DOJ: A Company Created To File Lawsuits Has Wasted 1,500 Hours Of The Government’s Time
By: David Yates
The U.S. Department of Justice is asking federal judges around the country to dismiss lawsuits it says are brought by shell companies that misrepresent their true purposes – filing meritless litigation against health care companies.
On December 17, the DOJ filed motions to dismiss qui tam (whistleblower) lawsuits brought by Health Choice Group and other companies represented by high-profile plaintiffs lawyers. The DOJ says these plaintiffs were created for the sole purpose of filing suit under the federal False Claims Act and is complaining that it spent hundreds of hours investigating kickback allegations only to find no merit to them.
Apparently, the government’s investigation into the wrongdoing alleged in these cases found that the complaints were baked using the same cookie cutter.
“Having completed its investigation, and finding the allegations to lack sufficient merit to justify the cost of investigation and prosecution and otherwise be contrary to the public interest, the United States now seeks to dismiss these actions,” the motions state.
The FCA is a law that allows whistleblowers to sue companies that allegedly overcharge the federal government for certain services and products, most commonly involving Medicaid and Medicare.
Once a whistleblower files its suit, the federal government and eligible states have the option to join the plaintiff in prosecuting the action.
The whistleblower, for its efforts, is entitled to a substantial percentage of any recovery.
For example, in June 2017, Health Choice Group – an LLC that the DOJ says was established for the sole purpose of bringing the litigation – filed a False Claims Act suit against Bayer, Amgen, Onyx Pharmaceuticals, AmerisourceBergen and the Lash Group, alleging the companies enriched themselves at the expense of the government.
According to the lawsuit, the defendants engaged in “unlawful marketing schemes,” deploying “nurse educators,” who were “in reality acting as undercover sales reps,” to push two types of drugs – Betaseron, which is used to treat multiple sclerosis, and Nexavar, a cancer treatment medication.
The suit further alleges the companies provided “in-kind remuneration” to prescribers in the form of reimbursement support services, saving prescribers thousands of dollars in administrative expenses – an alleged violation of the federal Anti-Kickback Statute.
The federal government found this not to be the case and wants it and 10 other FCA cases booted from court, though a motion to dismiss does not appear yet on the docket of one of these lawsuits.
Among the law firms representing the plaintiffs in the cases is the firm of prominent personal injury lawyer Mark Lanier of Texas. Lanier’s exploits include a recent $4.7 billion verdict in a lawsuit that alleges Johnson & Johnson’s talcum powder includes cancer-causing asbestos.
Plaintiff Health Choice Group was established by the National Health Care Analysis Group, which is itself a pseudonym for a partnership comprised of limited liability companies set up by investors and former Wall Street investment bankers, the DOJ said in its motion.
The partnership, acting through shell company relators, filed 11 separate qui tam complaints in seven jurisdictions against a total of 38 different defendants for essentially the same alleged conduct.
“In preparing its numerous complaints, NHCA Group appears to have utilized the same model or template, resulting in what are essentially cloned complaints,” the motion states.
“When viewed side-by-side, it is apparent that certain allegations are repeated from one complaint to the next, including seemingly particularized allegations.”
The NHCA Group qui tam business model
Shortly before the first of the actions was filed, the managing agent for NHCA Group, John Mininno, spoke to the media and explained the group’s business model.
Described as a “big-data entrepreneur,” Mininno recalled that when the Centers for Medicare and Medicaid Services made available to the public vast amounts of Medicare claims data, he viewed it as “a massive business opportunity,” specifically with regard to qui tam suits.
Backed by a “Wall Street angel investor,” NHCA Group was established.
In order to obtain information for its qui tam business, NHCA Group created a database of resumes, “scraped and extracted from publicly-available sources,” which the organization used to identify “potential informants,” the motion states.
NHCA Group then contacted the individuals under the guise of conducting a “research study” of the pharmaceutical industry, offering to pay them to participate in what it called a “qualitative research study,” the DOJ says.
However, the information was actually being collected for use in qui tam complaints filed by the NHCA Group through its pseudonymous limited liability companies, the DOJ says.
“On its website, NHCA Group makes no mention of its role behind dozens of qui tam actions, instead holding itself out to the public as a ‘healthcare research company that engages in qualitative research of pharmaceutical and other healthcare-related industries,’” the motion states.
And although NHCA Group collects information to use in qui tam actions against pharmaceutical companies, it states prominently on its website that it has “no particular bias one way or the other about the industry.”
“By utilizing cloned complaints and information gleaned from its fictitious ‘research study,’ NHCA Group advances sweeping allegations of nationwide misconduct by thirty-eight different defendants – allegations that, for Medicare Part D alone, implicate more than 73 million prescriptions written by hundreds of thousands of different physicians for millions of different Medicare beneficiaries,” the DOJ states.
“Due to the expansive scope of the allegations, the Department of Justice has expended substantial resources investigating the NHCA Group matters.”
The lawsuits were originally filed under seal. After concluding the allegations lacked sufficient factual and legal support, the U.S. notified the court in the case against Bayer and others on October 30, 2017, that it was declining to intervene.
The case was thereafter unsealed and an amended complaint was filed on January 12, which was dismissed without prejudice seven months later.
A second amended complaint was filed on August 15, which the government now requests be dismissed.
The FCA directs that a whistleblower must file a complaint under seal and serve it, along with a written disclosure of evidence, on the U.S. The government has 60 days to investigate the allegations and elect whether to intervene in the litigation.
If the U.S. intervenes, the government assumes the responsibility of prosecuting and the relator remains a party, but if the U.S. declines to intervene, the relator has the right to proceed, although that right is not absolute.
“In this case dismissal is appropriate because it is rationally related to the valid governmental purposes of preserving scarce government resources and protecting important policy prerogatives of the federal government’s healthcare programs,” the motion states.
“As an initial matter, based on its extensive investigation of all of the various Venari Partner (Mininno and his NHCA Group) complaints, the government has concluded that the relators’ allegations lack sufficient factual and legal support.”
DOJ attorneys in the Civil Division’s Fraud Section have collectively spent more than 1,500 hours investigating the 11 NHCA Group complaints.
The government is represented by Assistant U.S. Attorney James Gillingham, along with DOJ attorneys Michael Granston, Edward Crooke and Brian McCabe.
Texas law firms representing the plaintiffs include McKool Smith of Marshall; Patton Tidwell of Texarkana; and Howry Breen of Austin.
In Pennsylvania, there are Joseph Trautwein of Blue Bell and Youman & Caputo in Newtown Square.
In Illinois, there are Busse, Busse, & Grasse of Chicago; Norman Rifkind of Chicago; Quantum Legal of St. Louis; and Beasley Allen of Montgomery, Ala., which, like the Lanier firm, has recently played a major role in talc litigation.
The suit against Bayer was filed June 19, 2017 in the U.S. District Court for the Eastern District of Texas, Texarkana Division, cause No. 5:17-00126
The other 10 lawsuits are:
• U.S. ex rel. SAPF, LLC, v. Amgen, Inc., No. 16-cv-5203 (E.D. Pa.);
• U.S. ex rel. SMSPF, LLC v. EMD Serono, Inc., No. 16-cv-5594 (E.D. Pa.);
• U.S. ex rel. SMSF, LLC v. Biogen, Inc., No 1:16-cv-11379-IT (D. Mass.);
• U.S. ex rel. NHCA-TEV, LLC v. Teva Pharms., No. 17-cv-2040 (E.D. Pa.);
• U.S. ex rel. SCEF, LLC v. Astra Zeneca PLC, No. 17-cv-1328 (W.D. Wash.);
• U.S. ex rel. Miller, v. AbbVie, Inc., No. 3:16-cv-2111 (N.D. Tex.);
• U.S. ex rel. Carle, v. Otsuka Holdings Co., No. 17-cv-966 (N.D. Ill.);
• U.S. ex rel. CIMZNHCA v. UCB, Inc., No. 3:17-cv-00765 (S.D. Ill.);
• U.S. ex rel. Health Choice Alliance, LLC v. Eli Lilly & Co., No. 5:17-cv-123 (E.D. Tex.); and
• U.S. ex rel. Health Choice Advocates, LLC v. Gilead, et al., No. 5:17-cv-121 (E.D. Tex.).