Fifth Circuit Upholds Dismissal of Qui Tam Kickbacks Case by Government

On Wednesday, a precedential opinion was released by the Fifth Circuit Court of Appeals, in a case brought by Health Choice Alliance against Eli Lilly and appealed from the Eastern District of Texas. The case was a qui tam action on behalf of the United States, specifically Medicare, Tricare, and Medicaid,  regarding possible violations of the Anti-Kickback Statutes by pharmaceutical manufacturers Eli Lily and Bayer, among others. The Fifth Circuit affirmed the dismissal of the case.

The original cases against Eli Lily and Bayer argued that providing doctor and patient educational programs prior to the prescription of  drug constituted offering something of value to the doctors and was therefore an automatic kick back the statute. Upon filing the Qui Tam action, Health Choice Alliance made the required notice to the United States, who after review of the case declined to intervene. Health Choice then proceeded against the defendants, however one year into the proceedings, the United States stepped in and requested dismissal in the case. The United States argued that the case was not going to be cost effective in terms of the cost of litigation as opposed to the potential recovery, and also arguing that the educational programs provided by the companies were beneficial to recipients of the program and did not constitute kickbacks. After the trial courts dismissed the actions, Health Choice appealed to the Fifth Circuit.

The Fifth Circuit noted that in every Qui Tam action, the ultimate party in interest is the government, and therefore the government does have a right to intervene at any point in the case, even if the government originally declined to intervene. When the government chooses to intervene, the Fifth Circuit confirmed that there must be a hearing and that hearing must be more than a pro forma hearing under statute. However, if the original plaintiff declines to present evidence at that hearing, that is the choice of the original plaintiff and there is no requirement for a further hearing beyond that original hearing, the opinion said.

The court also noted that there is a circuit split on the standard for the review of the governments reasoning for the dismissal, with the D.C. Circuit and Seventh Circuits holding that the government has unfettered ability to dismiss, and the Ninth and Tenth Circuits holding that the government must show a rational basis for the dismissal and if it does, the burden shifts to the original plaintiff to show that the basis is arbitrary or capricious.

The Fifth Circuit noted that the original plaintiffs made no counter in their briefs against either of the two main arguments of the government and also noted that the rational basis argument does not require that the stated motivations be the only motivations of the government, but that they be a sufficient motivation.

Health Choice Alliance was represented by the Lanier Law Firm.