A recently leaked internal DOJ memo reveals a dramatic shift in DOJ’s approach to dismissal of non-intervened qui tam suits. Citing the “significant resources” that the government expends even in non-intervened cases, the memo—drafted by Commercial Litigation Branch Director Michael Granston—sets forth a series of factors for lawyers with DOJ and U.S. Attorneys’ offices to consider when evaluating whether to seek dismissal of a qui tam case. (more…)
As discussed here and here, courts continue to grapple with how to resolve qui tam cases where the government continued purchasing from the defendant even after being made aware of the relator’s allegations of fraud. One judge recently vacated an “unwarranted, unjustified, unconscionable, and probably unconstitutional” $350 million jury verdict for the relator, finding the government’s continued payment of the defendants’ claims dispositive on the issue of materiality. United States ex rel. Ruckh v. Salus Rehabilitation LLC, No. 11-cv-1303 (M.D. Fla. Jan. 11, 2018). The case reinforces the important role that government purchasing histories play post-Escobar.
The Supreme Court emphasized in Escobar that questions of materiality are not “too fact intensive for courts” to decide through a motion to dismiss. Nonetheless, what facts a plaintiff must allege adequately to plead materiality consistent with Escobar’s “demanding” standard remains a hotly contested question. In a recent decision, the Second Circuit held that the relator’s failure to allege that CMS, the agency allegedly defrauded, changed its reimbursement practices after becoming aware of information supposedly withheld by the defendant, doomed the complaint on materiality grounds. See United States ex rel. Coyne v. Amgen, Inc., No. 17-1522 (2d Cir. Dec. 18, 2017). The decision underscores the significance of the materiality requirement at the motion to dismiss stage. (more…)
Clinical laboratories stand in a position of tension: although laboratory tests must be medically necessary to be reimbursable by federal healthcare programs, laboratories often do not directly engage with patients in a way that would permit them to assess medical necessity. A district court recently corrected its ruling regarding the extent to which laboratories can be held liable under the FCA when the tests for which they submit claims are not medically necessary. United States ex rel. Groat v. Boston Heart Diagnostics Corp., No. 15-cv-487 (D.D.C. Dec. 11, 2017). (more…)
CMS has recently committed significant resources to advance the use of electronic health records (“EHR”) systems. One of the biggest initiatives is the “meaningful use” program, through which CMS offers incentive payments to healthcare providers who demonstrate and attest to using EHR systems that have certain qualities and satisfy specific objectives. (more…)
If the government “repeatedly concludes that it has not been defrauded,” could fraud have nonetheless occurred? The Fifth Circuit grappled with this question when reviewing an appeal from a $663 million jury verdict against Trinity Industries, a manufacturer of highway guardrails. See United States ex rel. Harman v. Trinity Indus., No. 15-41172 (5th Cir. Sept. 29, 2017). In finding the relator’s allegations of materiality wanting, the Fifth Circuit’s grant of judgment as a matter of law for Trinity Industries reiterated that the Supreme Court’s Escobar decision “heightened” the materiality standard to “adjust tensions between singular private interests and those of government and cabin the greed that fuels” False Claims Act litigation.
In Escobar, the Supreme Court upheld implied certification claims “at least where two conditions are satisfied,” namely specific misrepresentations and noncompliance with a material requirement. Some courts have interpreted this phrase as defining two necessary conditions to establish implied certification liability under the FCA. Other courts view the phrase as introducing one potential path to liability, where the first condition, specific misrepresentations, is not required. Citing what has emerged as a “majority view” among district courts in the Second Circuit that the two conditions are mandatory, the Southern District of New York recently deepened the divide. See United States ex rel. Forcier v. Computer Scis. Corp., No. 12-cv-1750 (S.D.N.Y. Aug. 10, 2017). (more…)
Both before and after the Supreme Court’s decision in Escobar, courts have hesitated to accept “fraud on the FDA” theories of liability, which posit that misrepresentations aimed at FDA render subsequent requests to government payors false. Breaking with a growing line of courts, the Ninth Circuit recently articulated a broad understanding of how noncompliance with FDA regulations can form the basis of FCA liability. See United States ex rel. Campie v. Gilead Sciences, Inc., No. 15-16380 (9th Cir. July 7, 2017). (more…)
The heightened materiality standard imposed by the Supreme Court last year in Escobar continues to pose a formidable bar to relators pursuing expansive theories of FCA liability. As we explain below, one court recently rejected a claim against pharmaceutical manufacturers alleging that the defendants had fraudulently induced state formulary committees to cover the defendants’ drug, refusing to take a “step toward bringing all misrepresentations to government bodies within the purview of the FCA.” See United States ex rel. Dickson v. Bristol-Myers Squibb Co., No. 13-cv-01039 (D.N.J. June 27, 2017). (more…)
Noncompliance with ambiguous regulations often presents a weak case for an FCA suit. A growing number of courts (as discussed here and here) have held that reasonable interpretations of regulations, absent contrary guidance from the government, reflect a mens rea inconsistent with the requisite “knowing” misconduct under the FCA. However, the Eleventh Circuit recently reached a contrary conclusion, holding that defendants who articulate reasonable interpretations of ambiguous regulations can nonetheless be liable under the FCA. See United States ex rel. Phalp v. Lincare Holdings, Inc., No. 16-10532 (May 26, 2017). (more…)