On September 30, 2019, a judge in the United States District Court for the Northern District of Illinois granted a motion to dismiss in an intervened FCA qui tam suit, finding that the relators, the United States, and the state of Illinois failed to satisfy Federal Rule of Civil Procedure 9(b)’s heightened pleading requirements for fraud claims. The suit targeted an entity referred to as C&M Specialty Pharmacy (“C&M”), which provides specialized medication for complex medical conditions.
Last week, the Eleventh Circuit issued an opinion holding that a Relator bringing an FCA claim premised on an AKS violation – at least when relating to lease arrangements – must show that the financial arrangements were not at fair market value. See Bingham v. HCA, Inc., Case No. 1:13-cv-23671 (11th Cir. 2019). Significantly, this ruling provides that proving fair market value (or lack thereof) is not a burden imposed solely on defendants as part of a safe harbor defense, but is instead an essential element to establishing the existence of remuneration in the first instance. In the same opinion, the court also held that a Relator cannot rely upon information gleaned in discovery to satisfy Rule 9(b)’s pleading requirements.
In a recent decision, the First District of the Illinois Appellate Court reversed the dismissal of a complaint brought pursuant to the Illinois False Claims Act (the “IFCA”). The circuit court had held that relators satisfied the public disclosure bar because their claims were not substantially the same as publicly disclosed allegations or transactions, but that relators had failed to plead their claim with specificity. The First District agreed with the circuit court’s ruling regarding the public disclosure bar, but found that the circuit court had erred in holding that relators had failed to state a claim. This decision is the third Illinois Appellate Court decision in the last thirteen months reversing dismissals of IFCA actions (see People ex rel. Lindblom v. Sears Brands, LLC et al., No. 1-17-1468 (Ill. App. Ct), and Phone Recovery Services of Illinois, LLC ex rel. State of Illinois v. Ameritech Illinois Metro, Inc. et al., No. 1-17-0968 (Ill. App. Ct.)), and the language used by the court reflects a high threshold for dismissal.
As we previously reported, in U.S. ex rel. Polukoff v. St. Mark’s Hospital, 895 F.3d 730 (10th Cir. 2018), the Tenth Circuit reversed a district court’s dismissal of qui tam claims, reasoning that the relator’s allegations satisfied Rule 9(b). In so holding, the Tenth Circuit “excuse[d] deficiencies that result from the plaintiff’s inability to obtain information within the defendant’s exclusive control.” Earlier this year, Defendant Intermountain Health Care filed a petition for a writ of certiorari, and the Supreme Court recently requested a response from Relator and the United States.
The U.S. District Court for the Northern District of Florida recently held that a False Claims Act suit can proceed against a Florida pharmacy and its owner, rejecting in particular the owner’s arguments that the complaint did not sufficiently allege that he acted with improper intent or caused the submission of false claims.
The U.S. Court of Appeals for the Eighth Circuit joined a growing trend among courts in tightening False Claims Act (“FCA”) pleading requirements, affirming the dismissal of a qui tam action brought against a nonprofit hospital because the relators failed to meet the “particularity” standard set forth under Rule 9(b) of the Federal Rules of Civil Procedure. In doing so, the court reminded FCA litigants that Rule 9(b) requires either “representative samples” of false claims plead with adequate specificity, or particular details of a scheme to submit false claims paired with reliable indicia that they were submitted. United States ex rel. Strubbe v. Crawford Cnty. Mem’l Hosp., No 18-1022, 2019 WL 512190 (8th Cir. Feb. 11, 2019). (more…)
In Carrel v. AIDS Healthcare Foundation, No. 17-13185 (August 7, 2018) the Eleventh Circuit affirmed summary judgment for the defendant on Anti-Kickback Statute-based FCA claims, holding that incentives to employees for referring patients for its services were covered by the employee safe harbor to the Anti-Kickback Statute, and that these payments in particular served the congressional intent of the Ryan White Act to provide AIDS patients with ease of access to services. The Court also upheld the prior dismissal of all other allegations for a lack of particularity, noting that the only instances that relators alleged with particularity were actually covered “services” under the Ryan White Act and that they would not “infer fraud from instances of lawful conduct.” (more…)
On April 28, 2017, the District Court for the District of Massachusetts dismissed a qui tam complaint alleging off-label promotion against a pharmaceutical manufacturer. Dismissal was a sanction for relator’s counsel having devised and implemented what the Court called “an elaborate scheme of deceptive conduct in order to obtain information from physicians about their prescribing practices, and in some instances about their patients.”
Relator filed his initial complaint in 2012, alleging that the manufacturer was promoting off-label use of two drugs and paying physicians kickbacks for prescribing those drugs. While the case was under seal, the relator filed an amended complaint adding detail to his allegations and including a reference to a third drug. After the United States declined to intervene and the case was unsealed in April 2014, relator filed a second amended complaint that focused only on alleged off-label promotion of the third drug.
On March 22, 2017, the District Court for the Northern District of California dismissed a False Claims Act, 31 U.S.C. §3729 complaint against several hospitals for alleged Medicare, Medicaid, Tricare claims submission schemes. United States ex rel. Cherry Graziosi v. Accretive Health, Inc., et al, No. 13-cv-1194 (N.D. Ill. Mar. 22, 2017).
The relator alleged that each of the Defendant hospitals submitted a claim for payment to federal health insurance programs for hospital admissions. When submitting this form, Relator alleged, the hospital must certify that inpatient admissions were determined to be medically necessary by a licensed physician with personal knowledge of the medical necessity. She alleged that the hospitals submitted forms for reimbursement for inpatient treatment in circumstances where the Emergency or Hospital Staff physicians had previously determined that inpatient treatment was not required. According to Relator, these fraudulent submissions were generated or recommended by Accretive Health, Inc., a consultant.
In U.S. ex rel. Alex Booker and Edmund Hebron v. Pfizer, Inc., the U.S. Court of Appeals for the First Circuit affirmed two district court judgments rejecting allegations of the defendant’s sales and marketing activities related to its drug Geodon, noting that, after 6 years of litigation, the whistleblowers failed to provide sufficient evidence to show that defendant’s alleged conduct resulted in the actual submission of fraudulent claims.