In United States v. Eli Lilly and Co., No. 19-40906, 2021 WL 2821116 (5th Cir. July 7, 2021), the court of appeals affirmed dismissal of the appellants' qui tam action under the FCA, alleging violations of the Anti-Kickback Statute (AKS) by pharmaceutical companies. The complaints in the Eli Lilly and Bayer cases allege that the pharmaceutical companies illegally provided free product-education services from nurses in order to induce healthcare providers to prescribe their products in violation of AKS and certain state laws. Roughly one year after declining to intervene in the cases, the government advised the appellants that it intended to move to dismiss the complaints based on such concerns as to whether there was sufficient factual and legal support to prove violations of the AKS and the costs and burdens for the U.S. if the qui tam actions were to continue. The FCA allows the government to assert control over qui tam litigation through such procedural mechanisms as intervention, settlement and the power to veto voluntary settlements.
The court recognized an already existing circuit split over what is required for the government to dismiss a case under 31 U.S.C. § 3730. The District of Columbia Circuit accords the government unfettered discretion to dismiss qui tam lawsuits. The Ninth and Tenth Circuits adopted a rational-relation test for reviewing the government's motion to dismiss a qui tam lawsuit. The Seventh Circuit applies a standard informed by Federal Rule of Civil Procedure 41. Rejecting the D.C. Circuit's test, the Fifth Circuit focused on the right to a "hearing" in 31 U.S.C. § 3730(c)(2)(A) to require something more than a forum for the appellant to convince the government not to dismiss the case, but declined to decide the precise bounds of the government's discretion under the circumstances because, in the court's judgment, the appellant received such a hearing preceding dismissal. The appellant argued that there had been an absence of an evidentiary hearing in violation of procedural due process, but the court of appeals determined that the district court had not precluded an evidentiary hearing and that, instead, the appellant consciously and strategically chose not to offer evidence at the hearing. Without deciding that the Ninth and Tenth Circuits' rational-relation test applies, the court determined that the government satisfied the test.
The rational-relation test requires the government first to show that there is a valid government purpose and a rational relation between dismissal and accomplishment of that purpose. The court decided that the government made this showing by arguing that the allegations in the qui tam complaint lack sufficient merit to justify the cost of investigation and prosecution, and additional litigation would undermine practices that benefit federal healthcare programs by providing patients with greater access to product education and support. The burden shifted to the appellants to show that the government's motion to dismiss was fraudulent, arbitrary, and capricious or illegal. The court ruled that the appellants did not meet this burden by alleging animus against them.
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Mr Nathan Adams IV
Holland & Knight
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