The district court granted the government’s motion to dismiss a qui tam case over the relators’ objections, finding the government had adequately investigated the claims and found the case insufficiently supported and therefore the decision to conserve government resources was reasonable. While the relators alleged that free services provided by the defendants to physicians who prescribed their medications amounted to “white coat marketing,” the government explained that these services were a common industry practice intended to benefit the patients who received the medications, not necessarily the physicians. The relators—an LLC formed for the exclusive purpose of filing qui tam suits—complained that the government did not share its concerns with them, meet with counsel, or accept supplemental information, but the court found this assertion factually incorrect.
The government moved to dismiss a qui tam case alleging that AstraZeneca Inc. and its affiliates violated the Anti-Kickback Statute when marketing various pharmaceuticals and thus caused the submission of false claims in violation of the federal and various state False Claims Act.
SCEF LLC is a company formed by other LLCs and their investors as a vehicle for bringing qui tam actions. In this action, the relators alleged that AstraZeneca improperly promoted its drugs by providing free nursing services to physicians who prescribed their products and by providing free reimbursement support services. The United States declined to intervene and then sought dismissal of the case.
The government explained that its investigation into the allegations showed the relators lacked sufficient factual and legal support for their case, and therefore dismissal was warranted to conserve government resources. The government also argued that some of the patient-support services described in the complaint were common industry practices that benefit the government and healthcare program beneficiaries. Accordingly, the government does not consider these services an improper inducement to physicians to prescribe certain drugs, but an important method via which patients can receive information about their prescriptions.
In response, the relators argued the government had not shown that dismissal would conserve government resources or further a public policy goal. However, the court noted that the Ninth Circuit’s decision in Sequoia Orange did not require the government to make an evidentiary showing, but merely to identify a valid government purpose and to connect dismissal to the accomplishment of that purpose. Given the nature and lengthy timespan of the allegations, the court found it obvious the government would expend substantial costs if the litigation continued. The court found the government’s purpose legitimate.
The court also found the relators failed to show the government’s request was fraudulent, capricious, or illegal. The relators argued the government’s request was at odds with its interest in discouraging “white coat marketing,” but the government noted that the case cited by the relators involved healthcare professionals marketing items and services to their patients, not patient services provided by manufacturers to beneficiaries who had been prescribed their products.
The relators complained that the government did not shares its concerns with their counsel, meet with them, or accept additional information. However, the court noted that the Department of Justice notified the relators that it would seek dismissal of their complaint on October 3, 2018, and delayed that filing multiple times at the relators’ request, while also accepting additional information.
The court granted the government’s motion to dismiss with prejudice as to the relators but without prejudice to the United States.
