On April 26, 2021, the Eleventh Circuit affirmed the dismissal with prejudice of a qui tam action brought by two former employees of a Georgia hospice provider and associated medical providers. The Court held that the relators did not plead with sufficient particularity under Rule 9(b) that the defendant had submitted a false claim to the government. Estate of Debbie Helmly, et al. v. Bethany Hospice and Palliative Care of Coastal Georgia, LLC, et al., No. 20-11624 (11th Cir. Apr. 26, 2021).
A federal district court recently issued a rare order denying the Department of Justice’s (DOJ) motion to intervene in a qui tam suit after the government’s initial declination months earlier. See United States ex rel. Odom v. Southeast Eye Specialists, PLLC, 3:17-cv-00689 (M.D. Tenn. Feb. 24, 2021). The False Claims Act allows the government to intervene in a case in which it previously declined to intervene upon “a showing of good cause.” Although DOJ does so not frequently seek to intervene after previously declining to do so, courts are generally deferential to the government’s shift in position. This decision provides important precedent for defendants in the position of arguing that a late intervention by DOJ is not appropriate.
In line with an emerging trend of False Claims Act enforcement against private equity funds for the activities of their portfolio companies, the government and a private equity fund that formerly owned a medical device and pharmaceutical manufacturer recently settled a qui tam suit alleging violations of the False Claims Act. U.S. ex rel. Johnson v. Therakos, Inc., Case No. 12-cv-1454, E.D. Pa. The suit resolves allegations that from 2006 to 2015 the manufacturer promoted a cancer treatment for use in pediatric patients—a use that had not been approved by the Food and Drug Administration. As a result, the government contended, the private equity fund former owner caused the manufacturer to submit false claims to Medicaid, the Federal Employee Health Benefits Program, and Tricare. The case remains under seal; as a result, it is not yet apparent whether the government has alleged that the private equity fund took an active role in the management of the portfolio company or other facts that would support FCA liability attaching to the investor. In settlement of the claims, but without admitting liability, the private equity fund agreed to pay the United States and participating states $1.5 million. The settlement agreements are available here.
We will continue to monitor the docket for this case and for further action by DOJ against private equity investors in the healthcare and life sciences industries.