What follows is a guest post from Joe Metro and Andy Bernasconi of Reed Smith. Andy has some experience with the guest post gig (here and here), and Joe has finally heeded the call to share his fraud and abuse expertise with our readers. That particular expertise is not in abusing the legal process like the plaintiffs discussed below. Joe and Andy deserve any praise or blame for their post.
The U.S. Department of Justice (DOJ) recently took the relatively unusual step of seeking the dismissal of eleven pending False Claims Act (FCA) cases that had been filed throughout the country by relators under the qui tam provisions of the FCA against 38 pharmaceutical manufacturer defendants. DOJ filed motions to dismiss in each action on December 17, 2018, asserting the government’s investigation revealed that the cases “lack sufficient merit to justify the cost of investigation and prosecution, and otherwise [are] contrary to the public interest.” United States’ Motion to Dismiss at 1-2, 14 (Dec. 17, 2018) (hereafter, “DOJ MTD”). A copy of the motion to dismiss, as filed in a case in Texas, can be found here.
Significant to DOJ’s analysis was the fact that the qui tam relators used “false pretenses” to obtain information from witnesses. DOJ MTD at 6. According to the government, the actions all were filed by a “professional relator” entity that sought to develop contacts and inside information under the guise of conducting a research study of the pharmaceutical industry, id. at 1, 5, and offering to pay individuals for information provided in a purported “qualitative research study,” even though the information was “actually being collected for use in qui tam complaints filed by [the professional relator] through its pseudonymous limited liability companies.” Id. at 5. At no time were witnesses told that the interviewer was acting at the direction of attorneys to collect information for use in lawsuits, or that the interviewees would be named as corroborating witnesses in those lawsuits. Id. at 6.
This alleged scheme of using false pretenses to obtain information to be used as the basis for qui tam FCA suits may sound familiar to you: we previously wrote here and here about a similar case against a pharmaceutical company, involving the same “professional relator” and the same alleged scheme to obtain information as the basis for a qui tam FCA suit. As detailed in our prior discussion, the District of Massachusetts ultimately dismissed that prior case after finding that the means used to obtain information for use in that lawsuit violated ethical rules, and ruling that the remaining allegations of the complaint—when stripped of the information obtained through improper means—could not satisfy the pleading standards to survive a motion to dismiss.
That decision is perhaps one reason why a judge in one of the 11 cases in which DOJ filed motions to dismiss, the same District of Massachusetts, issued an order on December 18, 2018 (i.e., the day after DOJ filed its Motion to Dismiss), directing relators’ counsel to show cause by January 2, 2018, why their pro hac vice status should not be revoked for “prosecuting an action without sufficient factual and legal support, as charged” in DOJ’s Motion to Dismiss and supporting documentation. See U.S. ex rel. SMSF, LLC v. Biogen, Inc., No. 1:16-cv-11379-IT (D. Mass.), Electronic Order, Dkt. No. 55 (Dec. 18, 2018).
Indeed, it would be awkward for DOJ to sit idly by and allow qui tam cases to proceed, in the government’s name—which is how the qui tam system works—when those cases are purportedly premised on a scheme one district court already described as involving ethical violations and “an elaborate series of falsehoods, misrepresentation, and deceptive conduct.” Some commentators have suggested that DOJ’s efforts to seek dismissal in these cases is a natural consequence of the so-called “Granston Memo,” an internal DOJ memo originally dated January 10, 2018, that has since been incorporated into the Justice Manual (formerly known as the U.S. Attorneys’ Manual), which provides guidelines for DOJ attorneys to consider in evaluating whether to dismiss qui tam cases for lack of merit. While DOJ’s Motion to Dismiss relies on various factors for seeking dismissal, including the “substantial costs in monitoring the litigation and responding to discovery requests” and the “substantial litigation burdens for the United States,” DOJ MTD at 15, it is at least as likely—if not more so—that DOJ’s decision to seek dismissal of these 11 cases was driven by the relator’s scheme to collect information for use in qui tam cases, as characterized in DOJ’s Motion to Dismiss. Indeed, the litigation burdens for the government have existed since those cases were filed under seal and investigated by the government, 31 U.S.C. § 3730(b)(2), and DOJ easily could have exercised its authority to seek dismissal of the cases long before its December 17 filings. Thus, we are skeptical that DOJ’s exercise of its dismissal authority should be portrayed as a sign that DOJ will readily dismiss burdensome cases, particularly in the absence of other significant (if not egregious) considerations.
Finally, the government’s motion is atypical, and significant, with respect to its comments on the substantive merits of the relator’s allegations. The relators’ complaints made sweeping allegations that various types of common manufacturer product support programs – ranging from nurse training or hotlines, disease education, and reimbursement support – amounted to violations of the anti-kickback statute. In seeking dismissal, the DOJ not only acknowledged that government enforcement agencies had indicated that the practices in question were not kickbacks, but also emphasized that the practices supported federal policy interests in appropriate product utilization.
The former principle should seem an unremarkable basis for the government to seek dismissal of whistleblower litigation, but the more common approach seems to have been to ignore, dismiss, or distinguish enforcement agencies’ prior guidance to industry. Given the other unusual aspects of the cases discussed above, one would be hard-pressed to declare this approach to the merits to be a “new trend.” But at the least, it is a useful reminder of the potential value of early engagement with the government on the regulatory merits of relators’ theories. Indeed, while the government’s motion cited a recent safe harbor regulation preamble, there is a wealth of other guidance that may prove useful, including the OIG’s Compliance Program Guidance documents, safe harbor regulations, special advisory bulletins, and advisory opinions.
The latter point noted by the government – that manufacturer product support programs are often actually aligned with federal health care programs’ interests – is equally significant. Simply stated, in an age where emerging genetic therapies are more precise and more complicated, and in an age where the government is increasingly focused on outcomes-based health care delivery and payment systems, the government’s acknowledgement that manufacturers have a legitimate role to play in facilitating appropriate product use is important not only from the perspective of False Claims and anti-kickback defense, but also when counseling on such arrangement.
What should not be lost here, particularly for readers of the Blog’s usual fare, is that the economic incentives in place for generating and pursuing litigation against drug manufacturers sometimes lead to egregious conduct by putative plaintiffs and their lawyers. The conduct can be so bad that even DOJ, which is often aligned against the drug manufacturers, cannot stomach it. Whether that dyspepsia affects DOJ’s position on other types of litigation against medical product companies remains to be seen.