DOJ dismisses False Claims Act cases

01.08.19

The U.S. Department of Justice has made an unprecedented move to terminate 11 False Claims Act cases in the wake of the so-called “Granston Memo.” In doing so, the United States exercised its inherent authority under 31 U.S.C. § (c)(2)(a) of the False Claims Act to dismiss any action over the objections of the relator as outlined by Michael Granston, the Director of DOJ’s  Civil Fraud Section, in a 2018 memorandum.

The decision has given industry insiders pause, with critics suggesting that it is indicative of an industry shift to protect “Big Pharma.” The DOJ, echoed by many in the defense bar, defended its pronouncement in its motion by explaining that it aims to keep the government from incurring undue expenses and hindering federal healthcare programs.

Much of the pushback against the government’s new use of the tactic comes from groups like the National Healthcare Analysis Group (NHCA), a new breed of company that seeks to generate FCA cases. NHCA and its ilk have been accused of using “shell corporations” to drum up flimsy FCA suits. The NHCA Group released a statement condemning the DOJ’s dismissal after the DOJ filed a motion to dismiss the 11 “essentially cloned” complaints against multiple drugmakers in a Texas federal court on Monday.

Here, the relators brought this recent rash of cases claiming that certain patient assistance services being provided by pharmaceutical manufacturers constituted unlawful kickbacks. The DOJ responded to these claims in no uncertain terms, stating that these support services were in line with the goals of ensuring the success of federal healthcare programs. The DOJ further condemned the allegations, suggesting that if the relators were allowed to pursue the claims it would “undermine common industry practices” the government has already deemed “appropriate and beneficial.”

The dismissal notices include complaints against AbbVie Inc., Amgen Inc., AstraZeneca PLC, Bayer Corp., Biogen Inc., Eli Lilly & Co., and Teva Pharmaceuticals USA Inc. These dismissals are generally accepted to be in light of the Granston Memo, which encourages the courts to dismiss cases that are brought by whistleblowers with the sole purpose of profiting from a loophole that enables companies such as NHCA to use shell corporations to file what are often found to be meritless suits under the FCA.

The dismissal of similar cases across the country did not just catch the attention of NHCA and its peers; others across the healthcare industry also took note because the dismissal indicates that the DOJ is serious about tightening up that loophole and exercising its discretion in unilaterally dismissing FCA whistleblower suits. With each new dismissal by the DOJ we learn more about when, and under what circumstances it will use the United States’ inherent authority to dismiss – or “Granston” – these cases.  This is something that bears watching in 2019.