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Will High Court Ever End Circuit Split Over FCA Pleading?

The U.S. Supreme Court’s latest refusal to tackle the enduring and highly consequential circuit split over how precisely False Claims Act suits must be pled has left lawyers wondering whether justices will wade into the legal morass anytime soon.

The refusal happened on April 16 when justices shot down a petition from Johnson & Johnson, which is accused of defrauding Medicare by selling defective hip implants. J&J wanted the high court to resolve the split over Federal Rule of Civil Procedure 9(b), which requires that FCA suits be pled with “particularity.”

It marked at least the second time this term that justices swatted away an FCA petition involving 9(b). In October, the Supreme Court batted down a petition from Pennsylvania-based Victaulic Co., which allegedly violated the FCA by importing unmarked pipe fittings and falsifying import documents.

The high court’s repeated refusals have occurred despite its clear interest in the topic; twice since 2010, justices have asked the U.S. solicitor general whether to address the split, but they still haven’t pulled the trigger on a 9(b) case.

“Given recent history, it is difficult to envision a scenario in which the Supreme Court would be eager to weigh in as to how the requirements of Rule 9(b) should be applied to FCA claims in the near term,” Bass Berry & Sims PLC member Matthew Curley told Law360.

Notably, the petitions that the Supreme Court have rejected have often involved some of the country’s biggest businesses and most elite lawyers. J&J, of course, is a corporate powerhouse, and its lead counsel was appellate superstar Paul Clement of Kirkland & Ellis LLP.

If that sort of petition isn’t enough for the Supreme Court right now, then it’s hard to see any petition satisfying the court in the next few years, some observers say.

“It appears to me that there were very competent lawyers laying out the argument that the Supreme Court should address this issue, and it’s clear to me that it’s not something that’s going to be addressed in the near future,” said Reuben A. Guttman of Guttman Buschner & Brooks PLLC. “But obviously that can change.”

The central dispute over 9(b) is whether it requires whistleblowers to identify specific billing claims that were allegedly fraudulent. The Fourth, Sixth, Eighth and Eleventh Circuits usually require such specificity, while the other circuits are more tolerant of allegations that strongly suggest fraudulent billing claims must have been filed.

Attorneys differ over the scope of the split, but most agree it’s real enough to make or break cases depending solely on where they’re filed. For the plaintiffs bar, heavy-handed applications of 9(b) are unwise because they shield fraudsters simply because whistleblowers don’t have easy access to billing records.

“The lack of information on particular details when the whistleblower has plausibly alleged a scheme involving fraud on the government should not derail a case at an early stage,” Phillips & Cohen LLP partner Claire Sylvia said.

It’s also not always clear that a specific billing claim is essential to 9(b)’s main purpose, which is to provide adequate notice of fraud allegations and thereby allow a robust defense.

“The reality is that 9(b) is just a defense red herring. … It’s not a reality that they don’t know what the case is about — they’re just raising a technical argument,” Guttman said.

Defense lawyers see things much differently, arguing that whistleblowers can embark on unwarranted fishing expeditions if allowed to proceed to discovery without first identifying a single bogus billing claim.

“A relaxed or watered-down version of Rule 9(b) often allows complaints to proceed where there is no real connection between the alleged fraud scheme and any actual false claims,” Curley said.

There are different theories about why the Supreme Court hasn’t waded into the 9(b) fight. It’s possible that it has hoped the circuit split would resolve itself — something the solicitor general in 2014 said looked increasingly likely, but which has not yet happened.

It’s also possible that the Supreme Court is wary of mandating a one-size-fits-all approach that ends up torpedoing relatively strong FCA cases or unleashing relatively weak FCA cases.

“Pleading is kind of the bailiwick of the lower courts in some ways,” Morgan Verkamp LLC founding partner Rick Morgan said. “I think that the Supreme Court is concerned about appearing to cabin the discretion of the front-line judges.”

Alternatively, the right case may simply not have presented itself yet.

“I think the court looks at each petition presented by litigants and determines whether the particular case meets the criteria for meriting Supreme Court review,” Sylvia said. “I don’t think the court is looking for an FCA 9(b) case or avoiding an FCA 9(b) case.”

Whatever the reason, it won’t be long before the Supreme Court will once again have to consider delving into the circuit split. Whistleblowers earlier this month filed a petition asking the Supreme Court to resolve the 9(b) split as part of an FCA case they filed against Bristol-Myers Squibb Co. and Otsuka America Pharmaceutical Inc.

The whistleblowers — former sales representatives at Bristol-Myers — are represented by Morgan. He called the case a solid vehicle for addressing 9(b), while also acknowledging that it could join the long line of 9(b) cases that the Supreme Court has swept aside.

“We certainly think that it’s very well-founded, and that the court should be looking for a way to rationalize the 9(b) jurisprudence across the circuits,” Morgan said. “At the same time, there’s now a many-year history of the court not taking cases like this. So we put it up and see what happens.”

By Jeff Overley www.law360.com
–Additional reporting by Braden Campbell. Editing by Pamela Wilkinson and Breda Lund.

Reprinted with permission.

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Safe Healthcare Depends on Whistleblowers

by Reuben Guttman and Traci Buschner, Partners at Guttman Buschner & Brooks, PLLC

For centuries, the integrity of healthcare delivery has been premised on the words “first do no harm” which – though not technically part of the Hippocratic Oath – seem to find their origin in teachings of the Greek Physician, Hippocrates, who lived more than two millennia ago. Whatever the origin, it is a phrase which views healthcare delivery through the eyes of the physician; the presumptive gatekeeper of healthcare delivery.

Today, it is true that physicians are still the gatekeepers. Yet, the swing of their gate is now subject to influences that are beholden to money and not medicine.

Doctors are the middlemen for drug and device manufacturers; their decisions to write prescriptions are often premised on company spin sometimes touting interpretations of cherry picked data neatly planted into publications that have the aura of reliability. This is a strategy employed by “Big Pharma” to cause product utilization well beyond the boundaries of the FDA approved package label. Factor in speaker fees to doctors to give canned speeches for thousands of dollars a pop, drug representatives who are trained to hint at ways that products can be used for purposes outside their approved indication, and company marketers who strategize about how to downplay side effects, and at the end of the day, the doctor gatekeepers are no longer able to swing their gate based on honest medical information.

If this is disturbing, consider that Wall Street and the investment bankers own an interest in hospitals, nursing homes and emergency care facilities. Pharmacy benefit managers (PBM’s) – influenced by rebates from Big Pharma – decide what drugs are going to be “preferred” by the health and welfare funds that reimburse us for our prescriptions. And did you ever wonder why more psychiatrists are writing prescriptions for drugs as opposed to engaging patients in long term therapy? The answer? It is drug company spin combined with the way insurance companies reimburse.

Here is the point; the obligation to do no harm has been compromised by non-medical monied interests that influence our health care delivery system. This we know from the efforts of whistleblowers who risked their careers to surface information that has caused most of the large pharmaceutical companies, and others in the health care delivery business, to admit to criminal violations or pay significant dollars to reimburse the Medicare and Medicaid systems for drugs, devices and treatments that were not medically justified and/or have placed patients at risk. If you think we are making this it up, check out these headlines from Department of Justice Press Releases reporting on resolution of cases initiated by whistleblowers: Abbott Labs to Pay $1.5 Billion to Resolve Criminal and Civil Investigations of Off Label Promotion of Depakote; Wyeth Pharmaceuticals Agrees to pay $490.9 million for Marketing Prescription Drug Rapamune for Unapproved Uses; Pfizer to pay $2.3 Billion for Fraudulent Marketing; Glaxco SmithKline to Plead Guilty and Pay $3 Billion to Resolve Fraud Allegations and Failure to Report Safety Data; Amgen to Pay $24.9 million to Resolve False Claims Act Allegations; Community Health Systems to Pay $98.15 Million to Resolve False Claims Act Allegations.

And it is not just the drug industry, whistleblowers have exposed the malfeasance of hospital and nursing home chains, outpatient clinics, the insurance industry and unfortunately even doctors who are sworn to do no harm.

The most valuable legal channel for whistleblowers has been the Federal False Claims Act (FCA), a statute dating back to 1864. Through statutory revisions over the years, the FCA allows individuals to sue in the name of the United States to recover monies that have been paid out because of fraudulent conduct or false statements that are made to secure payment from the government fisc. The statute imposes civil penalties and treble actual damages. And while the FCA allows for the recovery of federal dollars, over twenty states and even some cities have passed local statutes allowing for the recovery of local dollars. These statues have prudential standing requirements which limit suits to those brought by individuals or entities with information that generally cannot be found in media reports unless the whistleblower – known as a Relator – is an original source of the information, meaning that he or she has some knowledge of the wrongdoing that is independent of and materially adds to what is a matter of public record as defined by the technical terms of the statute.

Litigation under the FCA has recovered billions in federal and state dollars. More importantly – as DOJ press releases confirm — FCA litigation has surfaced pharmaceutical marketing schemes that have exposed patients to medically unnecessary drug regimens and potential hazards. FCA litigation has also exposed practices by hospitals and drug distributors that are either not medically necessary or that have placed patients at risk of harm.

For whistleblowers suing under the FCA and state/local legislative equivalents, no doubt the monied interests on Wall Street considers them snitches. Yet, these “snitches” are integral to regulatory compliance particularly – believe it or not – when the regulators themselves depend on Wall Street interests to regulate. Consider that the Center for Medicare and Medicaid Services (CMS) — in theory — is responsible for doling out trillions of dollars annually to pay for drugs, medical diagnosis, and treatment. Does CMS review each claim for reimbursement? Of course not; CMS contracts with private vendors to review claims and make payments. And for drug uses outside the FDA approved indication, these private vendors rely on other private entities – known as the “Compendia” – to ascertain whether a drug use has some level of medical acceptance. As to the Compendia, the entities that publish them may rely on the very doctors who are speakers for the drug industry.

How do we know all this? Whistleblowers! They bring the cases that stir the dirt to the surface; they expose impropriety to sunlight. They make our healthcare system safer. And no Wall Street, they are not snitches. Rather, they are integral to compliance enforcement.

*Guttman and Buschner have represented whistleblowers in cases brought under the False Claims Act against Abbott Labs, Glaxco SmithKline, Amgen, Pfizer, Wyeth, Celgene, Pharmerica, Omnicare, and Community Health Systems which collectively have returned over $5 Billion to the government.

**This is part of ACSblog’s Symposium on Whistleblowers.

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Treasury watchdog subpoenas Google to identify whistleblower

By Victoria Finkle, AmericanBanker.com

WASHINGTON — The Treasury Department’s office of the inspector general has gone to court to identify an anonymous employee at the Office of Financial Research who produced several critical online videos.

The employee reportedly posted five YouTube videos that raised concerns about discrimination and diversity problems at the research office, which is an independent bureau within Treasury.

The inspector general’s office subpoenaed Google, which owns YouTube, in February, asking for identifying information about the employee as well as for the content of two of the videos. All of the videos were removed from public view by the employee last fall, according to court filings. They were posted between May 2016 and October 2017.

. . .

Some observers noted that the Treasury inspector general’s subpoena was somewhat surprising given the content of the videos, as described by the employee.

“It strikes me as unusual that Treasury would issue this type of subpoena that would more normally be reserved for a matter of security or significant government operations that require confidentiality, not just complaints about the atmosphere,” said Justin Brooks, a founding partner at the law firm Guttman, Buschner & Brooks who works on whistleblower and employment litigation.

. . . .

Read the full article here.

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Amicus in Rose, et al, v Stephens Institute

SCOTT ROSE, et al, Plaintiffs-Appellees,
v
STEPHENS INSTITUTE, DBA Academy of Art University, Defendant-Appellant.

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA, OAKLAND
IN CASE NO. 4:09-CV-05966-PJH, HONORABLE PHYLLIS J. HAMILTON

BRIEF FOR AMICUS CURIAE NATIONAL NURSES UNITED (“NNU”) – CALIFORNIA NURSES ASSOCIATION, ET AL. IN SUPPORT OF PLAINTIFFS-APPELLEES

Amici curiae are healthcare-focused unions and policy advocates, practicing physicians, academics, and researchers: some have served as medical consultants to pharmaceutical manufacturers, including to their marketing teams. 1 Amici have seen firsthand – both in a clinical setting and in consulting capacities – the harm that can occur when manufacturers violate the Food, Drug & Cosmetics Act (“FDCA”) and False Claims Act (“FCA”) by promoting their drugs for off-label uses that have not been approved by the Food & Drug Administration and that have often been unsafe or ineffective.

Amici have a strong interest in the questions presented in this case, which are fundamental to the scope of liability under the FCA. Amici believe the FCA has fostered evidence-based medicine, prevented patient harm, and facilitated recovery of billions of dollars for the government. Amici are united by a goal to preserve the FCA as an effective tool to combat improper off-label promotion and other fraudulent conduct that causes the government to pay money not lawfully owed.

For decades, violations of the FDCA and other regulations have served as predicates for liability under the FCA in cases where the violations are material and the defendant acts with scienter to divest the government of money it does not lawfully owe. Last year, the United States Supreme Court rejected invitations to overturn Congressional intent and limit FCA liability to situations in which a defendant makes express false statements during the process of submitting claims to the government. See Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016). Appellant and amici supporting Appellant seek to relitigate Escobar and ask this Court to adopt interpretations that vitiate its holdings, holdings of other Supreme Court decisions, and this Court’s existing precedent.

Amici agree that Appellees’ interpretations are consistent with the mandates of Escobar and the Supreme Court’s prior FCA decisions as well as this Court’s existing precedent. Amici submit this brief because Appellant’s contrary interpretations and the interpretations of amici such as the United States Chamber of Commerce have wide-ranging implications beyond the instant case and, if adopted, would gut the effectiveness of the False Claims Act as a tool to combat fraud.

. . . .

Amincus in Rose v Stephens Institute.

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Recovering $280 Million on the eve of trial in one of the most heavily litigated cases under the False Claims Act.

GB recovered $280 million in a non-intervened False Claims Act case against Celgene Corporation on the eve of trial. The Complaint alleged that Celgene unlawfully marketed its drugs Thalomid and Revlimid, including for unsafe and ineffective uses, and subverted independent judgment of medical professionals through false and misleading promotion. The Complaint also alleged that Celgene paid kickbacks to medical professionals to prescribe and recommend Celgene’s drugs in violation of the Anti-Kickback Statute. The settlement is the second largest in a non-intervened case brought under the False Claims Act.