.”                            To plead an FCA

claim, a relator must plausibly allege four distinct elements:

“(1) [] there was a false statement or fraudulent course of

conduct; (2) made or carried out with the requisite scienter

[knowledge];     (3)    that    was       material;      and   (4)    that   caused      the

government to pay out money or to forfeit moneys due (i.e., that

involved a ‘claim’).” 6             Harrison v. Westinghouse Savannah River

Co., 176 F.3d 776, 788 (4th Cir. 1999).

     Relator contends that he adequately alleged the elements of

an FCA claim in this case.                He asserts that by failing to comply

with the CGMPs, Omnicare’s repackaged drugs were “adulterated”

     6
       These elements similarly apply to FCA claims brought under
§ 3729(a)(2) and (a)(7). See Harrison v. Westinghouse Savannah
River Co., 176 F.3d 776, 784-88 (4th Cir. 1999); U.S. ex rel.
Sanders v. N. Am. Bus Indus. Inc., 546 F.3d 288, 297, 299 (4th
Cir. 2008).

                                            12
and   prohibited          from    interstate       commerce          and,    therefore,

ineligible for reimbursement by Medicare and Medicaid.                            Relator

thus maintains that any claim for reimbursement for these drugs

under government programs was false or fraudulent within the

meaning of the FCA.

      To determine whether relator’s allegations in his second

amended complaint were sufficient to withstand Omnicare’s motion

to dismiss under Rule 12(b)(6), we first consider the general

regulations and the statutory provisions on which relator’s FCA

claim is based.           FDA regulations set forth the “Current Good

Manufacturing Practices” related to the handling of penicillin.

The   CGMPs      require         that     “[o]perations         relating         to   the

manufacture,        processing,          and    packing       of     penicillin”       be

“performed in facilities separate from those used for other drug

products for human use,” and additionally mandate “completely

separate” “air-handling systems” for such operations involving

penicillin    and    other       types    of   drugs.     21       C.F.R.   §§    211.42,

211.46(d).

      The regulations require that non-penicillin drugs be tested

for the presence of penicillin “[i]f a reasonable possibility

exists”   that      the     non-penicillin        drug    has       been    exposed    to

penicillin cross-contamination.                 21 C.F.R. § 211.176.             The non-

penicillin drug may not be marketed “if detectable levels [of

penicillin] are found when tested.”                     Id.        Drugs that do not

                                           13
comply with the CGMPs are considered “adulterated” within the

meaning of the Food, Drug, and Cosmetic Act (FDCA), and are not

permitted        in    interstate      commerce.            21    U.S.C.       §§   331,

351(a)(2)(B); see also 21 C.F.R. 210.1 (failure to comply with

the CGMPs renders a drug “adulterated”).

       Relator’s assertion that Omnicare fraudulently made claims

for payment for “adulterated” drugs is based on the statutes

governing        reimbursement    under     Medicare       and    Medicaid.         Those

statutes define “covered outpatient drugs” as those “approved

for safety and effectiveness” under the FDCA, 21 U.S.C. § 355.

See    42   U.S.C.     §    1396r-8(k)(2)(A)(i)       (Medicaid);        42   U.S.C.   §

1395w-102(e) (Medicare Part D); see also 42 C.F.R. § 423.100

(defining Medicare “Part D” drug).                   The FDA’s approval process

for new drugs under 21 U.S.C. § 355 requires that an application

for approval describe “the methods used in, and the facilities

and controls used for, the manufacture, processing, and packing”

of    the   drug.      21    U.S.C.    §   355(b).        The    FDA   may    refuse   an

application       or   withdraw    a   previously         approved     application     if

these methods or facilities “are inadequate to preserve [the

drug’s] identity, strength, quality, and purity.”                       Id. § 355(d),

(e).     A new drug may not be introduced into interstate commerce

unless      an   approved     application       is   in    effect.       21   U.S.C.   §

355(a).

                                           14
       According     to    relator,       because      the   Medicare     and   Medicaid

statutes refer to the FDCA’s requirements for new drug approval

and marketing set forth in Section 355, Medicare and Medicaid do

not authorize reimbursement for any drugs that are “adulterated”

due to non-compliance with the CGMPs.                         Relator acknowledges,

however,      that    the       Medicare    and        Medicaid      statutes     do        not

expressly     prohibit         reimbursement        for      drugs    that   have       been

adulterated.       Moreover, those statutes do not require compliance

with    the   CGMPs       or    any   other      FDA    safety       regulations       as    a

precondition to reimbursement.

       To qualify as a “covered outpatient drug” as defined in the

Medicare and Medicaid statutes, a drug merely must be approved

by the FDA.        The relevant statutes do not provide that when an

already-approved drug has been produced or packaged in violation

of FDA safety regulations, that particular drug may not be the

proper subject of a reimbursement request under Medicare and

Medicaid.      Therefore, we conclude that once a new drug has been

approved by the FDA and thus qualifies for reimbursement under

the    Medicare      and       Medicaid    statutes,         the     submission     of       a

reimbursement request for that drug cannot constitute a “false”

claim under the FCA on the sole basis that the drug has been

adulterated as a result of having been processed in violation of

FDA safety regulations.

                                            15
      Relator       maintains,       nevertheless,            that     he       adequately       has

pleaded    a   false       claim     because         compliance       with       the    CGMPs     is

material to the government’s decision to provide reimbursement

for   regulated           drugs.         However,          relator     must       allege       both

materiality         and    a   “false      statement         or    fraudulent          course     of

conduct” as distinct elements of an FCA claim.                                   See Harrison,
176 F.3d     at    788;      Owens, 612 F.3d       at    729.         Here,     because

compliance      with       the     CGMPs    is       not    required        for       payment     by

Medicare     and     Medicaid,       Omnicare         has    not     falsely          stated    such

compliance to the government, as contemplated by the FCA. 7                                    Thus,

relator’s allegations of regulatory violations fail to support

FCA liability.             See Harrison, 176 F.3d at 786-87 (discussing

U.S. ex. rel. Thompson v. Columbia/HCA Healthcare Corp., 125
F.3d 899, 902 (5th Cir. 1997), and stating that FCA liability

based on a false certification to the government “will lie only

if    compliance          with     the      statutes         or      regulations           was     a

prerequisite         to        gaining      a     benefit,           and        the     defendant

affirmatively        certified       such       compliance”).              As    we    previously

      7
       Because adulterated drugs are subject to reimbursement by
Medicare and Medicaid and therefore any claim for payment cannot
be “false,” we do not separately address relator’s arguments for
FCA liability under “implied certification” or “worthless
services” theories.     See generally United States v. Sci.
Applications Int'l Corp., 626 F.3d 1257, 1266-71 (D.C. Cir.
2010) (discussing various versions of the implied certification
theory); U.S. ex. rel. Mikes v. Straus, 274 F.3d 687, 702-03 (2d
Cir. 2001) (describing worthless services theory).

                                                16
have   explained,         the   correction          of   regulatory       problems         is   a

worthy goal, but is “not actionable under the FCA in the absence

of actual fraudulent conduct.”                      Mann v. Heckler & Koch Def.,

Inc., 630 F.3d 338, 346 (4th Cir. 2010) (emphasis added and

citation      omitted).         In      the    present      case,      relator       has    not

identified          any     false        statement          or      other        fraudulent

misrepresentation that Omnicare made to the government.

       Were    we    to   accept      relator’s          theory   of    liability          based

merely on a regulatory violation, we would sanction use of the

FCA as a sweeping mechanism to promote regulatory compliance,

rather than a set of statutes aimed at protecting the financial

resources of the government from the consequences of fraudulent

conduct.       When an agency has broad powers to enforce its own

regulations,        as    the   FDA      does       in    this    case,      allowing        FCA

liability      based      on    regulatory          non-compliance        could       “short-

circuit the very remedial process the Government has established

to address non-compliance with those regulations.”                             U.S. ex rel.

Wilkins v. United Health Grp., Inc., 659 F.3d 295, 310 (3d Cir.

2011).

       Under the provisions of the FDCA, the Secretary of Health

and Human Services may suspend or withdraw FDA approval of a

drug   if     the   packaging        process        is   “inadequate      to    assure       and

preserve [the drug’s] identity, strength, quality, and purity.”

21   U.S.C.    §    355(e).        In    the    present      case,     the     FDA    pursued

                                               17
numerous       regulatory        actions           against       Omnicare,             including

conducting      multiple      inspections           of    the    Toledo       building           and

issuing the warning letter.               The FDA also threatened seizure of

Heartland      products,      use    of       injunctive        remedies,         and      action

recommending        “disapproval         of     any       new    applications              listing

[Heartland] as a manufacturer of drugs.”                        The existence of these

significant remedial powers of the FDA buttresses our conclusion

that   Congress        did   not    intend         that    the    FCA     be      used      as    a

regulatory-compliance          mechanism           in     the    absence       of      a     false

statement      or      fraudulent        conduct         directed       at     the         federal

government.

       For the same reasons that relator has failed to plead the

existence of a false statement or fraudulent conduct, he cannot

plausibly allege that Omnicare acted with the requisite scienter

when   submitting       claims      to    the      government       for      drugs         not   in

compliance with the CGMPs.                    Liability under the FCA requires

that    the    defendant      acted       “knowingly,”           which       by     definition

requires      actual    knowledge,        deliberate         ignorance,           or    reckless

disregard of the truth or falsity of the information.                                  31 U.S.C.

§ 3729(a), (b)(1).           Because the Medicare and Medicaid statutes

do not prohibit reimbursement for drugs packaged in violation of

                                              18
the CGMPs, Omnicare could not have knowingly submitted a false

claim for such drugs. 8

       We also conclude that the district court did not abuse its

discretion in denying relator’s request to file a third amended

complaint.          In seeking leave to amend, relator did not comply

with the District of Maryland’s local rules, which require that

a plaintiff attach to a motion to amend “the proposed amended

pleading.”         D. Md. Local Rule 103(6)(a).            Relator’s failure to

comply with this rule justified the district court’s denial of

leave to amend.           See Francis v. Giacomelli, 588 F.3d 186, 197

(4th Cir. 2009).          Moreover, any amendment would have been futile

in light of our holding that adulterated drugs are not barred

from       reimbursement     by    Medicare     and   Medicaid   and,   therefore,

claims for reimbursement for these drugs cannot be “false” under

the FCA.

       Finally, we emphasize that we do not condone Omnicare’s

disregard of FDA safety regulations that apparently occurred in

this       case.        Nevertheless,      we     remain   convinced    that     the

submission         of   claims    for   payment    for   drugs   packaged   at   the

       8
       Because we conclude that relator failed to plead the
existence of a false statement and the scienter required for an
FCA claim, we do not address Omnicare’s alternative argument
that relator did not allege the presentment of a false claim
with particularity under Federal Rule of Civil Procedure 9(b)
and our decision in Nathan, 707 F.3d 451.

                                           19
Heartland facility did not constitute fraud on the government,

and   we   are    confident      that    the    FDA’s    use   of   its   regulatory

enforcement      powers    may    be    exercised     fully    to     ensure    further

compliance with applicable safety standards.

                                         III.

      In   sum,    we     conclude      that    the     district    court      properly

exercised jurisdiction over this action, but that relator failed

to plead the existence of a false statement and scienter as

required    by    the   FCA.       Accordingly,         we   affirm    the     district

court’s judgment.

                                                                               AFFIRMED

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