FCA Alert : Lawyers & Attorneys for Whistleblower, False Claims Act & Qui Tam Defense : Kelley Drye & Warren LLP

The Senate Finance Committee recently released a report describing the Committee’s findings based on an investigation into Amedisys, LHC Group, Gentiva, and Almost Family, four of the largest publicly-traded home health care companies.  See Report part I and part II.  The Committee alleges that home health care companies “gamed” the Medicare reimbursement system for therapy visits to the homes of eligible Medicare beneficiaries.

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Par filed a Complaint for Declaratory and Injunctive Relief against the United States, the U.S. Food & Drug Administration (FDA), the Commissioner of the FDA, and the Secretary of the Department of Health & Human Services seeking a declaratory judgment that the application of FDA off-label marketing regulations to Par’s marketing of Magace® ES violates the First Amendment.  Par believes that those regulations unlawfully prevent it from engaging in truthful speech regarding approved uses of Magace® ES with healthcare providers that may prescribe the drug for off-label uses.  There is no dispute that physicians are legally permitted to prescribe a drug for off-label uses.  Moreover, Par alleges that Magace® ES is prescribed more often for off-label uses.  However, as Par notes, the Government has prosecuted manufacturers under the federal False Claims Act for marketing a drug in settings where it was likely to be prescribed for off-label uses.  For example, the Government brought actions against Eli Lilly in connection with its marketing of Zyprexa and Pharmacia regarding its marketing of Bextra.  Presently, Par believes it is under investigation for its sales and marketing practices of Magace® ES as it received a subpoena in March 2009.  (Click here for our prior post regarding potential FCA exposure based on allegations of off-label marketing.)  Par alleges:  “The ongoing threat of prosecution for alleged ‘off-label promotion’ based on Par’s truthful and non-misleading speech to healthcare professionals concerning the FDA-approved use of Par’s FDA-approved prescription drug currently chills Par’s speech.” 

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Amgen alleged that government lawyers violated Rule 4.2 of the New York Code of Professional Responsibility by communicating with present and former Amgen employees in connection with a grand jury proceeding and False Claims Act qui tam litigation.  Amgen sought a protective order to require the government to comply with Rule 4.2, referred to as the “no-contact rule,” which provides that a lawyer may not communicate with the opposing party when it knows it is represented by counsel.  The District Court denied the motion, holding that the court did not have jurisdiction to grant Amgen relief, but even if it did, Amgen’s motion failed on the merits because Amgen and the United States cannot be considered “parties” in the same “matter” as required by Rule 4.2 and the government was “authorized by law” to contact Amgen’s employees.  See In re Amgen Inc., Case No. 10-MC-0249 (E.D.N.Y. April 6, 2011) (Magistrate Judge’s Report & Recommendation), 2011 WL 2418815 (E.D.N.Y. June 14, 2011) (District Court’s order adopting Magistrate Judge’s Report & Recommendation in its entirety).

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Earlier this month, we reported that the U.S. Attorney in the Southern District of New York filed a billion dollar False Claims Act lawsuit against Deutsche Bank and its subsidiary MortgageIT for alleged mortgage fraud during last decade’s housing bubble. (Click here for the prior post.)  It appears that a number of state attorneys general may begin to file lawsuits as well. Yesterday, the California Attorney General announced the creation of mortgage fraud strike force, and the Illinois Attorney General expanded her investigation into alleged practices used by banks and other mortgage institutions, including “robosigning.”  (Click here for the California AG press release and here for the Illinois AG press release).  Last week, the New York Attorney General opened an investigation into mortgage securitization practices.  (Click here for the story reported on the WSJ blog.)  Illinois, California, and New York all have state false claims acts and the increased attention given by the attorneys general may encourage private litigants to bring qui tam cases.

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Amedisys, Inc., the largest home health care company in the U.S., has received a civil investigative demand pursuant to the False Claims Act from the Department of Justice.  According to reports from the Wall Street Journal, the CID received by Amedisys requests documents and information relating to “clinical and business operations, including reimbursement and billing claims submitted to Medicare.”

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On September 21, 2010, the United States moved to intervene in a qui tam action filed by two former Wyeth sales employees. The relators’ complaint, originally filed on December 16, 2005, and most recently amended on May 24, 2010, alleges that Wyeth engaged in improper off-label marketing and promotion of the immunosuppressant drug Rapamune (generic name sirolimus).  In 1999, the FDA approved Rapamune to prevent organ rejection in patients aged 13 years or older receiving kidney transplants. Wyeth reported $374 million in Rapamune sales in 2008.  Pfizer acquired Wyeth in 2009.  A copy of the relators’ second amended complaint filed in United States et al. ex rel. v. Sandler et al., Civil Action No. 05-6609 (E.D.Pa.), can be found here.

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Can an athlete who has used performance enhancing drugs face FCA liability? A court somewhere in this country may soon face that question, according to the Wall Street Journal and the New York Daily News, which reported last week that 2006 Tour de France winner Floyd Landis has filed a False Claims Act suit against his former teammate and seven time Tour de France winner Lance Armstrong. The suit is currently under seal while the government considers whether to intervene in the action, but the Journal article notes that it likely relates Landis’s recent allegations that Armstrong used performance enhancing drugs and engaged in other prohibited practices during his cycling career.

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Earlier this month, the American Hospital Association sent a letter to U.S. Attorney General Eric Holder and Kathleen Sebelius, Secretary of Health and Human Services, requesting a review of a so-called kyphoplasty initiative being pursued by the Office of the United States Attorney for the Western District of New York. The AHA’s letter, and the concerns that it raises about the U.S. Attorney’s efforts, is further evidence of the federal government’s increasingly aggressive stance in policing potential false claims in the healthcare industry. Indeed, the letter accuses the DOJ of “using the threat of FCA liability as an enforcement tool.”

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