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Upswing in DOJ Qui Tam Dismissals

The Department of Justice (DOJ) appears to be taking to heart the policy articulated in what has come to be called the Granston Memo, as it has recently sought dismissal of 11 False Claims Act (FCA) cases in various federal courts across the country, in part on the grounds that the allegations “lack sufficient merit.” The Granston Memo, issued in January of last year, encouraged DOJ attorneys to seek dismissal of qui tam FCA suits “to advance the government’s interests, preserve limited resources, and avoid adverse precedent.” The 11 suits of which DOJ seeks dismissal all share the same legal theory: drugmakers who arrange patient education on proper drug usage and who assist with prior authorizations are essentially providing an illegal kickback to the prescribing physicians in violation of the Anti-Kickback Statute. DOJ filed the most recent motion to dismiss in U.S. ex rel. Health Choice Group, LLC v. Bayer Corp. et al., Case No. 5:17-CV-126 (E.D. Tex.), calling into question the entire legal theory. DOJ asserted that “given the vast sums the government spends on the medications at issue, federal healthcare programs have a strong interest in ensuring that, after a physician has appropriately prescribed a medication, patients have access to basic product support relating to their medication,” and cited “substantial costs in monitoring the litigation and responding to discovery requests” as part of its reasoning for dismissal. In the motion, the government named the 10 other cases it claims are connected and of which it has similarly supported dismissal. The National Healthcare Analysis Group (NHAG), a company that mines data to target healthcare companies with suspicious Medicare billing through qui tam FCA suits, is connected to all 11 cases.

While the FCA has long provided the government the right to seek dismissal of qui tam cases under 31 U.S.C. § 3730(c)(2)(A), DOJ has not often done so, opting instead for declinations to intervene. Together with a handful of earlier motions to dismiss and a recent brief to the U.S. Supreme Court, DOJ’s actions in the 11 cases discussed above appear to demonstrate a new willingness to exercise its right to dismiss FCA suits, as encouraged in the Granston Memo. This may be a reflection of the Administration’s business-friendly attitude, or recognition of a burgeoning qui tam industry typified by the NHAG. Indeed, DOJ spent several pages of its E.D. Tex. brief describing the business model behind NHAG and its related shell companies, noting that its representatives use “false pretenses” to collect information from witnesses that is then used in “cloned complaints” against pharmaceutical companies. Regardless of the DOJ’s motivation, this developing trend of dismissal is a good sign for qui tam FCA defendants who may avoid costly litigation when there are legitimate reasons to dismiss cases against them.

The Granston Memo is available here and includes 7 potential reasons DOJ should seek dismissal of qui tam FCA suits:

  1. Curbing Meritless Qui Tams

  2. Preventing Parasitic or Opportunistic Qui Tam Actions

  3. Preventing Interference with Agency Policies and Programs

  4. Controlling Litigation Brought on Behalf of the United States

  5. Safeguarding Classified Information and National Security Interests

  6. Preserving Government Resources

  7. Addressing Egregious Procedural Errors

Copyright © 2019, Sheppard Mullin Richter & Hampton LLP.

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About this Author

Keeley A. McCarty, Sheppard Mullin, Government Investigations Lawyer, International Trade Attorney
Associate

Keeley McCarty is an associate in the Government Contracts, Investigations & International Trade Practice Group in the firm's Washington, D.C. office.

Ms. McCarty’s practice focuses on government contracts litigation and counseling, including contract termination appeals, litigation and arbitration of subcontractor disputes, and internal investigations.  Ms. McCarty has counseled clients on a broad range of legal topics, including FAR mandatory disclosure rules, title passage under government contracts, and corporate compliance with the FCPA...

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