The Department of Justice (DOJ) has doubled down on its commitment to seek dismissal of qui tam actions it views as not serving the public interest. On December 17, 2018, the DOJ moved to dismiss 11 patient support qui tam actions under 31 U.S.C. § 3730(c)(2)(A). Each of these cases was filed by the same relator, who asserted claims under the False Claims Act (FCA) and Anti-Kickback Statute (AKS) against 38 defendants, including several pharmaceutical manufacturers and their commercial outsourcing vendors, concerning various patient-support programs.
The stated reasons for the DOJ's motions to dismiss are threefold: (1) all 11 cases were filed by a venture-backed, professional relator that asserted "cloned" claims; (2) burdensome discovery stemming from the relator's claims; and (3) public policy interests.
The professional relator
The 11 actions uniformly accused the defendants of violating the AKS (and thereby, the FCA) by allegedly engaging in so-called "white coat marketing" and providing illegal remuneration to physicians in the form of free nurse education and reimbursement support services. The DOJ noted the complaints were "essentially cloned" because each asserted the same allegations and each was filed by limited liability companies created specifically for the litigation. In its motions requesting dismissal, the DOJ traced these companies to a single entity – Venari Partners, LLC dba National Health Care Analysis Group (NHCA Group), which is funded by private investors.
Among other things, the DOJ rebuked NHCA Group's behavior in investigating the claims, asserting that NHCA Group obtained the information in the complaints "under false pretenses." Specifically, NHCA Group used publically available sources to contact defendants' current or former employees and asked them to participate in a research study, for which they offered cash payments, while failing to disclose that the information was being collected at the direction of an attorney for the purposes of filing a lawsuit. In fact, NHCA Group told interviewees "they have no bias one way or the other." The DOJ likened NHCA Group's conduct to the relator in United States ex rel. Leysock v. Forest Labs., et al., No. 1:12-cv-11354-FDS, 2017 WL 1591833 (D. Mass. April 28, 2017), where the court held similar actions violated the Massachusetts Rules of Professional Conduct.
Burdensome FCA discovery with little upside
The DOJ also cited the substantial time and expense needed to monitor and respond to discovery in the actions. NHCA Group's broad sweeping allegations implicated dozens of products covered by multiple federal healthcare programs, which meant the DOJ would need to produce a substantial number of documents and witnesses.
Also of concern to the DOJ was the fact that after spending more than 1,500 attorney hours investigating the claims, it concluded that NHCA Group's allegations lack legal and factual support, and it thus saw little upside to the "significant costs and burdens that the government will incur if the cases proceed."
Competing public policy considerations
Last, but certainly not least, the DOJ also moved to dismiss because it views the allegations asserted by NHCA Group as inconsistent with important policy considerations. It noted, for example, that patient support programs are in the public interest because, "given the vast sums the government spends on the medications at issue, federal healthcare programs have a strong interest in ensuring that . . . patients have access to basic product support[.]" Allowing NHCA Group's suits to go forward, according to the DOJ, "would undermine common industry practices the federal government has determined are . . . appropriate and beneficial[.]"
On December 18, 2018, NHCA Group issued a statement that it would oppose the DOJ's 11 motions. While the facts and standards for dismissal under § 3730(c)(2)(A) weigh heavily in the DOJ's favor, there is some risk that the eight different federal judges hearing the motions could reach inconsistent results.
At least one federal judge has already moved swiftly. The day after the DOJ filed its motions, Judge Indira Talwani (D. Mass.) ordered relator's counsel to show cause as to why their pro hac status should not be revoked given the facts alleged in the DOJ's motion.See U.S. ex. rel. SMSF, LLC, et al v. Biogen Inc., et al., No. 1:16-cv-1139 (D. Mass.) (ECF No. 55). Notwithstanding the DOJ's position, however, NHCA Group's statement also noted that some state attorneys general may not agree and may continue to pursue claims under state laws.
The DOJ's actions here confirm it is willing to aggressively exercise its authority to dismiss FCA actions under Section 3730(c)(2)(A). When viewed in conjunction with its recent amicus brief filed in Gilead Sciences, Inc. v. United States ex rel. Campie, it is clear that "whether the government's expected costs are likely to exceed any expected gain" is a significant factor in the DOJ's analysis to dismiss. See Granston Memo at 6.
Additionally, while pharmaceutical manufacturers can take some comfort in the fact that the DOJ has found nurse education and reimbursement support services to be "common industry practice" that are "appropriate and beneficial to federal healthcare programs and their beneficiaries," it is worth noting that the DOJ was careful to limit its statements to these particular cases. It leaves open the possibility that a more sympathetic relator armed with sufficient facts may be able to state an AKS and FCA violation if a pharmaceutical manufacturer improperly uses a patient support service to induce prescriptions.
In sum, it appears that the Granston Memo – the import of which was initially subject to considerable disagreement among observers–did portend something new. While every case will differ, this recent activity confirms that the DOJ will seriously consider moving beyond mere declinations when evaluating qui tam claims and will exercise its gatekeeping function, providing real opportunities for prospective defendants in the right case to avoid costly litigation before it begins.
Find out more about the implications of this development by contacting any of the authors.