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Law360 (December 10, 2020, 5:21 PM EST) --
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| Andrew Hoffman |
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| Colleen McElroy |
The working group is, according to HHS, a direct response to unprecedented levels of taxpayer support that the agency has administered to private organizations and individuals in response to COVID-19.
As part of Operation Warp Speed, for example, HHS has provided billions of dollars to life sciences companies in connection with their efforts to research, develop and distribute COVID-19 vaccines and therapeutics at a record-setting pace.
The press release announcing the new working group notes the vast majority of these companies have used government grants and other payments in good faith to combat the pandemic. Nevertheless, HHS is launching the working group to better protect taxpayer funds and deter would-be fraudsters.
This is, of course, a laudable goal and the False Claims Act has long been a key weapon in the government's anti-fraud arsenal.
But private whistleblowers, who are empowered under the statute's qui tam provision to bring lawsuits on behalf of the U.S. — and share personally in any recovery — sometimes use the False Claims Act not to combat intentional wrongdoing, but rather as a vehicle for punishing technical noncompliance with complex federal regulations, or even run-of-the-mill breaches of contract.
The U.S. Supreme Court has held repeatedly that such efforts are not supported by the statute.[1] This has not stopped many whistleblowers and their lawyers from continuing to file qui tam lawsuits based on little more than alleged statutory, regulatory or contractual foot faults.
Though these complaints may lack merit, the government must devote scarce resources to investigating them.[2] And life sciences companies must expend considerable resources responding to these investigations and, oftentimes, litigating the cases for years after the DOJ declines to pursue them.
Meritless qui tam cases thus create inefficiencies and distractions for government and industry alike, at a time when both are playing critical roles in the battle against the COVID-19 pandemic.
It appears these realities were a major factor in the creation of HHS' new working group. In the press release announcing the working group, HHS Secretary Alex Azar explained it has a two-fold purpose: (1) ensuring the government's enforcement resources are focused on bad actors, while at the same time (2) not burdening those working in good faith to comply with the law.
This formulation of the working group's mission statement acknowledges that all qui tam complaints are not created equal. And, for its part, HHS wants to focus its time and attention on complaints alleging actual fraud, not — in the words of the Supreme Court's landmark 2016 Escobar decision — "garden variety breaches of contract or regulatory violations."[3]
To achieve these goals, the working group will perform both a proactive function — identifying potential False Claims Act violations and referring them to the DOJ and OIG — and a reactive function — providing HHS' views on the intricate legal frameworks of the agency's numerous funding programs for filed cases already under government investigation.
The staffing of the new working group is comprised of HHS lawyers, former health care fraud prosecutors and former private counsel for health care and life sciences companies.
Providing defense counsel with a seat at the table — but not members of the qui tam plaintiffs bar — may also be an implicit acknowledgment that the theories of recovery advanced by many whistleblowers are often driven by profit motives rather than faithful adherence to the False Claims Act.
That whistleblowers continue to advance some questionable lawsuits is no secret, and the new HHS working group is only the latest example of the executive branch attempting to rein in qui tam complaints that diverge from the government's policy and enforcement priorities.
In 2018, for example, the DOJ issued the Granston memo, which encouraged federal prosecutors to exercise more frequently their discretion to recommend dismissals of meritless qui tam complaints, including, among others, those that conflict with the policy priorities of federal agencies.[4]
That same year, the DOJ moved to dismiss eleven False Claims Act cases brought by the National Health Care Analysis Group, a so-called professional relator that filed numerous complaints containing cloned allegations — specifically, that certain pharmaceutical companies and third-party vendors violated the False Claims Act through schemes to offer health care providers with kickbacks in the form of patient support services like clinical nurse educators and reimbursement support programs.[5]
DOJ argued dismissal of these actions was warranted because the lawsuits lacked legal and factual support, strained scarce DOJ resources and conflicted with the government's strong interests in facilitating patient access to important medications.[6]
HHS' False Claims Act working group seems to continue the trend of more careful management by the executive branch of the ever-expanding docket of qui tam complaints filed by individual and corporate relators.
On balance, the new working group may prove to be a positive development for life sciences and health care companies as they partner with HHS to respond to the COVID-19 crisis, while qui tam plaintiffs and their lawyers try to secure a share of massive federal spending in response to the pandemic. Time will tell whether these trends continue when the Biden administration comes to power on Jan. 20.
Andrew Hoffman II is a partner and Colleen McElroy is an associate at DLA Piper.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] See, e.g., Universal Health Services, Inc. v. U.S. ex rel. Escobar
, 136 S.Ct. 1989, 2003 (2016).[2] See 31 U.S.C. 3730(a) (requiring DOJ to investigate qui tam allegations "diligently").
[3] See Escobar, 136 S.Ct. at 2003.
[4] See generally DOJ Memorandum entitled "Factors for Evaluating Dismissal Pursuant to 31 U.S.C. 3730(c)(2)(A)" (Jan. 10, 2018).
[5] See, e.g., U.S. Motion to Dismiss Relator's Second Amended Complaint, U.S. ex rel. Health Choice Group, LLC v. Bayer Corp., et al., No. 17-00126 (Dec. 17, 2018 E.D. Tex.).
[6] Id.
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