Bipartisan Legislation Introduced To Overhaul FCA To Further Hamstring Defendants
A bipartisan group of senators, led by Senators Grassley (R-IA), Leahy (D-VT), Wicker (R-MI), Durbin (D-IL), and Kennedy (R-LA), has introduced the False Claims Amendments Act of 2021. This legislation is worth watching not just because it would significantly amend the FCA, but because Senator Grassley has a successful track record of shepherding through to passage legislation reversing gains made by defendants in FCA cases.
Government Narrowly Avoids Invalidation of All LCDs in the Ninth Circuit
A divided panel of the Ninth Circuit recently reversed a district court decision that held that local coverage determinations (“LCDs”) are valid only when issued through a 60-day notice-and-comment rulemaking process. Agendia, Inc. v. Becerra, No. 19-56516 (9th Cir. July 16, 2021). The impact of the district court’s ruling—and a spirited dissent from the Ninth Circuit majority opinion—would have been significant for healthcare enforcement actions, including under the False Claims Act. LCDs have never gone through notice-and-comment rulemaking. A decision that all LCDs are accordingly invalid would have undermined a number of False Claims Act cases premised on the use of LCDs to apply the “reasonable and necessary” standard for Medicare reimbursement. The Ninth Circuit is the first court of appeals to weigh in on this issue, however, and others may yet reach a different conclusion.
Fifth Circuit Affirms DOJ’s Broad Authority to Dismiss Qui Tams Over Relators’ Objections, but Adds Teeth to “Hearing” Requirement
On July 7, 2021, the Fifth Circuit affirmed a district court’s grant of the United States’ motion to dismiss—over the relator’s objection—two qui tams that challenged pharmaceutical patient support programs. While the court’s decision is consistent with those of other courts of appeal that have confirmed DOJ’s broad authority to dismiss qui tams over relators’ objections, the Fifth Circuit appears to add some teeth to the requirement that the relator be provided with a “hearing” before such a dismissal may be granted.
DOJ Opposes Supreme Court Review of Granston Dismissal Standard
On May 21, 2021, the Department of Justice filed a brief in opposition to a petition for writ of certiorari filed by the relator in U.S. ex rel. Cimznhca, LLC v. UCB, Inc. The petition challenges the Seventh Circuit’s decision reversing the district court’s denial of the government’s motion to dismiss over the relator’s objection. In reversing, the Seventh Circuit determined that, so long as relators have an opportunity to be heard under 31 U.S.C. § 3730(c)(2)(A), the government may dismiss qui tams when it satisfies the standard contained in Federal Rule of Civil Procedure 41(a)(1)(A)(i). That rule provides that a plaintiff may dismiss an action by serving notice of dismissal any time before the opposing party serves either an answer or a motion for summary judgment.
Eleventh Circuit Rejects Argument That Mathematical Probability Suffices To Allege The Existence of False Claims, Affirming Dismissal For Failure To Satisfy Rule 9(b)
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).
Grassley Letter to AG Nominee Garland Previews Legislation To Curtail DOJ Dismissal Authority and Materiality Requirement
Senator Charles Grassley, who supported the nomination of Merrick Garland for Attorney General, sent the then-nominee a letter on February 24 to ask the Department of Justice to work to “further clarify and strengthen the False Claims Act.” As we reported in previous posts (here, here, and here), Senator Grassley has publicly criticized DOJ’s position that its authority to dismiss FCA suits over relators’ objections is virtually unfettered, and has criticized the materiality standard established by the Supreme Court in Escobar as lending undue weight to role of government conduct (or lack thereof) in response to allegations of fraud. The letter discloses that Senator Grassley is working with “a cadre of bipartisan Senate colleagues” to “strengthen” and “improve” the False Claims Act by narrowing the materiality requirement, and by requiring a court to assess the merits of a qui tam in deciding whether to grant a motion to dismiss filed by DOJ. We will continue to monitor and report on any such legislation that may ultimately be proposed.
DOJ Releases Detailed Statistics on FCA Recoveries Through FY 2020
On January 14, 2021, Acting Assistant Attorney General Jeffrey Bossert Clark of the Department of Justice (DOJ) announced that the Civil Division recovered over $2.2 billion in settlements and judgments under the False Claims Act (FCA) for fiscal year 2020. This represents a more than $850 million decrease from last year’s figure and a $3.9 billion decrease from the all-time recovery record in 2014. Detailed statistics on FCA cases from 1986 through FY 2020 are available here.
Illinois Supreme Court Broadly Construes Relators’ Standing under the Illinois Insurance Claims Fraud Prevention Act
On November 19, 2020, the Illinois Supreme Court issued an opinion broadly construing relators’ standing to sue under the Illinois Insurance Claims Fraud Prevention Act (“Act”) (740 ILCS 92/1 et seq.). The Act is similar to the Illinois False Claims Act, but allows private citizens (“interested persons”) to sue on behalf of the State to remedy alleged fraud against private insurers. As with the Illinois False Claims Act, the State retains ultimate control over the litigation under the Act whether or not it intervenes, but the relator is entitled to a portion of the proceeds of any settlement or judgment if the litigation succeeds.
Court Permits Qui Tam Focused on Late-90s Conduct to Go Forward, Adopting a Broad Reading of Remuneration and FCA Causation
The Eastern District of Pennsylvania recently ruled on a summary judgment motion in a case that has been pending in the federal courts since 2002, involving alleged conduct by the defendant drug manufacturer from 1996-2004, when the pharmaceutical industry and compliance programs were vastly different than they are in 2020. U.S. ex rel. Gohil v. Sanofi U.S. Services Inc’s, No. 02-cv-02964 (E.D. Pa. Nov. 12, 2020). In its ruling, the court adopted an expansive definition of remuneration and a low bar to satisfy the causation element of FCA claims premised on underlying alleged violations of the Anti-Kickback Statute. On this basis, the court is allowing the relator to proceed to trial on allegations that his former employer caused the submission of false claims by paying kickbacks in the form of fees to physicians to participate in advisory boards and speaker programs, educational grants, and meals and gift baskets, while granting summary judgment for the defendant based on allegations related to preceptorships and other alleged kickbacks.
Court Sanctions DOJ and Defendants For Discovery Violations In False Claims Act Case
On July 10, 2020, a federal magistrate judge in the District of Minnesota issued a 39-page decision sanctioning DOJ (and the defendants) for various discovery violations in an FCA case based on alleged violations of the Anti-Kickback Statute.
As previously reported here, the Defendants Paul Ehlen (“Ehlen”), the majority owner of Precision Lens, and Cameron-Ehlen Group (conducting business as Precision Lens) (collectively, the “defendants”) are involved in the distribution of intraocular lenses and other products for ophthalmic surgeries. DOJ alleges that the defendants provided physicians with expensive trips, meals, and other in-kind remunerations at no cost or below fair market value. DOJ further alleges that, in exchange, these physicians purchased the Defendants’ products and used them during surgeries, which were subsequently billed to Medicare, in violation of the Anti-Kickback Statute and the False Claims Act. DOJ and the defendants filed motions seeking sanctions against the other in connection with inadequate preparation of 30(b)(6) designees and potential spoliation of information, documents, and electronically stored information. DOJ also filed a motion to compel the production of additional potentially relevant documents.