Drug and device manufacturers that sell FDA-approved products reimbursed by the federal government should stay abreast of the pending Supreme Court petition in United States ex rel. Campie v. Gilead Sciences, Inc. (the factual and procedural background is summarized here and here). In short, the relators allege the company made misrepresentations to FDA that led to product approval and ultimately payments by the federal government; the company’s response is that the alleged misrepresentations were not material to the government’s decision to approve or pay for the products, and therefore, no False Claims Act liability results. Even though the government declined to intervene in this matter several years ago, in April, the Court invited the Solicitor General to file a brief expressing the view of the United States. The government’s Statement of Interest, filed seven months later, addresses a slightly modified issue from the question presented by Gilead:
Whether the government’s continued payment for a product, after learning of allegations that the manufacturer had made misrepresentations to the government regarding that product, requires dismissal at the pleading stage of a suit under the False Claims Act, 31 U.S.C. 3729 et seq., on the ground that any misrepresentations were not material as a matter of law.
Not surprisingly, the government supports the Ninth Circuit decision that the relators had adequately alleged “materiality” under the False Claims Act: while the evidence may support that the alleged misrepresentations were not material to the government’s decision to pay for the drugs, the fact of continued payments “did not by itself” require dismissal of the case at the pleading stage. This position is consistent with DOJ’s filings in other matters involving the Escobar materiality standard.
What is surprising, however, is the gratuitous statement the government offered about its plan to affirmatively seek dismissal of the case should it be remanded to the district court. Recall that in January, DOJ issued a memo instructing attorneys handling False Claims Act cases to affirmatively seek dismissal of a qui tam complaint under certain circumstances. We have yet to see the Granston memo in action, until now. Although not citing it directly, the government’s brief claims that continued litigation could result in “burdensome discovery and Touhy requests for FDA documents and FDA employee discovery (and potentially trial testimony),” which would distract from the Agency’s public health mission. The government concluded that “allowing this suit to proceed to discovery (and potentially a trial) would impinge on agency decision-making and discretion and would disserve the interests of the United States.”
Now, we have learned (hat tip to Scott Stein @ Sidley) that the United States has begun filing motions to dismiss several other cases pending throughout the country. DOJ argues that it has the power to dismiss a qui tam action under either of the two standards adopted by the courts, one which grants DOJ “an unfettered right to dismiss” a qui tam action (called the Swift standard), and the other that requires a “rational relationship” between the government’s decision to dismiss and a legitimate government interest. The Swift standard, based on Swift v. United States, 318 F.3d 250 (D.C. Cir. 2003), is preferred by DOJ, and is based on the general principle of separation of powers: the Executive Branch not courts should decide whether to pursue litigation on behalf of the United States.
The rational relationship test requires the United States to (1) identify a “valid government purpose” for dismissing the case, and (2) show a “rational relationship between dismissal and accomplishment of the purpose.” If the government satisfies this test, the relator bears the burden to demonstrate that the dismissal is “fraudulent, arbitrary and capricious, or illegal.” In affirmatively moving to dismiss these cases, the government cites to the substantial litigation burden on the United States even if it is not a party. These costs include:
- Monitoring the litigation
- Collecting, reviewing, processing and producing documents
- Screening and redacting patient health information
- Preparing agency witnesses for depositions
- Filing statements of interests
- Addressing relator’s interpretation of laws
DOJ claims that its lawyers in the Civil Division’s Fraud Section have spent collectively more than 1500 hours on the matters it seeks to dismiss; this number does not include the time spent by the AUSAs throughout the country, the law enforcement agents assisting the investigation, or the attorneys from the affected agencies.
In a final kiss of death, DOJ states that the relator’s case conflicts with the policy and enforcement prerogatives of the federal government’s healthcare programs and would undermine common industry practices the government deems appropriate and beneficial.
Assuming the relators in these matters cannot meet their burden of showing the government’s decision to dismiss is “fraudulent, arbitrary and capricious, or illegal,” these lucky defendants had Christmas arrive a week early.