Three times previously we have “reported from the front” on the federal government’s efforts to dismiss False Claims Act litigation – ostensibly (and often ostentatiously) filed in the government’s name – after the government has concluded that the particular case is more bother than it is worth.  The most recent of those posts was late last year, and reported on Polansky v. Executive Health Resources, Inc., 17 F.4th 376 (3d Cir. 2021).

Continue Reading The FCA Front Moves To The Supreme Court

We’ve long believed that False Claims Act (“FCA”) cases – particularly in the health sciences area – are out of control.  Twenty-first century lawyers, and their solicitation techniques, have turned Abraham Lincoln’s Nineteenth Century law aimed at corrupt government contractors into its own form of corruption.  Today’s FCA racket is complete with professional relators, deceit to obtain confidential information, and incorporation of entities created solely to serve as FCA relators.

Professional relators?  Check out the discussion in David Engstrom, “Harnessing the Private Attorney General:  Evidence from Qui Tam Litigation,” 112 Colum. L. Rev. 1244 (2012), about so-called “FCA trolls”:

[A]n increasing share of qui tam litigation is the work of so-called “professional” relators who lack the traditional insider status of qui tam whistleblowers and instead build cases through information derived from private investigative work targeting present and past company employees or publicly available sources, including FOIA requests made on government agencies.

Id. at 1279 (footnote omitted).  According to Professor Engstrom, his research shows that “professional relators” “account for nearly one-fifth” of FCA filings.

Deceit?  We previously blogged about Leysock v. Forest Laboratories, Inc., 2017 WL 1591833 (D. Mass. April 28, 2017), in which agents of an FCA relator – acting in the name of the United States, lied to obtain confidential medical information:

There is no dispute that the investigative scheme devised by attorneys . . . with the assistance of [their physician agent], involved an elaborate series of falsehoods, misrepresentations, and deceptive conduct.

The investigation was designed to appear as if it were a medical research study; its only purpose, however, was to obtain otherwise-confidential information from busy medical professionals for use in litigation. . . .  [The agent] also falsely stated that the information obtained from the physicians would be kept confidential. . . .  [T]here is no doubt that the entire scheme was devised by attorneys . . . and that [the physician] was simply acting as their agent.

Id. at *8 (footnote omitted).  The complaint was dismissed as a sanction.  Id. at *13-14.

Specially incorporated FCA relators?  From the same Columbia Law Review article:

[I]n recent years qui tam litigation has seen the emergence of companies that self-identify in court filings, to cite just one example, as “engaged in the business . . . of acquiring information regarding, and investigating alleged violations of [federal and local] False Claims Acts.”

Engstrom, “Harnessing,” 112 Colum. L. Rev. at 1278-79 (footnote omitted).  See United States ex rel. SCEF, LLC v. AstraZeneca, Inc., 2019 WL 5725182, at *1 (W.D. Wash. Nov. 5, 2019) (relator was “a limited liability company established by [litigation investors] to file qui tam cases”); United States ex rel. CIMZNHCA, LLC v. UCB, Inc., 2019 WL 1598109, at *1 (S.D. Ill. April 15, 2019) (same, including several of the investors).

Thus, in late 2018 we blogged about the government finally cracking down on FCA abuse, and moving to dismiss a number of bogus FCA actions, which one would think the government would have the right to do, given that it is the real party in interest, and FCA relators purport to act in the government’s name.  The government’s opening shot was a January 10, 2018 Justice Department memorandum (called the “Granston Memo”) directing all Government attorneys handling FCA cases to consider dismissal of FCA actions under a variety of certain circumstances.  For more on the Granston Memo itself, see this post from the FDA Law Blog.

We haven’t followed up, before now, because this is primarily a product liability blog.  But because of the potential significance of the issue to our clients, we thought we’d see how the government’s battle to rein in abusive FCA litigation being brought in its name was going.

As one would expect, post-Granston, FCA relators have not reacted kindly to the government attempting to derail their gravy train.  They have returned fire, claiming, in effect, that they know better than the government itself what is good for it.  The FCA, however, provides that “[t]he Government may dismiss the action notwithstanding the objections of the [relator] if the [relator] has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion.”  31 U.S.C. §3730(c)(2)(A).  That’s it.  The FCA doesn’t specify what the hearing is for or what grounds, if any, are needed to support dismissal as an exercise of the government’s prosecutorial discretion.

Our court system being what it is – and the United States Supreme Court never having considered this issue (and having just denied a certiorari petition raising it) – the government faced a split of authority in the courts of appeals.  A couple of courts applied something that looks to us like an “arbitrary and capricious” standard.  “A two step analysis applies here to test the justification for dismissal:  (1) identification of a valid government purpose; and (2) a rational relation between dismissal and accomplishment of the purpose.”  U.S. ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., 151 F.3d 1139, 1145 (9th Cir. 1998) (quoting and approving standard created by district court).  The Ninth Circuit justified this result by asserting the general Due Process standard for evaluating any governmental action.  Id. at 1146.  See Ridenour v. Kaiser-Hill Co., 397 F.3d 925, 936 (10th Cir. 2005) (following Sequoia Orange).

However, the court of appeals with the most experience with administrative law had concluded that the government could effectively dismiss FCA suits brought in its name for any reason, without substantive judicial review:

We hesitate to adopt the Sequoia test.  It may be that despite separation of powers, there could be judicial review of the government’s decision that an action brought in its name should be dismissed.  But we cannot see how §3730(c)(2)(A) gives the judiciary general oversight of the Executive’s judgment in this regard.  The section states that “The Government” − meaning the Executive Branch, not the Judicial − “may dismiss the action,” which at least suggests the absence of judicial constraint.  To this must be added the presumption that decisions not to prosecute, which is what the government’s judgment in this case amounts to, are unreviewable.  Reading §3730(c)(2)(A) to give the government an unfettered right to dismiss an action is also consistent with the Federal Rules of Civil Procedure.

Swift v. United States, 318 F.3d 250, 252 (D.C. Cir. 2003) (citing, inter alia, Heckler v. Chaney, 470 U.S. 821, 831-33 (1985)).  See United States ex rel. Schweizer v. Oce N.V., 677 F.3d 1228, 1234 (D.C. Cir. 2012) (“in a pure dismissal . . ., the relator has no protection: he is not entitled to compensation or judicial review of the government’s decision”); Hoyte v. American National Red Cross, 518 F.3d 61, 64-65 (D.C. Cir. 2008) (government has “virtually unfettered discretion” to dismiss).  Other courts of appeals have made similar, albeit less definitive, statements.  Riley v. St. Luke’s Episcopal Hospital, 252 F.3d 749, 753 (5th Cir. 2001) (“the government retains the unilateral power to dismiss an action” under section 3730(c)(2)(A)) (en banc); United States ex rel. Rodgers v. Arkansas, 154 F.3d 865, 868 (8th Cir. 1998) (government’s right to dismiss FCA cases is “subject only to notice and a hearing for the qui tam relator”).

Obviously, all of this appellate precedent predated the Granston memo and thus the government’s recent campaign to restrain FCA abuses.  Given the circuits’ disparate (and often unknown) views on the dismissal standard, we’ve organized our research on a circuit-by-circuit basis, with the two most interesting circuits first.  But as an executive summary, we note that the government has mostly succeeded in this war.  In 22 of 24 post-Granston cases, motions to dismiss filed by the government have been granted.

In the only post-Granston appellate precedent so far, Chang v. Children’s Advocacy Center, 938 F.3d 384 (3d Cir. 2019), the court affirmed a government-initiated dismissal of an FCA case, without either a hearing, or even an opinion, from the district court.  While the relator had a right to a hearing under §3730(c)(2)(A), he never requested one, waiving that right.  Id. at 387-88.  Chang declined to opt for one side or another in the Sequoia/Swift debate, but concluded that, even under the less deferential standard, the relator failed to demonstrate that the government’s recitation of a desire to reduce “litigation costs” was not “arbitrary or capricious.”  Id. at 389.  Chang is only the appellate tip of the iceberg.  The government has blown out of the water several ill-conceived FCA actions in Third Circuit district courts.

Following Chang, the court in United States ex rel. NHCA-TEV, LLC v. Teva Pharmaceutical Products Ltd., held:

The Government’s interest in avoiding potentially burdensome or unnecessary litigation costs is legitimate even when a relator’s claims appear meritorious. . . .  [C]ourts have similarly accepted the Government’s putative policy interests in patient care and enforcement prerogatives as valid government purposes.

2019 WL 6327207, at *3 (E.D. Pa. Nov. 26, 2019) (citations omitted).  Further, “the FCA does not require the government to ‘fully investigate’ an alleged FCA violation before moving to dismiss.”  Id. at *6 (citation and quotation marks omitted).

Likewise, after seven years of litigation, the court in Polansky v. Executive Health Resources, Inc., 422 F. Supp.3d 916 (E.D. Pa. 2019), let the government throw in the towel.  The government’s assertion that plaintiffs had a weak case, along with “costs of continued litigation,” met the Sequoia – and thus a fortiori the Swift – standard.  Id. at 927.  In United States v. EMD Serono, Inc., 370 F. Supp.3d 483 (E.D. Pa. 2019), litigation costs took a back seat to the government’s disagreement with one of the premises of the plaintiff’s FCA theory:

[T]he relators’ allegations conflict with important policy and enforcement prerogatives of the federal government’s healthcare programs. . . .  [E]ducational programs, informational support, medication instruction, and nurse access and support are not “remuneration” and are programs that are appropriate and beneficial to the federal health programs and their beneficiaries.

Id. at 489 (footnotes omitted).

The government also found the Ninth Circuit a minefield of questionable FCA litigation.  The parties had previously appealed a different FCA issue in United States v. Gilead Sciences, Inc., 2019 WL 5722618 (N.D. Cal. Nov. 5, 2019), all the way to the Supreme Court.  The high court asked the government for its views, and in the resultant amicus brief the government dropped this bombshell – that it would “move to dismiss . . . under Section 3730(c)(2)(A)” in the district court because “if this suit proceeded past the pleading stage . . . “burdensome discovery” would “distract from the [FDA’s] public-health responsibilities.”  Id. at *3.  When that happened, the district court granted the government’s motion under the Ninth Circuit’s less deferential Sequoia standard.

[Plaintiffs] have failed to establish that dismissal would fall under any of the above categories.  [They] primarily argue that the government’s request to dismiss is arbitrary and capricious but . . . that position is not well supported under the particular facts and circumstances of this case.  There was a multi-year [government] investigation . . . and the government made deliberate enforcement decisions in regard thereto. The government [also] considered the burdens of this litigation. . . .

Id. at *8.  See Mikovits v. Whittemore Peterson Institute, 2020 WL 1000519, at *2 (D. Nev. March 2, 2020) (granting government’s dismissal motion where “[p]laintiff makes no allegation that the dismissal would be fraudulent, arbitrary and capricious, or illegal”); United States ex rel. Toomer v. TerraPower, LLC, 2018 WL 4934070, at *5 (D. Idaho Oct. 10, 2018) (that plaintiff “disagrees with the government’s priorities . . . is insufficient to establish that the government’s reasons for seeking dismissal are invalid”; “litigation costs [also] represent a valid governmental interest”), motion to certify appeal denied, 2019 WL 6689888 (D. Idaho Dec. 6, 2019).

In the aforementioned SCEF, 2019 WL 5725182, involving one of those specially incorporated FCA litigation entities, the court shot down, at the government’s request, an obviously made-for-litigation FCA claim.  “[C]onserving governmental resources and protecting important policy prerogatives of the federal government’s healthcare programs” were a proper basis for dismissal.  2019 WL 5725182, at *2.  The suit tried to convert valuable services into “false” claims:

[T]he federal healthcare programs have a strong interest in ensuring that, after a physician has appropriately prescribed a medication, patients have access to basic product support relating to their medication, such as access to a toll-free patient-assistance line or instructions on how to properly inject or store their medication.

Id. (citation and quotation marks omitted).

And the rest. . . .

The Sequoia versus Swift issue was left undecided in the only post-Granston decision out of the First Circuit, United States v. Bayer HealthCare Pharmaceuticals, Inc., 2019 WL 5310209, at *2 (D.R.I. Oct. 21, 2019), since the government’s dismissal motion was proper either way.  “The Court ha[d] no reason to doubt the Government’s contention that further litigation in this action will impose a significant burden on several federal agencies and take resources away from the administration of parts of the Medicare program.”  Id.  Once the government established a “valid” purpose and “rational relation,” the relator “must offer actual evidence of impropriety or fraud, not mere speculation,” which did not happen in BayerId.  A relator’s “subjective disagreement with the underlying conclusions of the Government’s investigation” doesn’t cut it.  Id. at *3.

From Second Circuit courts, United States v. Cooperatieve [sic] Bank U.A., 2019 WL 5593302 (S.D.N.Y. Oct. 30, 2019), opted for the less deferential Sequoia test, id. at *3, but granted dismissal to the government anyway.  Not only was dismissal “rationally related to the objective of conserving governmental resources,” but also served to “deter[] parasitic and opportunistic litigation, particularly where, as here, Relator’s allegations are based largely on information from public enforcement actions.”  Id.  Even if the government “did not sufficiently investigate [the] claims,” that “does not rise to the level of showing that dismissal is fraudulent, arbitrary and capricious, or illegal.”  Id.  United States ex rel. Borzilleri v. AbbVie, Inc., 2019 WL 3203000 (S.D.N.Y. July 16, 2019), decided not to decide, because “the Government may dismiss the case even under the more stringent standard.”  Id. at *2.  The case “would impose substantial burdens on government resources: and “divert time and resources to respond to discovery.”  Id.

Two district courts in the Fourth Circuit have “aligned” themselves with the Swift standard.  United States ex rel. Henneberger v. Ticom Geomatics, Inc., ___ F. Supp.3d ___, 2019 WL 8161574, at *2 (E.D. Va. June 12, 2019).  Accord United States v. Capital Rail Constructors, ___ F. Supp.3d ___, 2019 WL 8161575, at *2 (E.D. Va. Oct. 22, 2019) (“Considering the language of the statutes, and the nature of qui tam actions, this Court finds the D.C. Circuit’s standard proper.”).  Not surprisingly, both granted FCA dismissals at the government’s behest.  Capital Rail, 2019 WL 8161575, at *2 (governmental “investigation . . . revealed no evidence supporting culpability”); Henneberger, 2019 WL 8161574, at *2 (citing “potential cost” and lack of merit).  A third, earlier, case declined to pick a standard but granted dismissal under either Swift or Sequoia:

[The government] asserts that dismissal will further its interest in preserving scarce resources by avoiding the time and expense necessary to monitor this action.  Relator argues that the anticipated financial gain outweighs the anticipated time and money to be expended on this case; however, [the government’s] interest in allocating its resources as it sees fit has been validated on several occasions.

United States ex rel. Stovall v. Webster University, 2018 WL 3756888, at *3 (D.S.C. Aug. 8, 2018) (citing, inter alia, Heckler, 470 U.S. 821).

A decision out of the Fifth Circuit, Health Choice Alliance LLC ex rel. United States v. Eli Lilly & Co., 2019 WL 4727422 (E.D. Tex. Sept. 27, 2019), affirmed a magistrate’s grant of dismissal (2019 WL 5691988) under either Sequoia or SwiftId. at *8.

[E]ven assuming “constantly changing justifications” are arbitrary . . . the Government has consistently cited scarce resources as its motivation.  The Government’s position on the merits − i.e., that [plaintiff] is unlikely to recover − is part-and-parcel of the Government’s preservation-of-resources argument.  The Government does not want to expend resources on a claim that it believes to lack merit. . . .  [T]hat is a rational decision.

Id.  See United States ex rel. Johnson v. Raytheon Co., 395 F. Supp.3d 791, 795 (N.D. Tex. 2019) (threat of disclosure of “classified” information justified dismissal).  Cf. United States ex rel. De Sessa v. Dallas County Hospital Dist., 2019 WL 2225072, at *1-2 (N.D. Tex. May 23, 2019) (granting government dismissal motion under Swift); United States ex rel. Sibley v. Delta Regional Medical Center, 2019 WL 1305069, at *6 (N.D. Miss. March 21, 2019) (same; “Giving the government the unilateral power to dismiss qui tam actions is consistent with the notions of prosecutorial and executive discretion.”).

A district court in the Sixth Circuit granted a government motion to dismiss in United States ex rel. Maldonado v. Ball Homes, LLC, 2018 WL 3213614 (E.D. Ky. June 29, 2018), and adopted a Swift-like standard.  “[T]he plain language of the statute says nothing about the government being required to make any sort of showing in support of its motion to dismiss.”  Id. at *3.  The government had an interest in “reining in” FCA abuse:

It is clearly unreasonable to suggest that the government should sit by idly while [relator] prosecutes an action in the United States’ interest. . . .  [T]he government has a valid interest in reining in weak qui tam actions. . . .  After evaluating [relator’s] claims, the government concludes that he overstate[d] the significance of the alleged false statements and fail[ed] to tie the false statements to false claims.

Id. at *3 (citation and quotation marks omitted).  Finally, the FCA entitled a relator only to a “hearing” – not an “evidentiary hearing” – when the government sought dismissal.  Id. at *4.

In United States ex rel. Farmer v. Republic of Honduras, 2020 WL 496509 (S.D. Ala. Jan. 30, 2020), the court concluded that the Eleventh Circuit would likely follow the DC Circuit’s “unfettered” discretion standard for governmental dismissals.  Id. at *5.  The “allegations lack merit” and “dismissal would accomplish the valid government purpose of declining to litigate a non-meritorious claim.”  Id. at *6.  Unlike Farmer, United States ex rel. Graves v. Internet Corp. for Assigned Names & Numbers, Inc., 398 F. Supp.3d 1307 (N.D. Ga. 2019), dodged the Sequoia/Swift issue, again because the government won dismissal either way.  Id. at 1310.  Either of the government’s two justifications – lack of merit and interference with its objectives – was sufficient to meet even the Sequoia test.  Id. at 1311.

The relator in United States ex rel. Schneider v. J.P. Morgan Chase Bank, N.A., No. CV 14-1047 (RMC), 2019 WL 1060876 (D.D.C. March 6, 2019), tried to avoid Swift by claiming that Department of Justice “internal rules” constrained the power of the government to dismiss FCA cases.  Id. at *2.  No dice.  The government’s discretion to dismiss was “unfettered.”  On appeal, this ruling was summarily affirmed.  United States ex rel. Schneider v. JPMorgan Chase Bank, National Ass’n, 2019 WL 4566462 (D.C. Cir. Aug. 22, 2019).  Even more recently, the United States Supreme Court denied a petition for certiorari in Schneider.

Of course, even the most baseless litigation can occasionally find a safe haven.  Such was the case in CIMZNHCA, 2019 WL 1598109, where one of the investor-owned FCA cases survived a government motion to dismiss.  Not only did CIMZNHCA find nothing wrong with the business model of “professional relators,” but it held that the government’s objection to such practices meant the government’s objection was “pretextual and the Government’s true motivation is animus towards the relator.”  Id. at *4.

The government also lost a battle in United States v. Academy Mortgage Corp., 2018 WL 3208157 (N.D. Cal. June 29, 2018), under what may euphemistically be called a “searching” application of the Ninth Circuit’s Sequoia standard.  In response to the government’s dismissal motion, the court referenced an “evidentiary hearing” (unusual, to say the least) and refused to credit the government’s “drain its resources” justification.  Id. at *1.  Instead, Academy Mortgage criticized the government for investigating only the plaintiff’s limited initial complaint and not the “expanded” (and thus more burdensome to the government) amended complaint, despite “[a] more complete investigation [being] well within the Government’s ability.”  Id. at *2.  Uniquely, Academy Mortgage imported a “good cause” requirement into the government’s right of dismissal, even though that was limited to outright government intervention (31 U.S.C §3730(c)(3)) to take over prosecution of an FCA action.  Id. at *3.

These rulings in Academy Mortgage struck us (again euphemistically) as sufficiently unusual that we checked what happened after that – after all, couldn’t the government simply undertake a “more complete investigation” and again seek dismissal?  In Academy Mortgage the government filed an appeal (No. 18-16408) and sought to stay the action, which was denied, and then an interlocutory appeal, which was also denied.  See United States v. Academy Mortgage Corp., 2018 WL 4794231 (N.D. Cal. Oct. 3, 2018).  That was too much even for the Ninth Circuit, which (according to PACER, Docket #160) itself stayed the action on December 21, 2018.  The government’s appeal in Academy Mortgage was orally argued on November 14, 2019, and remains pending in the Ninth Circuit.  Thus, the trench warfare in Academy Mortgage continues for the time being.

Mr. Lincoln’s law has been badly abused.  Even though only a small percentage of all FCA cases have been affected to date, we do respect the government’s ongoing campaign against the litigation industry’s excesses – Rally ‘Round the Flag.

Today’s case doesn’t involve prescription drugs or medical devices.  But it is a circuit court opinion that we thought warranted bringing to the attention of our readers who deal with False Claims Act (“FCA”) claims.  We’ve discussed FCA claims as an “awkward vehicle” in pharmaceutical cases here and we hold true to that belief.  But, as we all know qui tam plaintiffs (relators) try to append the FCA to allegations of off-label promotion of prescription drugs.  The allegations typically go something like this – pharmaceutical company engaged in a nationwide “scheme” to promote its drug off-label, doctors therefore prescribed it off-label, and then the pharmacies filed claims with the government for those off-label prescriptions.  Putting aside that typically plaintiffs cannot sufficiently allege a connection between the alleged off-label promotion and any claim made to the government – where’s the “objective falsehood” that is the touchstone of an FCA claim.

Well, that was precisely the question before the Eleventh Circuit in United States v. Aseracare, Inc., — F.3d –, 2019 WL 4251875 (11th Cir. Sep. 9, 2019) in the context of claims for hospice care.  In order for a hospice claim to eligible for Medicare reimbursement, the attending physicians must certify based on the doctor’s “clinical judgment regarding the normal course of the individual’s illness” that the individual is terminally ill.  Id. at *2.  Terminally ill means that the patient’s life expectancy is 6 months or less.  Id.  That does not mean that if a patient survives for longer than 6 months, they are no longer eligible for hospice care under Medicare. The regulations take into consideration that “predicting life expectancy is not an exact science.”  Id. Patients can improve, they can be removed from hospice and return to hospice, they could simply survive longer than anticipated.  So there are also recertification periods every 60 to 90 days to remain on hospice.  There are not set criteria for determining whether a patient is terminally ill, but there are guidelines.  The bottom line is that the treating physicians are required to review all the medical information concerning the patient and user their best clinical judgment to reach a conclusion regarding whether a patient is terminally ill.  While the regulations may be different, the underlying premise is very similar to a physician using his/her clinical judgment to decide whether to prescribe a medication to a patient for an off-label purpose.

Plaintiffs in the present case alleged that defendant, a collection of hospice care providers, “submitted documentation that falsely represented that certain Medicare recipients were terminally ill when in the Government’s view they were not.”  Id.  at *3.  Again, sounds similar to a claim that prescriptions were falsely submitted for off-label uses that in the government’s view were not medically necessary.  The key words being “in the government’s view.”  The government was not alleging that the certifications by the treating physicians weren’t supported by the underlying medical records or by the physician’s own clinical judgment.  Just that the government didn’t agree with the treating doctor’s conclusion.

The case proceeded to trial because at the summary judgment stage, the trial court was unwilling to adopt a “reasonable doctor” standard.  Id. at *5.  At trial, the government’s expert testified that based on his review of the records, it was his medical opinion that the patients had life expectancies of greater than 6 months. The government’s expert conceded, however, that “his testimony was a reflection of only his own clinical judgment based on his after-the-fact review of the supporting documentation.”  Id. at *6.  Moreover, the government’s expert did not testify that no reasonable doctor would have concluded that the patients were terminally ill.  Id.

After a jury verdict in favor of plaintiff, on defendant’s post-trial motions, the court determined that it erred in not instructing the jury that proof of an “objective falsehood” was a necessary element of an FCA claim and that “a mere difference of opinion between physicians, without more, is not enough to show falsity.”  Id. at *8.  The Eleventh Circuit agreed.

The government’s primary argument against a narrow reading of what constitutes a falsity under the FCA was that hospice care would be eligible for reimbursement for anyone who finds a physician to sign the certification.  Id. at *13.  But that overlooked that the certification still had to be based on the physician’s clinical judgment informed by the patient’s medical records. Nothing in the court’s ruling required that every claim for hospice care had to be reimbursed without review by the government.  The government is still free to challenge any claim it believed was not “reasonable and necessary” under the regulations.  For instance, if the government had proof that the certifying doctor didn’t review the patient’s medical records or if the government proved that no reasonable doctor who have found the patient terminally ill. Id. at *15.    What it cannot do is use after the fact, secondary opinions to contradict first-hand, fully-informed, reasonable medical decisions by patient’s physicians.  Just as the regulations provide – life expectancy is a not an exact science.  So, it is not difficult to believe that two doctors could disagree – and neither be wrong.  Maybe because this is something we’ve lost sight of in general society, it warrants repeating.  Two people can hold different opinions and neither person is wrong.  It may be equally accurate to say neither person is correct either.  That’s why we call it an opinion.  It’s a person’s or people’s view or judgment.  We talk about opinions every single day on this blog.  They are the views of a single judge or a particular court as to what the law is.  Sometimes we don’t agree with them.  Sometimes we even accuse them of getting it wrong.  But that’s just our opinion too.

In medicine, a doctor renders an opinion about medical care.  It needs to be an informed opinion to be valid, but it’s still an opinion nonetheless. He/she needs to use his/her medical knowledge and the knowledge of his/her patient to reach a learned conclusion.  But it is still an opinion subject to individualized interpretation.  That’s why people get second opinions for major medical decisions.  But if your second opinion differs from your first, was your first doctor wrong or the second doctor?  In either event, neither was lying to you.  Neither stated an “objective falsehood.” That’s why the government didn’t have an FCA claim in this case.

[A] reasonable difference of opinion among physicians reviewing medical documentation ex post is not sufficient on its own to suggest that those judgments—or any claims based on them—are false under the FCA. A properly formed and sincerely held clinical judgment is not untrue even if a different physician later contends that the judgment is wrong.


We think this should apply to FCA claims involving allegedly medically unnecessary off-label uses.  There is no law against doctors prescribing drugs or using devices off-label if they are using their own independent medical judgment and doing what they believe to be in the best interests of their patients.  So, an FCA claim premised on off-label promotion supported by nothing more than plaintiff’s experts disagreeing ex post with the reasoned judgment of patients’ doctors shouldn’t hold up using the reasonable doctor standard adopted by the Eleventh Circuit.

This post is about a hidden gem.  That brings to mind a hiking trail that’s one of the two best in Pennsylvania (along with Ricketts Glen), but isn’t found in any of the “Fifty Hikes in [fill in the blank]” books that one finds in outdoorsy stores.  The hike is part of the Appalachian Trail, and begins on the west side of the Lehigh Gap, where the Lehigh River cut through Blue Mountain north of Allentown.  Rather than in any book, we found it by looking at an AT map, which read “exposed rock, continuous views, dangerous during bad weather.”  That’s the kind of trail we like, and it’s a rarity in Pennsylvania, and indeed anywhere on the east coast south of northern New England/New York.  Too many trees, but not on Lehigh Gap.  Best views in Pennsylvania, and not in any guidebook that we’ve seen.

Returning to the law, ever since the Department of Justice/FDA got spanked – hard – by the courts in United States v. Caronia, 703 F.3d 149 (2d Cir. 2012), and Amarin Pharma, Inc. v. FDA, 119 F. Supp.3d 196 (S.D.N.Y. 2015), we’ve noticed (and been told) that the government is being much more careful with its “off-label promotion” prosecutions.  A couple of left-over, pre-Caronia prosecutions dragged on, into the post-Caronia world, with inconsistent and at times disconcerting results, but the government takes care these days to go after only off-label communications that it can also portray as “false and misleading” in the First Amendment context.

Thus, we’re on record as predicting that, instead of direct challenges to criminal prosecutions, the “most promising spawning ground for future Caronias seems likely to be in False Claims Act (“FCA”) litigation.”  The “why” is relatively simple:

While FCA claims are ostensibly brought in the name of the government, agencies like the FDA have relatively little control over the allegations that FCA plaintiffs (called “relators”) make.  Also, to increase their own take, such relators have the incentive to make the broadest allegations, which means they would like to avoid having to prove reliance on false information on a one-by-one basis.

Well then, you might ask, where are those decisions?  Caronia has been around for over six years and Amarin for four.  Surely, some defendant should have tagged some FCA relator with a First Amendment dismissal in the meantime.  Heck, we’ve been wondering the same thing.

Speaking of hidden gems, we just turned up United States ex rel. Sullivan v. Atrium Medical Corp., 2015 WL 13799885, at *1 (Mag. W.D. Tex. Nov. 20, 2015), and our first reaction is “where has this been hiding all this time,” since the opinion is 3 ½ years old, but only recently appearing on Westlaw.

Sullivan is just that – a First Amendment based – more specifically an Amarin-based − dismissal of wayward FCA claims for seeking to impose liability for truthful off-label communications.

So how did the First Amendment win in Sullivan?

It helped that the relator’s allegations about supposed off-label promotion were, to use the Texas phrase, all hat and no cattle.  First, the relator alleged that old saw, fraud on the FDA.  But those claims had already been dismissed, because the fraud alleged was too remote – no fraud had been committed against the government payor agencies, as opposed to the FDA, which doesn’t pay claims.  See 6/15/15 Order at 19-23.  Second, the relator alleged that the defendant handed out “69 reprints of papers and articles” about the off-label use at issue.  2015 WL 13799885, at *7.  Third, the complaint contained the usual unsupported boilerplate “false and misleading” allegations that we have come to expect in this type of complaint.

As to off-label use itself, Sullivan held:

Off-label marketing concerns the dissemination of information about “product uses” not approved by the FDA.  Although the FDA “generally restricts a manufacturer from marketing for off-label purposes” physicians and hospitals are not prohibited from purchasing, “prescribing, or using a medical device for an off-label purpose.”  As a result, the “off-label use of many products and drugs is an accepted medical practice.  Further, “[c]ourts recognize that off-label use of a drug or medical device is not the same as medically unnecessary use of that drug or device.”

Sullivan, 2015 WL 13799885, at *11 (footnotes omitted).

Next, Sullivan addressed the implications of the First Amendment decision in Amarin on FCA cases:

When making its findings on likelihood of success, the Court held that the FDA could not support its claims against Amarin based on truthful and non-misleading speech.  The Amarin Pharma court also referenced the FCA, stating Amarin had “separately sought protection from civil claims under the FCA, on the premise that the Government might seek to hold Amarin liable if doctors submitted false claims securing reimbursement in connection with Vascepa prescriptions.”  The Court granted Amarin the injunctive relief it sought to permit Amarin to promote the off-label use of Vascepa “without exposing itself to liability for misbranding” and “without incurring liability for misbranding.”

Id. at *11 (footnotes omitted) (emphasis original).  Amarin therefore warranted “a detailed examination of whether relator has sufficiently pleaded false or misleading promotions sufficient to state a claim.”  Id. at 12.  It was a “new, persuasive precedent” that “Caronia . . . a criminal case, also applies in a civil action and that truthful and non-misleading speech cannot be used to state an actionable off-label marketing claim.”  Id. at *12, n.137 (this judge loves footnotes).

Then, the court TwIqballed the general “false and misleading” allegations.

[G]eneral allegations that [defendant] promoted the [device] for off-label uses . . . do not meet the Twombly/Iqbal plausibility standard because truthful and non-misleading promotions fall within the protection of the First Amendment and cannot render any subsequent claim false. . . .  [Relator] has not provided a particularized statement of facts sufficient to meet the Twombly/Iqbal plausibility standard to show why [defendant’s] off-label marketing of the [device] was false and misleading.

Id. at *13.  The court also threw out relator’s “generalized allegations of fraud, including . . . about training,” as “not meet[ing] Rule 9(b)’s pleading standard.”  Id.  This is a significant point.  Back when we were first developing the First Amendment as a defense, during the Bone Screw litigation, plaintiffs could get away with rote recitals that anything and everything was “false” or “misleading.”  Back then, we had easier defenses than the First Amendment.  But now we have TwIqbal.

Finally, the one specific allegation the relator had made, about the use of scientific articles, could not overcome the First Amendment.

The Amarin Pharma court expressly rejected the allegation, as relator makes here, that sharing reprints of articles about off-label use is impermissible.  Instead, Amarin Pharma held that sharing reprints of articles about off-label use is permissible, protected speech.

Id. (footnote omitted).

All told, the Sullivan decision concluded that the “allegations of false and misleading speech, taken as a whole and viewed in the light most favorable to relator, are not sufficient to state a claim” under the First Amendment protection of the defendant device manufacturer’s right to say truthful things about off-label uses of its product.  Id. (lengthy footnote about various allegations in the complaint omitted).  Therefore, “off-label marketing claims under federal or state law should be dismissed with prejudice.”  Id. at *14.

Boom!  That’s precisely the kind of First Amendment decision, brought about by an overreaching FCA relator, that we’ve been expecting to see.  And to think that it’s been out there, unbeknownst to anyone (or at least by us), for 3 ½ years.

Having read the magistrate’s report/recommendation in Sullivan, we immediately wondered whether it had been adopted by the district court – the usual next step.  We found nothing to that effect on Westlaw, or Lexis.  But we have a PACER account and we’re not afraid to use it, so we took a look at the docket.  Turns out that the relator in Sullivan never even sought district court review.  Instead, after a series of deadline extensions, the case settled in mid-2016 for who-knows-what.  So Sullivan wasn’t appealed, even to a district court.  Still we think it’s an important demonstration of the power of a post-TwIqbal First Amendment defense in FCA litigation.  So add Sullivan to your First Amendment repertoire.

Our day job has been keeping us busy, so busy with depositions, motions, delayed flights, and assorted drama that we have not posted in more than a month.  After such a long layoff, we had hoped to return with a vengeance, a “the North remembers” sort of vengeance.  Instead, we get fair market value, Current Procedural Terminology codes, and a Daubert challenge to a defense expert accountant.  Eh.  The decision is in a False Claims Act case about Medicare fraud and kickbacks, about which we care and have even spent some billable time.  But the reason we are writing about U.S. ex rel Lutz v. Berkeley Heartlab, Inc., No. 9:14-cv-00230-RMG, 2017 U.S. Dist. LEXIS 107481 (D.S.C. July 12, 2017), is because the rejection of opinions offered by the expert in this case undercuts the damages claims we see in other cases.

Lutz involves allegations that the defendants overbilled Medicare in connection with blood tests.  One part of the alleged scheme was that the defendant labs charged high processing and handling fees.  (We will ignore the issues of FCA materiality and causation that seem to flow from the absence of evidence of Medicare payment on processing and handling charges.) From what we can tell, the defendant’s expert opined that these fees were consistent with the fair market value—a defined term under the, aptly named, Stark Act—and did not represent kickbacks to referring physicians.  He offered a “charge-based methodology” to conclude that the fees were consistent with fair market value because physicians allegedly expected to recover for time spent on processing handling, not just for the actual blood draw.

“[I]t is no secret that the sticker price of services listed in physician bills and hospital chargemasters are totally unmoored from the reality of arm’s-length transactions actually taking place in the marketplace.” Id. at *12.  We think you can see where we are going with this.  In product liability cases, economic damages related to medical care, past and future, are typically based on amounts incurred.  The collateral source rule is often used offensively to create a windfall of the difference between the amount on the bills and the portion of that amount anybody ever paid or will pay.  We have called this “phantom damages.”  In FCA, RICO, and consumer protection cases, for instance, the plaintiff’s theory of price gouging or other impropriety sometimes relies on the list price of a drug or the amounts appearing on bills, regardless of what typically gets paid.  Although in the context of granting a challenge to an expert for healthcare providers that wanted the charges to matter, the Lutz decision supports the more typical defense position.

Actual transactions, not just bills, are a better indicator of fair market value because “physicians deliberately set their fees higher than the amount they either expect to receive or do in fact receive to ensure that no money is left on the table.” Id. at *16.  The court identified a number of decisions, from various types of cases, recognizing that “physicians’ billed charges do not necessarily reflect the market value of physician services.” Id. at **17-18 (citing cases).  So, the next time you have a case where the plaintiff says her damages include the total of all her medical bills and the only support she needs is her expert mouthing that “the charges were all reasonable and necessary,” think about whether Lutz and the cases it cites help you push back.  That was our return:  brief, a little bloody, and with the promise of more to come.

Ever since Buckman Co. v. Plaintiffs’ Legal Committee, 531 U.S. 341 (2001), held that state-law claims alleging fraud on the FDA are preempted, plaintiffs have been attempting to find some other way of bringing claims that attribute FDA actions to a defendant’s false pretenses.  Since preemption is based on the Supremacy Clause, and the constitutional relationship between the federal and state legal systems, the doctrine doesn’t apply where recovery is sought under a federal statute.  Since the False Claims Act (“FCA”) is a federal statute, sporadic attempts have been made to bring private fraud-on-the FDA-claims under that statute.  Bexis, who invented what became the Buckman fraud-on-the-FDA/implied-preemption defense in the Bone Screw litigation, even worked on an amicus brief in one such case, United States ex rel. Gilligan v. Medtronic, Inc., 403 F.3d 386 (6th Cir. 2005), that was ultimately decided (favorably to the defense) on other grounds.

A little less than a year ago we reported on an excellent FCA result in United States ex rel. D’Agostino v. EV3, Inc., 153 F. Supp.3d 519 (D. Mass. 2015).  Ever since we’ve been holding our breath, because the First Circuit has been known for pro-plaintiff rulings in cases against our drug and medical device clients.  Indeed, the First Circuit once led our list the worst drug/medical device cases of the year for two years running – in 2012 and 2013.  Whether something’s changed since then in the First Circuit, we can’t say.  But we can report that the district court’s dismissal of fraud-on-the-FDA-based FCA claims in D’Agostino has just been affirmed with an excellently reasoned decision.  See D’Agostino v. EV3, Inc., ___ F.3d ___, 2016 WL 7422943 (1st Cir. Dec. 23, 2016).

The facts in D’Agostino were thoroughly explained in our prior post.  Briefly, the relator (a fired sales rep) alleged that the defendants pulled fast ones on the FDA with respect to the approvals/supplemental approvals of two medical devices, one called “Onyx” and the other “Axium” (these defendants evidently like “x” as much as did the former Standard Oil of New Jersey).  The relator-plaintiff claimed that the defendants:  (1) sought approval of Onyx for a narrow indication, but intended to promote it more broadly off-label (exactly the claim in Buckman); (2) failed to live up to promises made to the FDA concerning extensive surgeon training in using Onyx (also a form of fraud on the FDA); (3) concealed the failure of Onyx’s active ingredient in a different device (ditto); and (4) failed to recall earlier versions of Axium after obtaining FDA approval (not fraud on the FDA, but a theory that could dangerously penalize innovation).  See D’Agostino, 2016 WL 7422943, at ??? (for some reason WL has omitted star paging, so we’ll also cite to the slip opinion), slip op. at 4-8.  Critically, although the FDA was informed of all of these claims, the Agency never instituted any enforcement action, nor did the government elect to join the D’Agostino FCA action.  Id. at 9, 15.  As discussed in the prior post, the district court dismissed all of these claims with prejudice as futile.

Continue Reading Fraud on the FDA Doesn’t Fly Under the FCA Either

What follows is the promised second guest post from Reed Smith’s Lindsey Harteis concerning the UHS v. Escobar False Claims Act case.  Lindsey’s first post set the stage.  The Supreme Court decided Escobar yesterday, so now she’s back with her take on the version of FCA “implied certification” that the unanimous Supreme Court recognized.

As always our guest posters deserve all the credit, and any blame, for the contents of their posts.


To someone born in 1984, the phrase “Elvis Lives” is tough to figure out.  We don’t know what things were like back when he was alive and on TV (from the waist up).  But we do get the general concept that something can live on after death, just in a different way.  And we definitely enjoyed the trio of violin-playing Elvises in a Coldplay music video a few years back.  So, Elvis is still around.  Just in a different way.

Unfortunately for us defense bloggers, so is the implied certification theory.  Yesterday the Supreme Court handed down its opinion in Universal Health Services, Inc. v. Escobar, No. 15-7, slip op. (U.S. June 16, 2016).  This is the pending Supreme Court decision we blogged about last month (here) that has determined both the scope and validity of the implied certification theory of False Claims Act liability.  While the theory survived, the opinion is not all bad news.  In fact, it should have relators all shook up more so than defendants.  So we’ll get going with a little less conversation and try to ease your suspicious minds about how a case that allows a pro-relator theory of liability to survive can actually still be good.

The case is overall good for FCA defendants because the Supreme Court emphasized just how rigorous the materiality threshold is in these cases.  The bad news is that the implied certification theory is still (at least in some circumstances) valid.  (As a quick refresher, implied certification cases are founded on the idea that when a provider submits a claim for payment to the Government, that claim impliedly certifies compliance with all conditions of payment.  Thus, the theory goes, if the claim fails to disclose the defendant’s violation of a material statutory, regulatory or contractual requirement, that claim is false and actionable under the FCA.)

Continue Reading Guest Post – FCA Implied Certification, the Slim, Early Elvis Version

How much is “enough?” Will we have enough money to retire someday? Did the Drug and Device Law College Sophomore study enough for her computer science midterm? Is there enough salt in the matzo ball soup? In the realm of summary judgment, we who represent defendants are painfully familiar with courts that dodge this question, allowing claims to proceed and avoiding the complicated issues of admissibility that determine whether a plaintiff has presented enough evidence to create a genuine issue of material fact.

Not so in United States of America ex rel. John King and Tammy Drummond, et. al. v. Solvay S.A., et al.. 2016 U.S. Dist. LEXIS 43133 (S.D. Tex. Mar. 31, 2016). In King, a False Claims Act case, the Relators claimed that the defendant promoted three drugs for off-label uses, and that the off-label promotion resulted in false claims being submitted for prescriptions paid for by government health care programs. King, 2016 U.S. Dist. LEXIS at *5. The defendants moved for summary judgment on these claims, arguing that the relators did not have any admissible evidence of false claims. Specifically, the defendants argued that the Relators relied on inadmissible Texas and New York claims data to create summary charts of supposed false claims and didn’t disclose who created the charts or explain how they were created. Further, the defendants objected to the Relators’ reliance on sales representatives’ “call notes,” arguing that the call notes contained hearsay and lacked foundation. Id. at *8-9.

New York Claims Data

The Relators claimed that the New York claims data was self-authenticating because it was produced in response to a subpoena. The court disagreed, holding, “. . .[W]hile certainly Relators’ assertion that the State of New York produced the New York Claims Data pursuant to a subpoena must be what was requested in the subpoena,” documents produced pursuant to a subpoena are not always self-authenticating. Id. at *13. In contrast to a case cited by the Relators, which involved documents that were going to be used against that producing party, the Relators, who sued on behalf of the State of New York, were using the documents to benefit New York. The court concluded that the New York claims data was not self-authenticating “simply because it was produced pursuant to a subpoena.” Id. at *13-14.

Continue Reading Summary Judgment for Defendants in FCA Action: No Admissible Evidence of False Claims

This post is from the non-Reed Smith side of the blog.

Modglin v. DJO Global Inc., 2015 U.S. Dist. LEXIS 60812 (C.D. Cal. May 8, 2015) is one of those cases that has so much good stuff going on, we just want to dive right in.  It is the complete dismissal with prejudice of an attempt to state a False Claims Act (“FCA”) case against the manufacturers of Pre-Market Approved (“PMA”) bone-growth stimulators based on allegations that the manufacturers were aware their products were being used off-label – a fact they failed to disclose to Medicare and other federal healthcare plans when submitting claims for reimbursement.  We’ve got allegations of fraud, connected to off-label promotion, surrounding a PMA medical device and all tied up in a dismissal with prejudice.  It’s like package wrapped in shiny paper with a big red bow on top.  As pretty as the trappings are, we’re still going to rip them off to see what’s inside. And we don’t think you’ll be disappointed.

Relators’ specific allegations are that defendants requested reimbursement for stimulators approved for lumbar spine use when they knew that the stimulators were being used with the cervical spine – an off-label use – which they claim is not allowed.  Id. at *25.  So, what is allowed?  Under the Medicare Act, to be reimbursed, the device must be “reasonable and necessary” for diagnosis or treatment.  Id. at *13.  The Department of Health and Human Services (“HHS”) has decided that PMA devices generally can be reimbursed.  Id. at *15.  So far so good for stimulators.

Continue Reading California Federal Court Gets Tough on Off-Label Promotion FCA Claims

Back in February, we hosted a guest post about United States ex rel. Rostholder v. Omnicare, Inc., 745 F.3d 694 (4th Cir. 2014), an extremely important False Claims Act (“FCA”) decision for the defense-side’s effort to prevent the FCA from being converted into an improper private enforcement mechanism for the FDCA.

We’ve got more news.  Certiorari has been denied.

Here’s a much briefer guest post (see our original one for details of the original decision) from Reed Smith partner Colin Wrabley (a member of the victorious team), putting this latest development in context.  As always our guest posters get all the credit (and any blame) for their work.

Continue Reading Another Guest Post on Rostholder FCA Developments