By

Matt Bergs

07 June 2022

DOJ Seeks to Avoid Supreme Court Review of Rule 9(b) Circuit Split; Argues Standard Has Largely “Converged”

There has been growing variation among courts of appeal over the appropriate pleading standard to apply under Rule 9(b) to the element of presentment, i.e., the requirement that plaintiffs plead with particularity the submission of a false claim to the government for payment. This topic has been the subject of repeated Supreme Court cert petitions (as discussed further here), and the topic has been raised yet again in a cert petition filed late last year in Johnson v. Bethany Hospice and Palliative Care, LLC (No. 21-462) (lower court opinion discussed here). The relator in Bethany Hospice, whose case was dismissed by the Eleventh Circuit for “rely[ing] on mathematical probability to conclude that a defendant surely must have submitted a false claim at some point”, seeks Supreme Court review of this “longstanding circuit split.” (more…)

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13 April 2022

New Pharmacy, Same Result: Seventh Circuit Holds That Objective Reasonableness Dooms “Usual and Customary” Pricing Case

On April 5, 2022, in a 2-1 decision, the Seventh Circuit applied the precedent it set in United States ex. rel. Schutte v. SuperValu Inc., 9 F.4th 455 (7th Cir. 2021) (discussed here) and found once again that a defendant retail pharmacy did not act with “reckless disregard” under the False Claims Act (“FCA”) by interpreting Medicare Part D and Medicaid “usual and customary” price requirements as allowing it to charge those programs its retail cash prices rather than prices offered through discount programs. United States ex rel. Proctor v. Safeway, Inc., No. 20-3425, 2022 WL 1012256 (7th Cir. Apr. 5, 2022). (more…)

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02 February 2022

First Circuit Joins Circuit Split on FCA Dismissal Authority, Finds Government Has Broad Authority to Dismiss FCA Cases

On January 21, 2022, the First Circuit affirmed the government’s request for dismissal of a whistleblower complaint alleging that several pharmaceutical companies had colluded to defraud Medicare Part D. The government, after declining to intervene, requested dismissal based on its finding that: (1) the suit would require “substantial expenditure of government resources”; (2) “many key aspects of [the relator’s] allegations [we]re not supported”; and (3) “allegations that [the relator] used the qui tam process to leverage his financial interests through securities trading .  . . convince[d] the [g]overnment that [the relator was] not an appropriate advocate of the United States’ interests.” (more…)

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28 January 2022

Fourth Circuit Applies Safeco to FCA Claims, Accuses CMS of “Maintaining Strategic Ambiguity” Around Medicaid Drug Rebate Program Requirements

In a recent 2-1 decision, the Fourth Circuit joined every other circuit to have considered the issue in applying Safeco’s “reckless disregard” standard to legally false FCA claims based on alleged violations of ambiguous laws and regulations.  Under Safeco, courts ask whether a defendant’s interpretation of the ambiguous law or regulation at issue was objectively reasonable and whether authoritative guidance might have warned the defendant away from that interpretation.  The Fourth Circuit found that the Safeco standard “duly ensures that defendants must be put on notice before facing liability for allegedly failing to comply with complex legal requirements.  Without such notice, defendants are not likely to receive due process.”

(more…)

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13 January 2022

Court Concludes Government Agencies Cannot Categorize Regulatory Violations as Material as a Matter of Law

On January 7, 2022, a district court in the Western District of Kentucky dismissed DOJ’s implied false certification theory relating to allegedly medically unnecessary genetic tests, holding that the prosecutors failed to adequately plead materiality.  In so holding, the court set forth a novel test for materiality that forecloses the government’s ability to argue that certain regulations are per se material based on the government’s characterization of them as conditions of payment.  Instead, plaintiffs must still plead “specific facts regarding the effect of a violation of that regulation” to survive dismissal. (more…)

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14 December 2021

Analyzing FCA Materiality Defense Outcomes Under Escobar

Since the Supreme Court in Escobar stated that continued payment by the government is “very strong evidence” that the alleged violations are not “material” under the False Claims Act (“FCA”), courts have grappled with how much weight the government’s continued payment should be accorded when assessing “materiality.” Courts have adopted varying approaches, with no obvious majority position. (more…)

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09 December 2021

Recent Settlement Illustrates Enforcement Risks Associated With Physician Roll-Ups

On December 2, 2021, the Department of Justice (“DOJ”) issued a press release announcing that Flower Mound Hospital Partners (“Flower Mound”), a partially physician-owned hospital, agreed to pay just over $18 million to resolve allegations that it had violated the False Claims Act by submitting claims that violated the Stark Law and the Anti-Kickback Statute. (more…)

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02 September 2021

Fraud Theories Fail Under Rigorous Standards for “Worthless Services” and Materiality

Earlier this week, a court in the Eastern District of Pennsylvania dismissed a declined qui tam action in which the relator, a licensed nurse, alleged that an operator of treatment facilities for disabled individuals fraudulently billed Medicare and Medicaid for substandard care and retaliated against her for investigating that fraud.

(more…)

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19 August 2021

Seventh Circuit Affirms That Safeco “Objective Reasonableness” Standard Applies to FCA Claims; Finds It Was Objectively Reasonable for Defendants to Charge Government Retail Cash Prices Instead of Discount Program Prices

In a 2-1 decision, the Seventh Circuit joined the Third, Eighth, Ninth, and D.C. Circuits in holding that the standard for “reckless disregard” under the Fair Credit Reporting Act (“FCRA”) established by the Supreme Court in Safeco Insurance Company of America v. Burr, 551 U.S. 47 (2007) applies equally to the False Claims Act (“FCA”). Applying Safeco, the Seventh Circuit also held that it was objectively reasonable for Defendants, a group of retail pharmacies, to charge the Medicare Part D and Medicaid programs their retail cash prices as their “usual and customary” prices for drugs rather than prices offered through competitor price-match discount programs.

(more…)

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12 July 2021

Drug Diagnosis Code Data Sought by HHS OIG May Cue Enforcement

Leadership from HHS-OIG recently advocated for new mandates that physicians include a diagnosis code with each prescription and that claims data capture this information. This followed on the heels of a Congressional Research Service report suggesting that Congress should pass legislation requiring healthcare providers to include diagnostic information in prescriptions.  As Sidley lawyers Jaime L.M. Jones, Brenna E. Jenny, and Matt Bergs discuss in an article published in Bloomberg Law entitled Drug Diagnosis Code Data Sought by HHS OIG May Cue Enforcement, HHS-OIG may see diagnosis code data as a tool to engage in nuanced investigations into pharmaceutical companies for off-label promotion of prescription drugs, leveraging law enforcement’s increasingly sophisticated capacity to use data analytics to identify targets for investigation.

A copy of the article is available here.

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