On October 8, 2019, a judge in the United States District Court for the Central District of California granted a stay and certified two questions for interlocutory appeal in relator Integra Med Analytics’ FCA suit against Providence Health & Services (“Providence”), its affiliates, and J.A. Thomas and Associates, Inc. (“JATA”), a clinical documentation consultant. The case, on which we have previously reported here, involves allegations that Providence perpetrated an upcoding scheme whereby it trained its doctors to describe medical conditions with language that would support increasing the severity levels of the DRGs that Providence reported to Medicare, leading to inflated Medicare reimbursements.
On July 16, 2019, the United States District Court for the Central District of California granted in part and denied in part motions to dismiss a declined FCA suit against defendants Providence Health & Services (“Providence”), its affiliates, and J.A. Thomas and Associates, Inc. (“JATA”), a clinical documentation consultant. The suit alleges that Providence perpetrated an upcoding scheme whereby it trained its doctors to describe medical conditions with language that would support increasing the severity levels of the DRGs that Providence reported to Medicare, leading to inflated Medicare reimbursements.
On March 29, 2019, the United States District Court for the Central District of California denied the Department of Justice’s Motion for Partial Summary Judgment against UnitedHealth Group (“United”) in a False Claims Act suit alleging that United knowingly retained overpayments for unsupported diagnosis codes submitted for Medicare Advantage patients. In reaching its decision, the Court relied on the decision by the United States District Court for the District of Columbia to vacate a portion of CMS’s 2014 Final Overpayment Rule applicable to the Medicare Advantage program in UnitedHealthcare Insurance Co. v. Azar, 330 F. Supp. 3d 173 (D.D.C. 2018), which we previously discussed here.
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 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.
A federal district court in California has denied a qui tam relator’s attempt to share in the proceeds of a $323 million FCA settlement, holding that he was not the “original source” of the information that led to the settlement because he learned most of it secondhand from a former co-worker.
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).
In a peculiar twist on a familiar issue, the United States recently filed a brief taking a broad view of the so-called “public disclosure” bar to argue that the U.S. District Court for the Central District of California lacked subject matter jurisdiction over a relator’s claims.
By way of background, relator James Swoben filed suit against SCAN Health Plan and, eventually, a number of other defendants. The United States and California settled with SCAN in 2012 and subsequently declined to intervene against the remaining defendants. When Swoben sought a relator’s share of the SCAN settlement, however, the government refused and took the position that the basis for Swoben’s claims against SCAN had been publicly disclosed in a 2008 report by California’s Controller’s Office. Swoben then moved for partial summary judgment, arguing that the report did not trigger the public disclosure bar because his claims were not “based upon the public disclosure of allegations or transactions in” the report, as required under the then-effective FCA provision. See 31 U.S.C. § 3730(e)(4)(A)(2008).
The government filed a motion in opposition. Swoben’s complaint alleged that SCAN had received duplicate payments from Medicare and Medi-Cal for some of the same services, and, according to the government, the Controller’s report also “allege[d] that SCAN appeared to be doing so.” U.S. Br. 3. That high-level assertion set the tone for the remainder of the brief. In it, the government argued in no uncertain terms that the statute’s “based upon” and “allegations or transactions” language must be read liberally: it “did not matter” if the Controller’s report failed to allege fraud, false claims, or “[f]acts [s]howing the [s]ame.” Id. at 12–18. To the government’s eye, the report contained enough to say that Swoben’s claims were “‘based,’ at least in part, ‘upon'” it and “stated the material transactions underlying” the purported fraud that was alleged expressly and in more detail in Swoben’s complaint. Id.
These arguments may prove useful to FCA defendants down the road: whether or not the government intervenes, defendants should consider ways to invoke the United States’ expansive and firmly articulated view of the applicable public disclosure bar to argue for the dismissal of FCA claims.
Posted by Jonathan Cohn, Paul Ray and Ben Mundel
A recent decision by a federal district court highlights some of the dangers of qui tam suits under the False Claims Act brought by a company against one of its competitors capitalizing on a patent dispute victory.
Needless to say, qui tam suits are typically brought by former officers or employees of a defendant corporation, because these persons are most likely to have access to the type of non-public information generally necessary for a successful qui tam action. See 31 U.S.C. § 3730(e)(4). But, in Amphastar Pharmaceuticals Inc. v. Aventis Pharma SA, EDVC-09-0023 MJG (C.D. Cal.), one pharmaceutical company has brought a qui tam action against one of its competitors. Amphastar, a drug manufacturer, is suing competitor Sanofi (formerly Aventis), alleging that Sanofi fraudulently inflated the price of one of its drugs (Lovenox) over which Sanofi claimed (ultimately unenforceable, as determined in litigation with Amphastar) patent rights and thus overcharged the federal government, as well as several state governments, for the drug. The case is important, because it could mark a new species of False Claims Act case involving corporate qui tam plaintiffs suing their competitors after prevailing in prior patent litigation.
The United States District Court for the Central District of California denied Sanofi’s motion to dismiss Amphastar’s amended complaint on April 19. (Coverage of an earlier order dismissing Amphastar’s original complaint with leave to replead can be found here.) Under Ninth Circuit precedent, the submission of false claims is often pleaded by describing representative examples of particular false claims that have been submitted. Because Amphastar is a competitor of Sanofi rather than a former officer or employee of the company, it did not have ready access to Sanofi’s internal information that might have helped Amphastar detail particular false claims in its complaint. Instead, it pleaded more broadly that Sanofi held the exclusive right to sell Lovenox, that as a result of its fraudulently obtained patent, Sanofi was able to inflate Lovenox’s price, and that the federal government bought certain quantities of Lovenox from Sanofi or its distributors. Sanofi argued that Amphastar’s complaint failed to plead with the particularity required by Federal Rule of Civil Procedure 9(b) that Sanofi had submitted false claims for Lovenox, as necessary for a claim under the False Claims Act. See 31 U.S.C. § 3729(a).
The court disagreed. It acknowledged that “Amphastar has not provided a detailed account of Aventis’s claims submission process, nor specifics regarding how government reimbursement programs work, both of which could be helpful to evaluate the presence of reliable indicia of claims submission.” Nevertheless, it concluded that “[s]uch detail … is not necessary,” because Amphastar “present[ed] a plausible contention that every claim for reimbursement at the inflated price was an actionable false claim.” Accordingly, the court found that Amphastar had pleaded its qui tam claim with adequate particularity under Rule 9(b), and denied Sanofi’s motion to dismiss.
This is an important case that may unfortunately increase the scope of FCA liability. The theory of liability in this case is novel and raises serious risks for pharmaceutical companies. Claims of fraud are a staple in patent litigation. If FCA liability can be predicated on the invalidation of the underlying patents of branded drugs after those patents have been invalidated by competitors on grounds of fraud, then pharmaceutical companies may face new and substantial FCA liability as a consequence of being defeated in patent litigation.
In a case defended by Sidley, a district court in the Central District recently granted a motion to dismiss with prejudice based on the public disclosure bar and, in doing so, clarified several important principles. United States of America, ex rel. Steven Mateski v. Raytheon Co., 2:06-cv-03614-ODW-FMO, Dkt. # 127. The Court recognized that the public-disclosure bar does not require a defendant to establish an exact one-to-one correspondence between public disclosures and allegations in a qui tam complaint. The Court rejected such a “particularity requirement” because the public disclosure bar broadly applies whenever a qui tam complaint rehashes “allegations or transactions” that are “substantially similar” to public disclosures. Slip op. at p. 4. “[P]ublic disclosures need not detail information underlying allegations or transactions so long as they supply enough information for the United States to pursue an investigation.” Id. at p. 6. In addition, the Court affirmed that a defendant need not prove that a qui tam complaint is “solely based upon” public disclosures to defeat jurisdiction – “a qui tam complaint partly based upon publicly disclosed information” is barred as well. Id. at p. 5. Finally, the Court found the relator failed to satisfy the three “independent source” requirements under Ninth Circuit law: (1) he did not “ha[ve] a hand in the public disclosure”; (2) he lacked “direct and independent knowledge” of the alleged fraud; and (3) he had not disclosed the basis of his qui tam allegations to the Government prior to filing the action. Id. pp. 7-9.