A recent case in the District of Massachusetts provides a good illustration of the application of the False Claims Act’s public disclosure and first-to-file bars in health care fraud cases. See United States ex rel. Bartz v. Ortho-McNeil Pharmaceutical, Inc. et al., Civil Action No. 11-10316 (D. Mass. March 2, 2012). In 2005, the relator, a former sales compensation manager for a drug manufacturer, filed a qui tam suit pursuant to the False Claims Act against the manufacturer, a distributor, and various related entities. The amended complaint asserts three broad categories of alleged fraudulent conduct – the manipulation of Medicaid rebate amounts, false reporting of AMP and best price for certain drugs, and the payment of kickbacks to nursing home drug purchasers. At the core of the relator’s allegations is the claim that the defendant pharmaceutical distributor took kickbacks from the manufacturer as an inducement to purchase the anti-psychotic medication Risperdal Consta. In 2008, the United States declined to intervene. As of the date of the court’s opinion, no State had moved to intervene.
The defendants moved to dismiss the amended complaint pursuant to the public disclosure and first-to-file bars of the FCA. Defendants characterized the relator’s amended complaint as a “hotchpotch of stale allegations that were previously presented in dozens of complaints and other public disclosures.” Defendants included a lengthy list of prior lawsuits and various news articles and government reports making similar allegations. The court held that as a matter of law, the information in these previously filed complaints and news reports are “public disclosures” for purposes of the barring rule of the FCA:
A comparison of these disclosures with the allegations made by Bartz demonstrates that all of the “essential elements” of Bartz’s claims – the allegedly false AMP and Best Price arising from free goods and hidden discounts and the “kickbacks” in the form of discounts and payment of administrative fees to promote particular pharmaceutical products—were in the public domain prior to Bartz’s various Complaints through the AWP Litigation, the Massachusetts Litigation, the LaCorte, Pauly, Montana, City of New York, and Commonwealth of Pennsylvania lawsuits, and general news reporting. Although these materials did not specifically reference the ASP and non-FAMP reporting, their allegations regarding AWPs, WACs, AMPs, and Best Prices were more than sufficient to place the government on notice of J&J’s alleged reporting fraud.
The court rejected the relator’s claim that the public disclosure bar should not apply because he provided additional information and analysis in his allegations:
Regardless of the value to the government of these elaborations on what was already known, the public disclosure bar’s focus is on notice and not detail. Allowing such a suit would allow potential qui tam plaintiffs to avoid the public disclosure bar by pleading their complaints with more and more detailed factual allegations slightly different from more general allegations already publicly disclosed. Given that the purpose of the qui tam action is to prosecute fraud of which the government is unaware, such a result would not advance Congress’ purpose and would only multiply the number of parasitic qui tam actions pursued by plaintiffs.
The court also rejected the relator’s assertion that the public disclosure bar did not apply because he was an “original source.” The complaint alleges, in relevant part, that “the allegations set forth in the Complaint are based upon the direct and independent knowledge of the relator, a former insider of the J&J defendants….This lawsuit is based solely on information and knowledge obtained by Relator in his position as a J&J insider.” The court concluded that relator failed to demonstrate that he was an original source because the complaint did not provide any supporting details that would corroborate his status as an original source, but rather parroted the statutory language.
Alternatively, the court held that the suit was precluded by the FCA’s first-to-file bar because the “identicality of elements with the prior-filed complaints is fatal to Bartz’s claims.”