false claims defense strategy

In this post, I will be focusing on the intersection of off-label communications with government enforcement of health care fraud through the False Claims Act. Over the past eight years, the U.S. Department of Justice (“DOJ”) has been particularly aggressive in using the False Claims Act to pursue recoveries from individuals, health care providers, and drug manufacturers that participate in federal health benefit programs. In fact, from 2009 to 2016, DOJ collected $19.3 billion from health care False Claims Act settlements and judgments, with $2.5 billion recovered in fiscal year 2016, alone. (More DOJ false claims statistics can be found here.) DOJ’s enforcement efforts are not solely targeted against garden variety billing fraud, but also involve claims arising from alleged violations of health care regulatory requirements. Among other things, the DOJ has been targeting claims for reimbursement for off-label uses of regulated products. DOJ’s aggressive policy of holding manufacturers accountable for off-label claims under the False Claims Act is entirely consistent with FDA’s stance on off-label communications as described in the January memo. However, recent court interpretations of off-label communications as protected First Amendment speech, as well as interpretations of the causality component of False Claims Act claims, have apparently caused DOJ to reconsider its strategy with respect to such cases. Continue Reading The Past, Present, and Future of Government Regulation of Off-Label Communications – Part 5

Written by Ellyn Sternfield and Stephanie Willis

Is time the government’s friend?  

When qui tam relators/whistleblowers file suit under the civil False Claims Act (FCA), they are “standing in the shoes” of the government to allege that the government has suffered damages due to fraud.  By law, the case remains under seal for a 60-day period to allow the government to initially investigate and verify the allegations.  The government may then (i) elect to intervene in the case and take over pursuit, or (ii) decline to intervene, forcing the relator to either proceed on his/her own or dismiss the case.  Either way, the case proceeds publicly. 

But law and reality can be vastly different.  In reality, these FCA cases can be pending under seal for years before any government action becomes public.  Historically, the government’s attorneys take advantage of numerous seal extensions to conduct full-scale investigations and negotiations, and ultimately use the threat of intervention as incentive for settlement.  A target company must defend itself without fully knowing the extent of the allegations filed against it.  Indeed, the underlying case behind the recent Pharmaceutical Industry Average Wholesale Pricing settlements with multiple pharmaceutical companies had been under seal for more than ten years.

But time may no longer be on the government’s side in qui tam cases.

Now companies are fighting back and district court judges are more carefully scrutinizing routine government requests to extend a seal in a FCA filing.  A recent National Law Journal article noted multiple jurisdictions where seal extensions are no longer automatically granted. 

There are definite strategic advantages to pushing back on seal extensions; for example, getting a qui tam suit unsealed provides target companies more leverage to counter the false claims allegations earlier in the investigation.  And as a July 2011 ruling from the District of Maryland illustrates, unsealing can have other strategic purposes.  In that case, a defendant used a motion to unseal all of the court filings to determine whether the relator improperly disclosed privileged attorney-client discussions to the government, and to bolster an argument that the relator was not the original source of the FCA allegations.  In granting the defendant’s request, the court rejected the government’s argument that its motions for extensions of the seal that contained critical investigative strategy and information that could affect other pending cases.  

As an April 2011 Fourth Circuit opinion confirms, the seal remains a tool that protects the integrity of an initial investigation by the government.  But aggressive defense counsel now have more hope of peeking behind the curtains of a seal sooner to see what false claims allegations are lurking there.