Exactly one year ago, DOJ moved to dismiss 11 qui tam False Claims Act actions brought by Venari Partners, LLC, doing business as National Health Care Analysis Group (NHCA), over NHCA's objections. Those motions, together with DOJ's promise in late November 2018 to dismiss Gilead Sciences, Inc. v. United States ex rel. Campie on remand from the Supreme Court, were an indication that DOJ was executing on the Granston Memo's directive to seek dismissals of meritless and burdensome qui tam cases. FCA watchers thus were eager to see how courts would resolve DOJ's motions, and in particular, how courts would address the Swift versus Sequoia split. Decisions have now been issued in all 11 cases. And while courts adopted different views as to the appropriate standard of review, 10 of the 11 cases ultimately were dismissed.
NHCA filed suit in 2016 and 2017 against 38 defendants across seven jurisdictions, alleging that the defendants violated the FCA and Anti-Kickback Statute (AKS) by using nurse educators to engage in "white coat marketing" and providing free nurse educator and reimbursement support services. According to DOJ, NHCA is a "professional relator" that was "set up by investors and former Wall Street investment bankers" specifically for the purpose of filing FCA suits.
On December 17, 2018, DOJ moved to dismiss each case under 31 U.S.C. § 3730(c)(2)(A), arguing, among other things, that the allegations "lack[ed] sufficient merit to justify the cost of investigation and prosecution" and "conflict[ed] with important policy and enforcement prerogatives of the federal government's healthcare programs." In particular, DOJ argued that the patient support programs at issue are in the public interest because, "given the vast sums the government spends on the medications at issue, federal healthcare programs have a strong interest in ensuring that . . . patients have access to basic product support." NHCA opposed the motions in most cases,1 arguing that DOJ did not have the right to dismiss over its objections and that DOJ failed to substantiate its stated reasons for dismissal.
Over the past year, courts granted DOJ's motions in all but one case.2 Some courts applied the "rational relation" test of Sequoia Orange Co. v. Baird-Neece Packing Corp., 151 F.3d 1139 (9th Cir. 1998), while others declined to formally adopt either Sequoia or the "unfettered right to dismiss" standard from Swift v. United States, 318 F.3d 250 (D.C. Cir. 2003), holding that DOJ had met its burden irrespective of which standard applied. In declining to definitively adopt one standard, several courts also noted that Sequoia was "only 'slightly more restrictive'" than Swift and that "both standards are extremely deferential to the Government."
Only one court denied DOJ's motion. In United States ex rel. CIMZNHCA v. UCB, Inc., No. 3:17-cv-00765 (S.D. Ill.), the court adopted the Sequoia standard and held that DOJ had not adequately investigated the specific claims at issue in that case and had not performed a sufficient cost-benefit analysis. DOJ's appeal of this decision is currently pending before the Seventh Circuit.
With all cases through the district court stage, FCA watchers now wait for the circuits to weigh in on the Swift versus Sequoia split. Stay tuned to Qui Notes for updates.
1. The following three cases were voluntarily dismissed by NHCA: United States ex rel. SAPF, LLC, v. Amgen, Inc., No. 16-cv-5203 (E.D. Pa.); United States ex rel. Carle, v. Otsuka Holdings Co., No. 17-cv-966 (N.D. Ill.); United States ex rel. Miller, v. AbbVie, Inc., No. 3:16-cv-2111 (N.D. Tex.).
2. The following seven cases were dismissed by the courts: United States ex rel. SMSPF, LLC v. EMD Serono, Inc., No. 16-cv-5594 (E.D. Pa.); United States ex rel. NHCA-TEV, LLC v. Teva Pharms., No. 17-cv-2040 (E.D. Pa.); United States ex rel. SMSF, LLC v. Biogen, Inc., No 1:16-cv-11379-IT (D. Mass.); United States ex rel. SCEF, LLC v. Astra Zeneca PLC, No. 17-cv-1328 (W.D. Wash.); United States ex rel. Health Choice Advocates, LLC v. Gilead, No. 5:17-cv-121 (E.D. Tex.); United States ex rel. Health Choice Alliance, LLC v. Eli Lilly & Co., No. 5:17-cv-123 (E.D. Tex.); United States ex rel. Health Choice Group LLC v. Bayer Corp., No. 5:17-00126 (E.D. Tex.).
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