Amicus Curiae Brief — United States, ex rel. Jesse Polansky, M.D., M.P.H., Petitioner v. Executive Health Resources, Inc., et al.
Supreme Court briefOct 24, 2022
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No. 21-1052
IN THE
Supreme Court of the United States
UNITED STATES OF AMERICA, EX REL.
JESSE POLANSKY, M.D., M.P.H.,
Petitioner,
v.
EXECUTIVE HEALTH RESOURCES, INC., ET AL.,
Respondents.
On Writ of Certiorari
To the United States Court of Appeals
For the Third Circuit
BRIEF OF PHARMACEUTICAL RESEARCH
AND MANUFACTURERS OF AMERICA
AS AMICUS CURIAE
IN SUPPORT OF RESPONDENTS
JAMES C. STANSEL
MELISSA B. KIMMEL
PHARMACEUTICAL RESEARCH AND
MANUFACTURERS OF AMERICA
950 F Street NW, Ste. 300
Washington, D.C. 20004
(202) 835-3400
JOHN D. W. PARTRIDGE
GIBSON , DUNN & CRUTCHER LLP
1801 California Street, Ste. 4200
Denver, CO 80202-2642
(303) 298-5931
LUCAS C. TOWNSEND
Counsel of Record
JONATHAN M. PHILLIPS
JESSICA L. WAGNER
GIBSON , DUNN & CRUTCHER LLP
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
(202) 887-3731
ltownsend@gibsondunn.com
Counsel for Amicus Curiae
QUESTION PRESENTED
Whether the Government may dismiss a suit under the False Claims Act, 31 U.S.C. § 3729 et seq., after initially declining to proceed with the action, and
what standard applies if the Government has that authority?
ii
TABLE OF CONTENTS
Page
INTEREST OF AMICUS CURIAE ............................. 1
SUMMARY OF ARGUMENT ...................................... 2
ARGUMENT................................................................... 4
I.
THE FCA’S TEXT AND HISTORY PERMIT
THE GOVERNMENT TO DISMISS A
RELATOR’S SUIT AT ANY TIME. ......................... 4
A. The Statutory Background And
History Show The Importance Of
Executive Control Over Qui Tam
Suits. ............................................................ 5
B. The Plain Text And Statutory
Context Give The Government
Virtually Unfettered Dismissal
Authority. .................................................... 7
II. THE GOVERNMENT’S DISMISSAL
AUTHORITY PROTECTS AGAINST
MERITLESS AND UNDULY BURDENSOME
FCA LITIGATION. ............................................. 13
A. An FCA Suit’s Viability May Not Be
Apparent Until Discovery
Commences. .............................................. 14
B. The Burdens And Costs Of Qui Tam
Litigation Often Are Not Apparent
At The Outset. .......................................... 20
C. Broad Dismissal Authority Is
Needed To Protect Against Frivolous
Litigation That Hinders Lifesaving
Treatments................................................ 28
CONCLUSION ............................................................. 31
iii
TABLE OF AUTHORITIES
Page(s)
Cases
United States ex rel. Borzilleri v. AbbVie, Inc.,
837 F. App’x 813 (2d Cir. 2020) ............................ 22
United States ex rel. Borzilleri v. AbbVie, Inc.,
No. 15-CV-7881, 2019 WL 3203000 (S.D.N.Y. July
16, 2019) .................................................................. 22
Borzilleri v. Bayer Healthcare Pharms., Inc.,
24 F.4th 32 (1st Cir. 2022) ................. 12, 13, 22, 23
United States ex rel. CIMZNHCA, LLC v. UCB, Inc.,
970 F.3d 835 (7th Cir. 2020) .................9, 10, 24, 26
Kellogg Brown & Root Servs., Inc. v. United States
ex rel. Carter, 575 U.S. 650 (2015) ......................... 8
United States ex rel. NHCA-TEV, LLC v. Teva
Pharm. Prods. Ltd., No. 17-CV-2040,
2019 WL 6327207 (E.D. Pa. Nov. 26, 2019) ........ 25
United States ex rel. Nicholson v. Spigelman,
No. 10 C 3361, 2011 WL 2683161 (N.D. Ill.
July 8, 2011) ............................................................ 23
United States ex rel. Piacentile v. Amgen, Inc.,
No. 04 CV 3983, 2013 WL 5460640 (E.D.N.Y.
Sept. 30, 2013) ........................................................ 27
United States ex rel. Polansky v. Exec. Health Res.,
Inc., 196 F. Supp. 3d 477 (E.D. Pa. 2016) ........... 18
iv
TABLE OF AUTHORITIES (continued)
Page(s)
Ridenour v. Kaiser-Hill Co.,
397 F.3d 925 (10th Cir. 2005) ..................... 8, 11, 12
United States ex rel. SCEF, LLC v. AstraZeneca PLC,
No. 17-CV-1328, 2019 WL 5725182 (W.D. Wash.
Nov. 5, 2019) ........................................................... 25
SEC v. U.S. Realty & Improvement Co.,
310 U.S. 434 (1940) ................................................ 10
United States ex rel. Sequoia Orange Co.
v. Baird-Neece Packing Corp.,
151 F.3d 1139 (9th Cir. 1998) ............ 7, 8, 9, 10, 12
Swift v. United States,
318 F.3d 250 (D.C. Cir. 2003) ............ 7, 8, 9, 11, 12
United States v. Bornstein,
423 U.S. 303 (1976) .................................................. 5
United States v. Eli Lilly & Co.,
4 F.4th 255 (5th Cir. 2021) .............................. 24, 25
United States v. EMD Serono, Inc.,
370 F. Supp. 3d 483 (E.D. Pa. 2019) .................... 25
United States v. Gilead Scis., Inc.,
No. 11-cv-941, 2019 WL 5722618
(N.D. Cal. Nov. 5, 2019) ................................... 26, 27
United States v. Health Possibilities, P.S.C.,
207 F.3d 335 (6th Cir. 2000) ................................. 11
v
TABLE OF AUTHORITIES (continued)
Page(s)
United States v. McNinch,
356 U.S. 595 (1958) .................................................. 5
United States v. Rogan,
517 F.3d 449 (7th Cir. 2008) ................................. 29
Universal Health Servs., Inc. v. United States
ex rel. Escobar, 579 U.S. 176 (2016) .......3, 5, 16, 17
Constitutional Provisions
U.S. Const. art. II, § 1, cl. 1 ........................................ 11
U.S. Const. art. II, § 3 ................................................. 11
Statutes
31 U.S.C. § 3729 ................................................... 2, 6, 16
31 U.S.C. § 3730 ................. 6, 7, 8, 9, 10, 11, 12, 13, 14
42 U.S.C. § 1320a-7 ..................................................... 31
42 U.S.C. § 1320a-7b ............................................. 24, 29
Pub. L. No. 78-213, ch. 377, 57 Stat. 608
(1943) ......................................................................... 5
Regulations
28 C.F.R. § 85.5 (2022) .................................................. 6
vi
TABLE OF AUTHORITIES (continued)
Page(s)
Rules
Fed. R. Civ. P. 24.......................................................... 11
Fed. R. Civ. P. 41.......................................................... 13
Other Authorities
7C Charles Alan Wright & Arthur R. Miller,
Federal Practice and Procedure § 1920 (3d ed.
2022)......................................................................... 10
Brenna Jenny et al., Analyzing FCA Materiality
Defense Outcomes Under Escobar, Law360 (Dec.
13, 2021), https://www.law360.com/articles/
1447443/analyzing-fca-materiality-defenseoutcomes-under-escobar ........................................ 17
Christina Orsini Broderick, Note, Qui Tam
Provisions and the Public Interest: An
Empirical Analysis, 107 Colum. L. Rev. 949
(2007) ................................................................. 13, 30
David Kwok, Evidence From the False Claims Act:
Does Private Enforcement Attract Excessive
Litigation?, 42 Pub. Cont. L.J. 225 (2013) ......... 29
Dayna Bowen Matthew, The Moral Hazard Problem
with Privatization of Public Enforcement: The
Case of Pharmaceutical Fraud, 40 U. Mich. J.L.
Reform 281 (2007) .................................................. 31
vii
TABLE OF AUTHORITIES (continued)
Page(s)
Michael D. Granston, U.S. Dep’t of Justice, Factors
for Evaluating Dismissal Pursuant to 31 U.S.C.
3730(c)(2)(A) (Jan. 10, 2018)
................................................. 14, 15, 20, 21, 23, 27
Michael Rich, Prosecutorial Indiscretion:
Encouraging the Department of Justice to Rein in
Out-of-Control Qui Tam Litigation Under the
Civil False Claims Act, 76 U. Cin. L. Rev. 1233
(2008) ...................................................................... 29
NHE Table 16: Retail Prescription Drug
Expenditures, Centers for Medicare & Medicaid
Services (Aug. 12, 2022), https://www.cms.gov/
files/zip/nhe-tables.zip ............................................. 1
S. Rep. No. 99-345 (1986) ...................................... 5, 6, 7
Tammy W. Cowart et al., Carrots and Sticks of
Whistleblowing: What Classification Trees Say
about False Claims Act Lawsuits, 17 ALSB J.
Emp. & Lab. L. 1 (2019) ........................................ 28
U.S. Dep’t of Justice, False Claims Act Cases:
Government Intervention in Qui Tam
(Whistleblower) Suits (June 12, 2012),
https://www.justice.gov/sites/default/files/usaoedpa/legacy/2012/06/13/InternetWhistleblower
%20update.pdf ........................................................ 30
U.S. Dep’t of Justice, Fraud Statistics (Feb. 1, 2022),
https://www.justice.gov/opa/press-release/file/
1467811/download ..................................2, 13, 28, 30
viii
TABLE OF AUTHORITIES (continued)
Page(s)
U.S. Dep’t of Justice, Justice Department’s False
Claims Act Settlements and Judgments Exceed
$5.6 Billion in Fiscal Year 2021 (Feb. 1, 2022),
https://www.justice.gov/opa/pr/justicedepartment-s-false-claims-act-settlements-andjudgments-exceed-56-billion-fiscal-year .............. 28
U.S. Dep’t of Justice, Justice Manual, § 4-4.111
(2021) ....................................................................... 15
U.S. Dep’t of Justice Letter to The Honorable
Charles E. Grassley (Dec. 19, 2019) .................... 13
INTEREST OF AMICUS CURIAE 1
0F
The Pharmaceutical Research and Manufacturers
of America (“PhRMA”) is a voluntary, nonprofit association representing the country’s leading researchbased pharmaceutical and biotechnology companies.
PhRMA’s mission is to advocate public policies encouraging innovation in life-saving and life-enhancing
new medicines. PhRMA’s members invent medicines,
including new cures, that allow patients to live longer,
healthier, and more productive lives. Since 2000,
PhRMA’s members have invested more than $1 trillion in the search for new treatments and cures—including $91.1 billion in 2020 alone. PhRMA frequently participates as amicus curiae in cases like
this one that affect is members.
Various federal healthcare programs, including
Medicare and Medicaid, provide reimbursement for
the cost of medicines developed by PhRMA’s members. Federal spending on prescription drugs is substantial. In 2020, Medicare, Medicaid, and other federal healthcare programs paid $156.7 billion for prescription drugs. NHE Table 16: Retail Prescription
Drug Expenditures, Centers for Medicare & Medicaid
Services (Aug. 12, 2022), https://www.cms.gov/files/
zip/nhe-tables.zip.
Because healthcare providers and pharmacies
submit billions of dollars of claims for reimbursement
of prescription drugs for patients covered by federal
healthcare programs to the Government each year,
1
Pursuant to Supreme Court Rule 37.6, no counsel for a party
authored this brief in whole or in part, and no person or entity
other than amicus or its counsel made a monetary contribution
to this brief’s preparation. All parties have consented in writing
to the filing of this brief.
2
companies in the pharmaceutical industry are magnets for private plaintiffs known as qui tam relators
who allege fraud on the Government. If successful,
these relators may be awarded as much as 30% of the
proceeds of a False Claims Act (“FCA”) action. Cases
involving healthcare services and products—including prescription drugs—comprise the majority of FCA
actions brought each year. In 2021, settlements and
judgments in FCA healthcare cases topped $5 billion,
comprising 90% of total FCA recoveries. See U.S.
Dep’t of Justice, Fraud Statistics (Feb. 1, 2022),
https://www.justice.gov/opa/press-release/file/1467
811/download.
In some instances, relators rightly identify fraud
and abuse in the healthcare sector. However, the prospect of massive FCA proceeds and associated qui tam
bounties incentivizes many relators to bring specious
suits targeting legitimate, lawful conduct. Each year,
hundreds of questionable FCA claims are filed against
healthcare companies, including PhRMA’s members,
and declined by the Government, and these claims
threaten beneficial activities by pharmaceutical companies and drive up healthcare costs. FCA claims impose significant litigation burdens on both pharmaceutical companies and the Government. PhRMA’s
members therefore have a substantial interest in the
interpretation of the FCA, and the Government’s ability to dismiss FCA actions.
SUMMARY OF ARGUMENT
The False Claims Act, 31 U.S.C. § 3729 et seq., allows private qui tam relators to challenge alleged
fraud against the Government by bringing suit on behalf of the United States and seeking treble damages
and per-claim penalties for the Government, as well
3
as a bounty for the relator, attorneys’ fees, and costs
in connection with any recovery.
The FCA’s plain text gives the Government virtually unfettered discretion to move for dismissal of a
qui tam suit at any time. Petitioner in this case, Relator Jesse Polansky, argues that the Government can
dismiss only when it has intervened at the outset of a
suit. But his construction of the FCA has not been
adopted by any court of appeals, reads verbiage into
the statute, and presents problems under the Take
Care Clause and separation of powers principles.
Because FCA suits can generate massive settlements and judgments, they attract both legitimate
whistleblowers and opportunistic relators looking for
a windfall. This is particularly true in the healthcare
industry, including the pharmaceutical sector, from
which the majority of FCA recoveries result. Companies in this industry must make extensive reports and
certifications to federal administrators, and some relators have exploited this regulatory environment to
advance extreme “implied certification” and other theories that extend beyond any traditional understanding of fraud and magnify the threat of massive damages. For any FCA claim to survive, it must pass “rigorous” materiality and scienter requirements. Universal Health Servs., Inc. v. United States ex rel. Escobar, 579 U.S. 176, 192 (2016). But litigating these elements—which may hinge on evidence about what the
Government knew and when—can require fact development beyond the pleading stage.
The Government’s unfettered authority to dismiss
FCA cases is vitally important in ensuring that relators do not prosecute FCA actions in the Government’s
name that are, or become, adverse to the Government’s interests. Often the merits and burden of a qui
4
tam suit, along with its potential for interference with
other Government prerogatives, will not be fully apparent at the outset of litigation, as this case illustrates. In these situations, among others, the Government must have authority to compel the dismissal of
cases in which it previously declined to intervene.
Given the potential for exorbitant awards, the significant costs of discovery and litigation, and the negative public effects of being accused of fraud, there is
tremendous settlement pressure on healthcare defendants. Thus, it is crucial to PhRMA’s members
that the Government have broad discretion to dismiss
unmeritorious relator suits throughout the litigation
whenever the Government determines that the litigation is no longer in the United States’ interests.
ARGUMENT
I.
THE FCA’S TEXT AND HISTORY PERMIT THE
GOVERNMENT TO DISMISS A RELATOR’S SUIT
AT ANY TIME.
As every circuit to address the issue has concluded, the Government may move to dismiss a qui
tam relator’s FCA suit even after declining to intervene in the suit initially. The plain text and history
of the FCA compels this conclusion. Furthermore, the
FCA’s text and history show that the Government’s
dismissal discretion is virtually unfettered. It serves
as an important check on potential abuses by relators
and helps ensure that FCA cases do not proceed
against the Government’s interests.
5
A. The Statutory Background And History
Show The Importance Of Executive
Control Over Qui Tam Suits.
First enacted in 1863, the FCA “was originally
aimed principally at stopping the massive frauds perpetrated by large [military] contractors during the
Civil War.” Escobar, 579 U.S. at 181 (quoting United
States v. Bornstein, 423 U.S. 303, 309 (1976)). “[A] series of sensational congressional investigations” revealed that “the United States had been billed for nonexistent or worthless goods, charged exorbitant prices
for goods delivered, and generally robbed in purchasing the necessities of war.” United States v. McNinch,
356 U.S. 595, 599 (1958). The original Act provided
for the Government to seek civil and criminal penalties against those who submitted false claims and also
allowed private plaintiffs known as relators to sue on
behalf of the United States. S. Rep. No. 99-345, at 7,
10 (1986).
The FCA was amended in 1943 to prevent relators
from suing or obtaining recovery based on information
the Government already possessed, even if the relator
was the original source of the information. See Pub.
L. No. 78-213, ch. 377, 57 Stat. 608 (1943). The
amendment was a compromise between the House
and Senate after Attorney General Francis Biddle
asked Congress to repeal the qui tam provisions, and
the House voted to do just that. See S. Rep. No. 99345, at 11. The ensuing jurisdictional “government
knowledge” bar significantly limited the abilities of relators. See id. at 12.
Congress overhauled the FCA in 1986 to “encourage more private enforcement suits.” S. Rep. No. 99345, at 23-24. Congress eliminated the jurisdictional
bar, increased damages from double to treble awards,
6
and raised the civil penalty ceiling up to approximately $25,000 per violation (after adjustments for inflation). 31 U.S.C. § 3729(a)(1); 28 C.F.R. § 85.5
(2022).
Under the amended Act, if a relator brings suit
and the Government intervenes and proceeds with it,
the relator may obtain 15% to 25% of the recovery. 31
U.S.C. § 3730(d)(1). If the Government does not proceed with the suit, the relator may be awarded 25% to
30% of the recovery. Id. § 3730(d)(2). Previously, a
relator received 10% of the recovery if the Government took over, and 25% of the recovery if the relator
litigated alone. See S. Rep. No. 99-345, at 27-28. The
1986 amendments’ increased awards, combined with
the treble damages provisions, allow relators to obtain
sizeable bounties. For example, if actual damages before trebling were $1,000, relators could obtain up to
$900.
Before the 1986 amendments, if the Government
intervened in the litigation, the relator was removed,
and the action was “controlled solely by the Government.” S. Rep. No. 99-345, at 25. Instead of an “‘all
or nothing’ proposition both for the person bringing
the action and for the Government,” the revised statute allows both relators and the Government to be involved simultaneously. Id. Where “the Government
proceeds with the action, it shall have the primary responsibility for prosecuting the action,” but the relator
“shall have the right to continue as a party,” subject
to certain limitations. 31 U.S.C. § 3730(c)(1). Where
the Government does not initially “proceed with the
action,” it may “intervene at a later date upon a showing of good cause.” Id. § 3730(c)(3).
The expanded role and incentives for relators led
the Department of Justice to “expres[s] concerns that
7
the broadening of qui tam provisions … might provoke
a greater number of frivolous suits.” S. Rep. No. 99345, at 16. But the revised FCA also included another
important protection for the Government—the provision at issue here:
The Government may dismiss the action notwithstanding the objections of the person initiating
the action if the person has been notified by the
Government of the filing of the motion and the
court has provided the person with an opportunity
for a hearing on the motion.
31 U.S.C. § 3730(c)(2)(A). Altogether, the “broadening
[of] the government’s powers of intervention,” along
with its expanded “supervisory powers” and dismissal
authority have “increased, rather than decreased, executive control over qui tam lawsuits.” United States
ex rel. Sequoia Orange Co. v. Baird-Neece Packing
Corp., 151 F.3d 1139, 1144 (9th Cir. 1998).
B. The Plain Text And Statutory Context
Give The Government Virtually Unfettered Dismissal Authority.
Polansky contends that the Government can dismiss a suit under § 3730(c)(2)(A) only when it has initially chosen to proceed with the action. See Pet. Br.
14-31. But this position is at odds with the statutory
text, and no court of appeals has adopted it. Properly
construed, § 3730(c)(2)(A) gives the Government an
“unfettered” right to “dismiss [the] action notwithstanding the objections” of the person initiating the
action if it complies with certain procedural requirements (notice and an opportunity to be heard). Swift
v. United States, 318 F.3d 250, 251-52 (D.C. Cir. 2003)
(citation omitted). “Regardless” of whether the United
States initially proceeds with the action, “it retains
8
the right at any time to dismiss the action entirely.”
Kellogg Brown & Root Servs., Inc. v. United States ex
rel. Carter, 575 U.S. 650, 653 (2015).
To conclude otherwise, Polansky effectively reads
§ 3730(c)(2)(A) as a subset of § 3730(c)(1), which applies “[i]f the Government proceeds with the action.”
See Pet. Br. 17-18. In so doing, Polansky makes two
related errors.
First, he assumes that because § 3730(c)(1) references the “right” “of the person bringing the action …
to continue as a party to the action, subject to the limitations set forth in paragraph (2),” paragraph (2) only
applies when paragraph (1) has been triggered—i.e.,
when the Government has “proceed[ed]” with the action. But, as a structural matter, each of the numbered paragraphs under subsection (c), which sets
forth the “[r]ights of parties to qui tam actions,”
stands alone. 31 U.S.C. § 3730(c). Tellingly, Polansky
does not argue that paragraph (3) of subsection (c),
which governs when “the Government elects not to
proceed with the action,” applies only when the Government has “proceed[ed] with the action” under paragraph (c)(1)—that would make no sense. Id. And
logically, paragraph (c)(1)’s reference to paragraph
(c)(2) does not mean that (c)(2) is limited only to the
circumstances of (c)(1). Because of their structural independence, there is good reason to conclude—as the
D.C., Ninth, and Tenth Circuits have done—that intervention is not necessary for the Government to dismiss the action. See Ridenour v. Kaiser-Hill Co., 397
F.3d 925, 934-35 (10th Cir. 2005); Swift, 318 F.3d at
252; Sequoia Orange Co., 151 F.3d at 1145. 2
1F
2 Nonetheless, whether the Government must intervene before
moving to dismiss a suit is “largely academic.” Swift, 318 F.3d
9
But even if intervention is required, as the Third
Circuit held, Polansky mistakenly assumes that the
Government “proceeds with the action” only when it
initially proceeds with the action, not when it later intervenes. This is Polansky’s second error. As the
Third Circuit rightly concluded, there is no such limitation in the text. See Pet. App. 15a-16a. The statute
allows the Government to “intervene and proceed with
the action within 60 days” after receiving the complaint, 31 U.S.C. § 3730(b)(2), and allows “the Government to intervene at a later date upon a showing of
good cause,” id. § 3730(c)(3). Regardless of when the
Government intervenes, it is beyond serious dispute
that once it has done so, the Government is proceeding
with the action. See Sequoia Orange Co., 151 F.3d at
1145.
Polansky puts great weight on the language in
paragraph (c)(3) providing that a court should not
“limi[t] the status and rights of the person initiating
the action” when it allows the “Government to intervene at a later date.” 31 U.S.C. § 3730(c)(3); see Pet.
Br. 15-16. But especially considering that the statute’s prior version removed the relator entirely when
the Government intervened, it is most natural to read
this requirement as a counterpart to paragraph
(c)(1)—i.e., when the Government “proceeds with the
action,” the person initiating the action “shall have
the right to continue as a party to the action, subject
at 252. As the Third Circuit concluded below, and the D.C. and
Seventh Circuits have recognized, a separate intervention motion is unnecessary because a motion to dismiss can be construed
as a motion for intervention. See Pet. App. 28a; United States ex
rel. CIMZNHCA, LLC v. UCB, Inc., 970 F.3d 835, 849 (7th Cir.
2020); Swift, 318 F.3d at 252. Where the Government has reason
to dismiss, there will almost certainly be “good cause” for intervention. Pet. App. 28a.
10
to the [Government’s dismissal authority] set forth in
paragraph (2).” Stated differently, where the Government intervenes at a later date, the relator “retains
the same status and rights as if the Government originally intervened.” Pet. App. 16a-17a; see also UCB,
Inc., 970 F.3d at 854 (“The better reading is that
§ 3730(c)(3) instructs the district court not to limit the
relator’s ‘status and rights’ as they are defined by
§§ 3730(c)(1) and (2).”).
Notably, under Polansky’s reading, if a relator’s
right to continue with the suit cannot be limited when
the Government intervenes at a later date, then the
other “limitations” in paragraph (c)(2) would not apply
either. The Government could not settle the action or
ask the court to limit the relator’s ability to present
evidence or participate in the litigation because of repetition, irrelevance, “harassment,” “undue burden or
unnecessary expense.” 31 U.S.C. § 3730(c)(2)(B)-(D).
But “[n]othing” “purports to limit” the Government’s
authority under § 3720(c)(2) “based upon the manner
of intervention.” Sequoia Orange Co., 151 F.3d at
1145.
Moreover, if a relator has an unbounded right to
prosecute the action when the Government intervenes
at a later date, it is unclear what the Government
could do. Normally, under the Federal Rules of Civil
Procedure, an “intervenor is treated as if the intervenor were an original party and has equal standing
with the original parties.” 7C Charles Alan Wright &
Arthur R. Miller, Federal Practice and Procedure
§ 1920 (3d ed. 2022). For example, “[t]he intervenor
may move to dismiss the proceeding and may challenge the subject-matter jurisdiction of the court.” Id.
(footnote omitted); cf. SEC v. U.S. Realty & Improvement Co., 310 U.S. 434, 458-60 (1940) (holding that
11
Securities and Exchange Commission could intervene
and move to dismiss Chapter XI bankruptcy proceeding). And there are many other actions an intervenor
could take under the Rules—including requests to
limit discovery—that could impinge on a relator’s ability to conduct a suit. It would be passing strange to
deny these rights to the party (the United States) in
whose name the litigation was brought and whose injury is the basis for the suit.
Preventing the Government from exercising default party rights under the Federal Rules of Civil
Procedure—in addition to limiting its statutory rights
under § 3730(c)(2)—also would raise serious concerns
under the Take Care Clause and separation of powers
principles, as Respondent Executive Health Resources, Inc. has explained. See U.S. Const. art. II,
§ 1, cl. 1; id. art. II, § 3; EHR Br. 23-35; cf. Ridenour
v. Kaiser-Hill Co., 397 F.3d 925, 934 (10th Cir. 2005).
If the Government, which unquestionably remains
“the real-party-in-interest in any False Claims Act
suit,” United States v. Health Possibilities, P.S.C., 207
F.3d 335, 341 (6th Cir. 2000) (citation omitted), cannot
even exercise the normal rights of a party intervening
under Rule 24, it is not at all apparent that the President can “take Care that the Laws be faithfully executed,” U.S. Const. art. II, § 3; see also id. art. II, § 1,
cl. 1 (vesting “executive Power” in the President). For
this reason, under the canon of constitutional avoidance, the Court should reject Polansky’s argument
that a relator’s rights to maintain a suit are unbounded—by either statute or rule—when the Government intervenes at a later date. Cf. Swift, 318
F.3d at 253 (discussing Government’s discretion to
bring or continue suit under the Take Care Clause).
12
Instead, it should hold that the relator’s right to maintain the action—regardless of when the Government
becomes involved—is subject to all of the limitations
“set forth in paragraph (2).” 31 U.S.C. § 3730(c)(1).
For similar reasons, the Court also should hold
that the Government’s power of dismissal is virtually
“unfettered,” Swift, 318 F.3d at 252, subject only to
the procedural requirements spelled out in the statute, see 31 U.S.C. § 3730(c)(2)(A). The FCA contains
no language substantively limiting the Government’s
dismissal authority, and there is no basis to infer any
limitations here. 3 EHR Br. 16, 47-48. The Ninth Circuit has invented a two-step analysis for dismissal under which the Government must (1) identify a “valid
government purpose,” and (2) show “a rational relation between dismissal and accomplishment of the
purpose,” before the burden shifts to the relator “to
demonstrate that dismissal is fraudulent, arbitrary
and capricious, or illegal.” Sequoia Orange Co., 151
F.3d at 1145 (citation omitted); see also Ridenour, 397
F.3d at 936 (adopting this standard). The Court
should reject that rational-relation test, which lacks
textual support or foundation. Consistent with the
Government’s broad authority under § 3730, buttressed by separation of powers principles, the Court
should hold that where the Government has provided
notice to the relator and the opportunity for a hearing,
2F
3 Of course, there may be constitutional and judicial limits to the
Government’s dismissal authority in extreme factual scenarios
not presented here. See Borzilleri v. Bayer Healthcare Pharms.,
Inc., 24 F.4th 32, 42-43 (1st Cir. 2022) (discussing Equal Protection and fraud on the court).
13
it may dismiss
§ 3730(c)(2)(A). 4
the
case.
See
31
U.S.C.
3F
II. THE GOVERNMENT’S DISMISSAL AUTHORITY
PROTECTS AGAINST MERITLESS AND UNDULY
BURDENSOME FCA LITIGATION.
The 1986 revisions to the FCA have led to a “drastic increase in qui tam actions.” Christina Orsini Broderick, Note, Qui Tam Provisions and the Public Interest: An Empirical Analysis, 107 Colum. L. Rev. 949,
955 (2007). In 1987, relators filed 31 qui tam suits; in
2021, they filed nearly twenty times as many (598).
U.S.
Dep’t
of
Justice,
Fraud
Statistics,
https://www.justice.gov/opa/press-release/file/14678
11/download. With the explosive growth of qui tam
suits, spurred by the potential for high-dollar recoveries, spurious litigation also has increased. Against
this backdrop, the Government’s dismissal authority
has been an important—albeit carefully exercised—
protection. In recent years, the Government has
moved to dismiss only approximately 3.85% of qui tam
cases. 5
4F
To protect against meritless and burdensome litigation, the Government must be able to exercise this
dismissal authority throughout the litigation, not just
4 Amicus takes no position on whether the requirements of Fed-
eral Rule of Civil Procedure 41(a) also apply to such dismissal,
as the Third Circuit concluded. Pet. App. 25a-27a. Although the
Rules generally apply to FCA actions, Rule 41 does not neatly
map onto the dismissal authority codified in § 3730(c)(2)(A). See,
e.g., Borzilleri, 24 F.4th at 41.
5 See U.S. Dep’t of Justice Letter to The Honorable Charles E.
Grassley at 1 (Dec. 19, 2019) (explaining that from January 1,
2018 through October 25, 2019, 1,170 qui tam actions were filed,
and the Department moved to dismiss 45 of them).
14
at the outset. The Government has specified its criteria for exercising this authority; these criteria often do
not become clear until after discovery. For example,
the suit’s merit (or lack thereof), costs to the Government, and public policy often are not apparent until
later in the litigation. The potential for abuse is particularly pronounced in healthcare-related FCA actions where ongoing protection of the public interest
is paramount. Unnecessary litigation distracts the
Government from its overarching goal of protecting
and promoting public health, and it bleeds resources
from private healthcare providers and pharmaceutical companies that would otherwise help ensure that
patients receive lifesaving care and treatment. It also
potentially puts into the hands of a lay relator decisions about complex clinical regulatory matters that
underlie the FCA allegations. In this context, the
Government has repeatedly dismissed suits in which
it initially chose not to intervene, and it should be allowed to continue to do so.
A. An FCA Suit’s Viability May Not Be Apparent Until Discovery Commences.
In 2018, Michael Granston, then the Director of
the Fraud Section of the Civil Division of the Department of Justice, issued a memo setting forth a “general framework” for “when to seek dismissal under
section 3730(c)(2)(A).” Michael D. Granston, U.S.
Dep’t of Justice, Factors for Evaluating Dismissal
Pursuant to 31 U.S.C. 3730(c)(2)(A), at 2 (Jan. 10,
2018) (“Granston Memo”). The Granston Memo set
forth seven factors—with specific case examples—for
when Department attorneys should consider dismissal. See id. These factors, which the Government had
already been employing after decades of litigation,
15
were subsequently incorporated into the Justice Manual. See U.S. Dep’t of Justice, Justice Manual, § 44.111 (2021). 6
5F
The first factor is “[c]urbing [m]eritless [q]ui
[t]ams,” and the Granston Memo urges dismissal
whenever a “qui tam complaint is facially lacking in
merit—either because [the] relator’s legal theory is inherently defective, or the relator’s factual allegations
are frivolous.” Granston Memo at 3. But the
Granston Memo further explains that “[i]n certain
cases, even if the relator’s allegations are not facially
deficient, the government may conclude after completing its investigation of the relator’s allegations that
the case lacks merit,” and it should consider dismissal
at that point. Id. Moreover, “[i]f the Department is
concerned that a case lacks any merit, but elects to
afford the relator an opportunity to further develop
the case, the Department … may consider advising
the relator that dismissal will be considered if the relator is unable to obtain additional support for the re-
6 The factors are:
1. Curbing meritless qui tams that facially lack merit ….
2. Preventing parasitic or opportunistic qui tam actions that
duplicate a pre-existing government investigation and add no
useful information to the investigation. 3. Preventing interference with an agency’s policies or the administration of its
programs. 4. Controlling litigation brought on behalf of the
United States, in order to protect the Department’s litigation
prerogatives. 5. Safeguarding classified information and national security interests. 6. Preserving government resources,
particularly where the government’s costs … are likely to exceed any expected gain. 7. Addressing egregious procedural
errors that could frustrate the government’s efforts to conduct
a proper investigation.
Justice Manual § 4-4.111.
16
lator’s claims by a specified date.” Id. at 4. The Government’s ability to dismiss unmeritorious cases both
protects against wasteful litigation and allows it to
avoid the development of potentially unfavorable
precedent, which could hinder its enforcement efforts
elsewhere.
In some factually intensive FCA cases the action’s
viability might not become clear until there has been
some discovery. For one thing, the Act has “demanding” scienter and materiality requirements, which
may hinge on initially unknown facts relating to the
Government’s knowledge and activities. Escobar, 579
U.S. at 194. As this Court has explained, “materiality
‘look[s] to the effect on the likely or actual behavior of
the recipient of the alleged misrepresentation.’” Id. at
193 (brackets in original; citation omitted); see also 31
U.S.C. § 3729(b)(4) (defining “material” to mean “having a natural tendency to influence, or be capable of
influencing, the payment or receipt of money or property”).
Further, in recent years relators have advanced
increasingly creative and expansive theories of FCA
liability, including so-called “implied certification”
theories, which treat submission of a claim to the Government for reimbursement as containing an implied
certification of compliance with a host of contractual,
regulatory, and statutory requirements. See Escobar,
579 U.S. at 187. Any arguable noncompliance with
these requirements purportedly renders the certification “false”; the relator frequently seeks to recover all
funds paid by the Government in connection with the
claims. In this context, the FCA’s materiality element
has taken on critical significance. If the relator cannot show that the certification was material to the
17
Government’s decision to pay, then the claim fails. Id.
at 192.
In Escobar, the Court clarified that “[a] misrepresentation cannot be deemed material merely because
the Government designates compliance with a particular statutory, regulatory, or contractual requirement
as a condition of payment.” 579 U.S. at 194. “Nor is
it sufficient for a finding of materiality that the Government would have the option to decline to pay if it
knew of the defendant’s noncompliance.” Id. Instead,
“proof of materiality can include … evidence that …
the Government consistently refuses to pay claims in
the mine run of cases based on noncompliance with
the particular statutory, regulatory, or contractual requirement.” Id. at 194-95. Alternatively, “if the Government pays a particular claim [or type of claim] in
full despite its actual knowledge that certain requirements were violated, that is very strong evidence that
those requirements are not material.” Id. at 195.
After Escobar, defendants who can show that the
Government continued paying claims after knowing of
the alleged “fraud” often can convince courts to rule in
their favor. But uncovering this type of evidence—regarding whether the Government has paid claims,
notwithstanding its knowledge of noncompliance, as
well as what the defendant knew about the Government’s payment of these claims—often requires discovery. One study of defendants’ use of the materiality defense between 2019 and 2021 found that district
courts dismissed FCA complaints on this basis in 37%
of the decisions on motions to dismiss and 40% of the
decisions on summary judgment or judgment as a
matter of law. Brenna Jenny et al., Analyzing FCA
Materiality Defense Outcomes Under Escobar,
18
Law360 (Dec. 13, 2021), https://www.law360.com/articles/1447443/analyzing-fca-materiality-defense-outcomes-under-escobar.
This case illustrates the potential difficulties in
assessing the viability of claims and the existence of
materiality at the outset of litigation. Polansky filed
suit in 2012 alleging that Respondent Executive
Health Resources, Inc. and other healthcare entities
(collectively, “Executive Health”) improperly caused
claims for outpatient medical services to be billed as
inpatient, “exploit[ing] the difference in reimbursement rates” between the two. Pet. 32a-33a. The Government investigated Polansky’s complaint for two
years before deciding not to proceed with the action.
Pet. App. 5a. After the complaint was served on Executive Health and litigation began, the district court
denied Executive Health’s motion to dismiss in July
2016, finding the complaint facially plausible. Pet.
App. 32a; see United States ex rel. Polansky v. Exec.
Health Res., Inc., 196 F. Supp. 3d 477, 493 (E.D. Pa.
2016). In February 2019, in the midst of discovery,
the Government announced that it planned to dismiss
the case. Pet. App. 37a. After hearing from the parties, the Government agreed not to seek dismissal if
Polansky narrowed the scope of his claims, but reserved its “right to evaluate whether dismissal is warranted in the future based on further developments,
including arguments raised by the parties, further
factual and evidentiary developments, and associated
discovery burdens.” Id.
Polansky then filed an amended complaint that
purportedly narrowed his claims, although the Government disputed the extent of narrowing. Pet. App.
37a-38a. Thereafter, Executive Health deposed Po-
19
lansky, and the Government participated in the deposition. Pet. App. 39a. Additionally, a Special Master
recommended that the Government produce documents previously withheld as privileged and documents “for additional custodians.” Pet. App. 38a.
According to the district court, these three events
led to the Government’s renewed motion to dismiss in
August 2019. See Pet. App. 55a-56a. Among other
things, “[i]nformation learned during [Polansky’s]
deposition was considered in evaluating dismissal and
evidently changed the Government’s calculation.”
Pet. App. 56a. In support of its motion, the Government “cite[d] genuine concerns regarding the likelihood that Relator will successfully establish FCA liability,” because of “his inability to access ‘medical records’” to determine whether submitted claims were
false, “his failure to demonstrate that Defendant
‘caused the submission of false claims to CMS,’” and
“his credibility given prior behavior in this case.” Pet.
App. 51a. In short, after years of litigation and discovery, the Government now had serious concerns
about the viability of Polansky’s case.
Although it did not need to address the issue given
its grant of the dismissal motion, the district court offered its own views on whether Polansky likely would
be able to demonstrate materiality in the event of a
future reversal and summary judgment. At least for
certain claims, under this Court’s decision in Escobar,
the district court “doubt[ed]” that Polansky could “establish that [Executive Health’s] alleged noncompliance was material to the Government’s decision to
pay.” Pet. App. 74a. The district court pointed to the
Government’s own actions in the case—both in “declining to intervene and moving for dismissal”—as
“probative of the lack of materiality” of Polansky’s
20
claims. Pet. App. 74a-75a. “The Government’s apparent view that [Polansky’s] claims are not worthy of
even private enforcement is relevant because it underscores the conclusion that [Executive Health’s] alleged
fraud was not material in the eyes of the payor and
ultimate beneficiary of Relator’s claims—the Government.” Pet. App. 75a.
The district court also relied on the lack of evidence that the Government ever refused to pay a
claim certified by Executive Health even though Polansky alleged that the “scheme” was ongoing. Pet.
App. 76a. This was “‘strong evidence’ that the noncompliance was not material.” Id. Accordingly, although the district court refused to grant summary
judgment on this basis due to unfinished discovery, it
concluded that Polansky “likely falls short of [Escobar’s] demanding materiality standard.” Pet. App.
74a n.23; see Pet. App. 77a.
As this case amply illustrates, any attempt to
limit the Government’s dismissal authority to the outset of the case would prevent the Government from
terminating burdensome litigation that is likely to be
unmeritorious. As the real party in interest, the Government undoubtedly has a stake in preventing the
entry of judgment in cases that could set poor precedent and potentially intrude on its ability to prosecute
meritorious cases.
B. The Burdens And Costs Of Qui Tam Litigation Often Are Not Apparent At The
Outset.
Most of the other Granston Memo factors relate to
the burden of qui tam litigation on the Government
and interference with its policy prerogatives and the
21
public interest. For example, the Government considers potential “[i]nterference with [a]gency [p]olicies
and [p]rograms,” its “litigation prerogatives,” the need
to [s]afeguard[] [c]lassified [i]nformation and
[n]ational [s]ecurity [i]nterests,” and “[p]reserv[ation
of] [g]overnment [r]esources.” Granston Memo at 4-6.
While some of these issues may be evident at the outset of an FCA suit, many become apparent only after
the parties begin discovery. As the following examples illustrate, the Government has repeatedly dismissed suits against healthcare companies based on
these factors after declining to intervene initially. It
is important that the Government retain this authority.
1. Preserving Government Resources.
The Granston Memo recommends dismissal
whenever the “government’s expected costs are likely
to exceed any expected gain.” Granston Memo at 6.
In many ways, this is the factor that undergirds—and
is frequently intertwined with—all of the other factors. But the Government often cannot conduct a full
cost-benefit analysis until suit has progressed and
some discovery has occurred.
This case is again illustrative. When the Government sought dismissal, not only was the Government
concerned about Polansky’s ability to succeed on the
merits of his claims, it also cited the “costs of continued litigation.” Pet. App. 51a. Even though it had
declined to intervene, the Government had significant
ongoing burdens related to the case: “internal staff obligations,” “anticipated costs related to the document
production recommended by the Special Master, expected attorney time associated with preparing depositions of CMS personnel and monitoring the litiga-
22
tion, including filing statements of interest,” all in addition to “the concern that material it deems as privileged has been produced and will be used.” Pet. App
53a-54a (footnotes omitted). Obviously, many of these
burdens only arose as a result of discovery and were
not evident at the outset of the case. Therefore, the
Government’s conclusion that the “costs outweigh the
benefits of continued litigation” also was not apparent
from the start. Pet. App. 54a.
This scenario is not uncommon. The First and
Second Circuits recently affirmed courts in Rhode Island and New York that dismissed FCA cases where
the same relator made sweeping allegations that
pharmaceutical manufacturers colluded with pharmacy benefit managers to drive up the cost of drugs
by paying kickbacks disguised as service fees. Borzilleri, 24 F.4th at 37; United States ex rel. Borzilleri
v. AbbVie, Inc., 837 F. App’x 813, 815 (2d Cir. 2020).
The Government initially declined to intervene but
later moved to dismiss these cases because “(1) [they]
would likely require significant expenditure of government resources; (2) the relator’s claims were unlikely
to result in any material recovery for the United
States; and (3) the relator was not an appropriate advocate for the government.” Borzilleri, 837 F. App’x
at 815.
If the litigation continued, “attorneys from multiple offices would be required to monitor the litigation
and likely coordinate third-party discovery, rather
than pursue other (and in the Government’s view,
more meritorious) cases,” while “program staff from
the Centers for Medicare and Medicaid Services
(‘CMS’) … would likely have to divert time and resources to respond to discovery requests.” United
States ex rel. Borzilleri v. AbbVie, Inc., No. 15-CV-
23
7881, 2019 WL 3203000, at *2 (S.D.N.Y. July 16,
2019). Moreover, after a multi-year investigation that
included “review of tens of thousands of documents,
interviews with more than thirty witnesses, consultations with regulatory experts within the U.S. Department of Health and Human Services, and the retention of expert consultants,” the Government “concluded that many key aspects of [relator’s] allegations
[were] not supported.” Borzilleri, 24 F.4th at 38, 45.
As these examples illustrate, the Government’s
ongoing dismissal authority is crucial in preserving
the Government’s resources. See also, e.g., United
States ex rel. Nicholson v. Spigelman, No. 10 C 3361,
2011 WL 2683161, at *2 (N.D. Ill. July 8, 2011) (dismissing at Government’s request where costs to Government far exceeded any potential recovery).
2. Preventing Interference with Agency
Policies and Programs.
According to the Department of Justice, “[d]ismissal should be considered where an agency has determined that a qui tam action threatens to interfere
with an agency’s polices or the administration of its
programs.” Granston Memo at 4. Dismissal is also
appropriate “where an action is both lacking in merit
and raises the risk of significant economic harm that
could cause a critical supplier to exit the government
program or industry.” Id. at 5.
If the Government cannot exercise discretion over
which cases should and should not be pursued in its
name, private individuals will exercise power to make
policy decisions on the Government’s behalf. The Government may determine that certain activities by
healthcare entities arguably violate broadly worded
24
statutes or regulations that allegedly support FCA liability, but nevertheless should not be subject to enforcement action because they benefit the public on
balance. The Government must continue to have the
prerogative to make those policy decisions.
In a notable string of cases, the National Health
Care Analysis Group, a for-profit, private investment
group, filed eleven nearly identical complaints
through various affiliates against thirty-eight pharmaceutical companies in district courts across the
country. See United States v. Eli Lilly & Co., 4 F.4th
255, 259 & n.1 (5th Cir. 2021) (collecting cases). The
Group alleged that patient educational programs and
nurse support provided by the companies constituted
illegal kickbacks under the FCA and the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b), which prohibits
remuneration given willfully in return for referrals for
items or services covered by federal programs. After
declining to intervene, the Government subsequently
moved to dismiss most of these cases (the other cases
were jointly dismissed by the parties, or in one instance by the defendant). See Eli Lilly, 4 F.4th at 259
n.1
After extensive consideration, the Government
determined that “further litigation ... will undermine
practices that benefit federal healthcare programs by
providing patients with greater access to product education and support.” Eli Lilly & Co., 4 F.4th at 267
(ellipsis in original). “[A]cross nine cited agency guidances, advisory opinions, and final rulemakings,” the
Government had “consistently held that the conduct
complained of”—product support services—was “[n]ot
only lawful, but beneficial to patients and the public.”
UCB, Inc., 970 F.3d at 852; see also Eli Lilly & Co., 4
F.4th at 268 (similar).
25
As a result, the Government concluded that “the
allegations ... lack sufficient merit to justify the cost of
investigation and prosecution.” Eli Lilly & Co., 4
F.4th at 267 (ellipsis in original). The scope of the
claims was massive—the Group “alleged violations
spanning a six-year period involving Medicare, Medicaid, and TRICARE.” Id. “For Medicare Part D
alone,” the allegations against one company “involve[d] more than 32,000,000 prescriptions, from
more than 400,000 physicians, for more than
1,000,000 Medicare beneficiaries.” Id. For another
company, the Medicare Part D allegations involved
“nearly 500,000 prescriptions, from more than 10,000
physicians, for ‘tens of thousands’ of Medicare beneficiaries.” Id. at 267-68. Given these claims’ breadth,
which became clear as discovery loomed, the Government was concerned about the “‘substantial litigation
burdens’ on the United States as it monitors the cases,
responds to discovery requests, prepares agency employees for depositions, et cetera.” Id. at 268.
In all but one of the cases, the district court
granted the Government’s motions to dismiss. See Eli
Lilly & Co., 4 F.4th at 269; United States v. EMD Serono, Inc., 370 F. Supp. 3d 483, 491 (E.D. Pa. 2019);
United States ex rel. NHCA-TEV, LLC v. Teva Pharm.
Prods. Ltd., No. 17-CV-2040, 2019 WL 6327207, at *6
(E.D. Pa. Nov. 26, 2019); United States ex rel. SCEF,
LLC v. AstraZeneca PLC, No. 17-CV-1328, 2019 WL
5725182, at *4 (W.D. Wash. Nov. 5, 2019). The one
exception was swiftly reversed by the Seventh Circuit,
which labelled the relators “investment vehicles for financial speculators” and endorsed the Government’s
argument that the Group’s claims would jeopardize
26
practices that the Government had found “appropriate and beneficial to federal healthcare programs and
their beneficiaries.” UCB, Inc., 970 F.3d at 852.
In another instance, the Government sought dismissal where allowing a relators’ suit to proceed
would “impinge on agency decisionmaking and discretion.” United States v. Gilead Scis., Inc., No. 11-cv941, 2019 WL 5722618, at *3 (N.D. Cal. Nov. 5, 2019).
In Gilead Sciences, the relators contended that the
pharmaceutical company had violated the FCA by
seeking Medicare and Medicaid payment for HIV
drugs that was contingent on FDA approval of the
drugs. The relators alleged that the company had distributed drugs that were partly manufactured at a facility in China that was not FDA-approved. Id. at *12. The United States declined to participate in the
case at the outset but filed multiple statements of interest and amicus briefs before the district court,
Ninth Circuit, and Supreme Court that were favorable to the relators without taking “a position on the
ultimate merits.” Id. at *2-3.
Notwithstanding these statements, the Government later moved to dismiss the litigation. The FDA
had engaged in its own investigation of the alleged
conduct before the relators ever filed suit, and the
Government was concerned that if the litigation continued, it would “undermin[e] the considered decisions of FDA and CMS about how to address the conduct at issue.” 2019 WL 5722618, at *5. The FDA had
already “taken into account [the relators’] claims in its
regulatory oversight of [the company] and taken actions it deemed appropriate,” short of further enforcement. Id. at *5-7. Accordingly, the Government
wanted “to avoid the additional expenditure of government resources on a case that it fully investigated and
27
decided not to pursue,” especially since continued litigation could lead to “burdensome discovery” and “requests for FDA documents and FDA employee discovery (and potentially trial testimony),” which “would
distract from the [FDA’s] public-health responsibilities.” Id. at *3, *5 (citation omitted).
3. Controlling Government Litigation
Brought on Behalf of the United
States.
The Granston Memo also recommends “dismissing cases when necessary to protect the Department’s
litigation prerogatives.” Granston Memo at 5. The
potential for a qui tam action to interfere with separate Government litigation may not become fully apparent until later in the suit.
For example, in United States ex rel. Piacentile v.
Amgen, Inc., No. 04 CV 3983, 2013 WL 5460640, at *1
(E.D.N.Y. Sept. 30, 2013), the Government dismissed
a relators’ suit after the Government reached a $780
million settlement with a company based on allegations arising from multiple complaints that the company had engaged in fraudulent marketing, provided
unlawful kickbacks, and promoted off-label use of its
drugs. The settlement was the culmination of an
eight-year investigation in which the Government reviewed over 9 million documents and interviewed over
250 witnesses. Id. at *3. The Government offered relators $1.8 million of the settlement. Id. at *1. After
they refused the offer, the Government declined to intervene in and moved to dismiss their particular suit,
citing the cost to the Government in continuing the
case, the weakness of the relators’ claims, and the unlikelihood of further recovery. Id. at *1-4.
*
*
*
28
As these examples illustrate, the Government’s
ability to dismiss qui tam suits throughout litigation
in accordance with its own dismissal factors is necessary to protect the Government’s interests.
C. Broad Dismissal Authority Is Needed
To Protect Against Frivolous Litigation
That Hinders Lifesaving Treatments.
FCA claims can generate massive recoveries.
Last year settlements and judgments in FCA cases
topped $5.6 billion; 90% of this—over $5 billion—came
from the healthcare industry. See U.S. Dep’t of Justice,
Fraud
Statistics,
https://www.justice.gov/opa/press-release/file/1467811/download.
And most of that amount stemmed from cases involving pharmaceutical companies. See U.S. Dep’t of Justice, Justice Department’s False Claims Act Settlements and Judgments Exceed $5.6 Billion in Fiscal
Year 2021 (Feb. 1, 2022), https://www.justice.gov/opa/pr/justice-department-s-false-claims-actsettlements-and-judgments-exceed-56-billion-fiscalyear. Statistical analysis of unsealed FCA settlements between 2004 and 2014 revealed that pharmaceutical companies are the most likely of any industry
to have FCA settlements exceeding $10 million.
Tammy W. Cowart et al., Carrots and Sticks of Whistleblowing: What Classification Trees Say about False
Claims Act Lawsuits, 17 ALSB J. Emp. & Lab. L. 1,
13, 15 (2019).
The vast reach of the Anti-Kickback Statute often
drives significant FCA settlements with pharmaceutical companies. See, e.g., U.S. Dep’t of Justice, Justice
Department’s False Claims Act Settlements and
Judgments Exceed $5.6 Billion, supra (discussing
29
$400 million in settlements paid by generic pharmaceutical manufacturers in 2021 to resolve kickback
claims). As amended in 2010, the Anti-Kickback Statute provides that a claim for an item or service “resulting from” a violation of the statute is false for purposes of the FCA. 42 U.S.C. § 1320a-7b(g). Because
relators and the Government typically request the total value of items or services billed as damages in
kickback cases—on the theory that the kickback
“tainted” the judgment of the healthcare provider who
selected the product or service for a patient—and
since damages under the FCA are trebled, FCA cases
involving kickbacks have the potential to generate especially large recoveries. See, e.g., United States v.
Rogan, 517 F.3d 449, 453 (7th Cir. 2008) (affirming
$64 million damages award). And the seeming possibility of a massive recovery provides an enormous incentive for would-be relators.
In appropriate cases, relators can play a beneficial
role in ferreting out and driving accountability for
true fraud. PhRMA’s members invest many resources
in preventing fraud and abuse affecting Government
healthcare programs. Too often, however, the prospect of exorbitant bounties incentivizes opportunistic
relators to pursue aggressive theories and legal fictions to establish “fraud” on the Government.
Historically, Government intervention has been
correlated with the likelihood of recovery in FCA litigation. See, e.g., David Kwok, Evidence From the
False Claims Act: Does Private Enforcement Attract
Excessive Litigation?, 42 Pub. Cont. L.J. 225, 237
(2013) (“DoJ’s published data demonstrate that relators and their law firms do not have a good track record in successfully litigating nonintervened cases.”);
Michael Rich, Prosecutorial Indiscretion: Encouraging
30
the Department of Justice to Rein in Out-of-Control
Qui Tam Litigation Under the Civil False Claims Act,
76 U. Cin. L. Rev. 1233, 1264 (2008) (finding that
fewer than 10% of relator suits in which the Government does not intervene result in monetary recovery);
Broderick, Qui Tam Provisions and the Public Interest, 107 Colum. L. Rev. at 971 (finding “much support
for the assumption that the Attorney General will intervene when a suit has merit”). Most FCA awards
and settlements typically have come from cases where
the Government either brings suit directly or intervenes in a relator’s suit. See U.S. Dep’t of Justice,
Fraud Statistics, https://www.justice.gov/opa/pressrelease/file/1467811/download (In 2021, $3.9 billion of
FCA recoveries came from non-qui tam suits; $1.2 billion came from qui tam suits in which the Government
intervened; and only $479 million came from qui tam
suits in which the United States declined to intervene).
Nevertheless, the overwhelming majority of FCA
cases are brought by private relators. See id. (598 qui
tam suits filed in 2021, compared to 203 filed by the
Government). In approximately 75% of these, the
Government does not intervene. See U.S. Dep’t of Justice, False Claims Act Cases: Government Intervention in Qui Tam (Whistleblower) Suits (June 12,
2012), https://www.justice.gov/sites/default/files/usaoedpa/legacy/2012/06/13/InternetWhistleblower%20
update.pdf; see also Broderick, Qui Tam Provisions
and the Public Interest, 107 Colum. L. Rev. at 971 (between 1987 and 2004, the United States intervened in
only 22% of qui tam suits). Although most of these
FCA suits are unlikely to succeed, the threat of crushing damages and negative public perception pushes
defendants to settle even unmeritorious cases. See
31
Dayna Bowen Matthew, The Moral Hazard Problem
with Privatization of Public Enforcement: The Case of
Pharmaceutical Fraud, 40 U. Mich. J.L. Reform 281,
314 (2007). Additional settlement pressure occurs because companies found to have violated the FCA or
Anti-Kickback Statute face mandatory or discretionary exclusion from federal healthcare programs, including Medicare and Medicaid—the death knell to a
healthcare company. See 42 U.S.C. § 1320a-7. This
settlement pressure has “resulted in billions of dollars
in settlements” “without any clear finding of fault or
liability.” Matthew, supra, at 285. Accordingly, even
unmeritorious FCA cases impose substantial societal
costs.
Biopharmaceutical companies offer lifesaving
treatment and care. These treatments often are available to the public through federal healthcare programs, and the Government has a clear interest in ensuring that such treatments remain available. Unmeritorious and burdensome FCA litigation can interfere with that mission by diverting time and resources
away from drug development. Especially in the context of FCA suits in which the Government has not
intervened, the Government’s ability to later dismiss
unmeritorious suits is a crucial protection for both the
Government, healthcare defendants, and society.
CONCLUSION
The Court should affirm the judgment of the court
of appeals.
32
Respectfully submitted.
JAMES C. STANSEL
MELISSA B. KIMMEL
PHARMACEUTICAL RESEARCH AND
MANUFACTURERS OF AMERICA
950 F Street NW, Ste. 300
Washington, D.C. 20004
(202) 835-3400
JOHN D. W. PARTRIDGE
GIBSON , DUNN & CRUTCHER LLP
1801 California Street, Ste. 4200
Denver, CO 80202-2642
(303) 298-5931
LUCAS C. TOWNSEND
Counsel of Record
JONATHAN M. PHILLIPS
JESSICA L. WAGNER
GIBSON , DUNN & CRUTCHER LLP
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
(202) 887-3731
ltownsend@gibsondunn.com
Counsel for Amicus Curiae
October 24, 2022
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.