On January 24, 2023, the United States District Court for the Middle District of Florida denied a motion to dismiss a qui tam suit premised on Anti-Kickback Statute (“AKS”) allegations, explaining that it could not dismiss the case because DOJ and several interested states had filed oppositions to application of the public disclosure bar. See United States ex rel. Marcus v. BioTek Labs, LLC, No. 8:18-cv-2915 (M.D. Fla. Jan. 24, 2023).
Bringing claims under the FCA and state analogs, the relator argued that the defendants violated the AKS by providing remuneration—in the form of “free supplies, personnel, training, and equipment, as well as a percentage of gross collections”—to a medical practice to induce the practice to work with the defendants to offer allergy testing and treatment to their patients. Among other bases, the defendants moved to dismiss under the FCA’s public disclosure bar and analogous bars incorporated into state False Claims Acts.
Under subsection 3730(e)(4) of the FCA, the public disclosure bar applies—“unless opposed” by the United States or unless the relator is an “original source”—when the relator’s allegations are “substantially the same” as what has been disclosed publicly though one of three enumerated channels.
DOJ took the unusual step of filing an opposition to the application of the public disclosure bar. In its opposition, DOJ noted that the defendants contended that the relator’s allegations were previously disclosed (1) in “the course of a federal criminal investigation/prosecution,” and (2) on the defendant’s website. In all events, according to DOJ, its opposition rendered the defendants’ public disclosure argument “moot.” Adopting DOJ’s framing, the court concluded that the opposition of the United States and some of the interested states to dismissal under the public disclosure bar rendered its application “moot.” To the extent some of the interested states had not expressed opposition, such that the application of the public disclosure bar to claims under those states’ FCAs was at least viable, the court found that the relator was an original source who acquired personal knowledge of the defendants’ purportedly unlawful practices while she performed marketing for the defendants. The court also quoted the Supreme Court for the overly narrow view that the public disclosure bar targets only “a subset” of claims “deemed unmeritorious or downright harmful,” concerns the court found inapplicable to this case.
In the same filing, DOJ included a statement of interest disagreeing with one of the defendants’ AKS arguments. Relying on the Eleventh Circuit’s Bingham opinion, which we discussed here, the defendants argued in their motion to dismiss that showing “remuneration” under the AKS requires demonstrating a transfer of value that was commercially unreasonable or inconsistent with fair market value (“FMV”). The defendants were wrong to rely on Bingham, DOJ argued, because FMV or commercial reasonableness does not immunize a defendant’s conduct under the AKS. DOJ acknowledged that some AKS safe harbors include a requirement that “remuneration be . . . consistent with fair market value.” According to DOJ, however, “that inclusion further undercuts” the defendants’ FMV argument in two ways. First, “it would make no sense to require” a relator to allege or to prove the absence of FMV as part of the relator’s prima facie case, but then to require the defendant to allege or to prove FMV as part of an affirmative defense such as a safe harbor. Second, the safe harbors with a FMV requirement have additional requirements, such that only a small subset of FMV transactions are actually lawful under those safe harbors.
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