A district court recently denied a relator’s efforts to translate alleged manipulation of skilled nursing facility (“SNF”) CMS Star Ratings into a claim under the FCA, while allowing the relator to proceed with allegations that the CEO of a SNF chain oversaw a kickback scheme designed to churn business. See U.S. ex rel. Orten v. North Amer. Health Care, Inc., No. 14-cv-02401 (N.D. Cal. Nov. 9, 2015). The case reinforces well-established precedent that FCA suits alleging regulatory violations cannot proceed where the government does not condition payment on complete regulatory compliance. The government’s Statement of Interest arguing that the public disclosure bar was triggered as to certain claims demonstrates the DOJ’s growing wariness of opportunistic behavior by relators seeking to capitalize on pre-existing government investigations to which they did not contribute.
A district court recently took a broad view of the public disclosure bar in holding that where previously unsealed qui tam suits take a scattershot approach to broad industry allegations of misconduct, even companies not named in those suits can successfully invoke the public disclosure bar during later litigation.
In United States ex rel. Ambrosecchia v. Paddock Labs., LLC, No. 12-cv-2164 (E.D. Mo. Sept. 23, 2015), the relator alleged that defendants violated the FCA by making fraudulent misrepresentations to CMS about FDA approval dates for drugs and providing false Drug Efficacy Study Implementation (“DESI”) codes indicting defendants’ products were safe and effective, which the federal healthcare programs then relied upon to pay for drugs ineligible for reimbursement. The defendants moved to dismiss, arguing that the claims were substantially the same as those in a suit filed prior to the relator’s, and therefore the public disclosure bar applied. The relator attacked the application of the public disclosure bar both procedurally and substantively.
On September 25, 2015, a Central District of California judge denied the government’s request to maintain documents under seal in a declined qui tam suit, on the basis that the documents describe only routine investigative methods of the government. See United States ex rel. Hong v. Newport Sensors, Inc. et al., No. 13-cv-01164-JLS-JPR (C.D. Cal. Sept. 25, 2015). This order followed the court’s prior denial of an attempt by the government to maintain the seal for a failure to show good cause to limit the unsealing to only specific documents.
A judge in the Western District of Texas recently departed from a magistrate judge’s recommendation, ruling that the novelty of the relator’s FCA claims – which are based on allegations that the defendant medical device manufacturer committed “fraud on the FDA” by seeking clearance for its stent devices based on substantial equivalence with a predicate device, when the defendant allegedly had no intention of marketing its device for the predicate device’s use – could not overcome the failure to otherwise meet all of the requisite criteria for interlocutory appeal. See United States ex rel. Sullivan v. Atrium Med. Corp., No. SA-13-CA-244-OLG (W.D. Tex. Oct. 1, 2015). This suit involves a continued, but as yet unsuccessful, effort to expand the potential basis for FCA liability to fraudulent conduct directed to one government agency separate from the payor agency.
A court in the Central District of California recently granted in part and denied in part the motions to dismiss of defendants—multiple Medicare Advantage (“MA”) plans and a home health assessment company—in a suit alleging that the sickness of patients had been inflated through illegitimate in-home assessments. See United States ex rel. Silingo v. Mobile Med. Examination Servs., No. 13-cv-01348 (C.D. Cal. Sept. 29, 2015). The case is one further development in the broader ongoing enforcement effort against private Medicare insurers (as reported here), and highlights the scrutiny by CMS of the role in-home assessments play in the MA program.
On August 20, 2015, the District of New Jersey granted in part and denied in part defendants’ motion to dismiss allegations that by making comparative claims regarding an on-label use of a drug, the defendant prevented physicians from making informed decisions about whether resulting prescriptions were eligible for Medicare or Medicaid reimbursement. See United States ex rel. Dickson v. Bristol-Myers Squibb Co., No. 13-1039 (D.N.J. Aug. 20, 2015). The case highlights relators’ ever-broader use of the FCA to target sales and marketing activities of pharmaceutical manufacturers.
On August 7, in the first Caronia progeny case, the United States District Court for the Southern District of New York (Engelmayer, J.) granted preliminary relief to Amarin Pharma, Inc. (“Amarin”) in a highly significant case involving First Amendment limitations on the Government’s entitlement to bring misbranding charges based on manufacturers’ truthful, non-misleading speech about off-label uses of drugs. See Amarin Pharma Inc. v. Food and Drug Admin., No. 1:15-cv-03588 (S.D.N.Y. Aug. 7, 2015).
Posted by Jaime L.M. Jones and Brenna Jenny
On Friday, the Northern District of California dismissed with prejudice claims alleging that a failure to obtain supplemental approval for major changes in manufacturing processes created FCA liability. U.S. ex rel. Campie v. Gilead Sciences, Inc., No. 11-0941 (N.D. Cal. June 12, 2015). The court also adopted a narrow reading of “worthless services” in the context of pharmaceutical products. Together, these holdings deal a significant blow to those seeking to premise FCA suits on violations of current Good Manufacturing Practices (“cGMPs”).
Posted by Jaime L.M. Jones and Brenna Jenny
A decision earlier this month by the Central District of California that the public disclosure bar had been triggered marked an unusual ruling in which the court determined that a whistleblower whose allegations led to an administrative investigation may be precluded from sharing in the settlement funds due to the disclosure of the resulting report to the relator himself. United States ex rel. Swoben v. SCAN Health Plan, No. 09-cv-05013 (C.D. Cal. June 1, 2015).
Posted by Jaime Jones and Bevin Seifert
On May 12, 2015, Maryland Governor Larry Hogan signed into law Senate Bill 374, an expansion of the Maryland False Claims Act (“MFCA”), which took effect on June 1, 2015. The prior version of the MFCA was limited to Medicaid and healthcare-related fraud, whereas the new law covers any claims made to the state or to local government.