False Claims Counsel

On February 25, Judge Richard G. Stearns of the District of Massachusetts entered an order in the consolidated cases against Johnson & Johnson and its subsidiaries (Ortho-McNeil-Janssen Pharm. and Johnson & Johnson Health Care Systems, Inc.) for allegedly paying kickbacks to the long-term care pharmacy chain Omnicare. (Omnicare settled its part of those allegations in November, 2009; two nursing homes to which Omnicare in turn paid kickbacks settled those allegations in February, 2010.) The case arose from two qui tams – Lisitza”, initially brought in 2003; and Kammerer, filed in 2005 – both of which were filed on behalf of the U.S. and several states. The government intervened in the cases in January, 2010.

Before Judge Stearns was the defendants’ motion to dismiss all of the complaints against it. He held:

• Kammerer’s suit was barred under the first-to-file rule by Lisitza’s filing two years earlier. Judge Stearns rejected the relator’s attempt to distinguish the cases, concluding that Kammerer’s “simply adds a sprinkle of factual garnish” to Lisitza’s.
• Lisitza’s best price fraud allegations were publicly disclosed in a case filed in the same district against Johnson & Johnson (and several others) in 2003; since Lisitza was not an original source as to those allegations, they were dismissed under the public disclosure bar.
• Johnson & Johnson was not entitled to “safe harbor” protection for the payments the government alleged were kickbacks, because the court found that although amounts of rebates were disclosed, their terms and conditions were not.
• Allegedly false claims submitted by Omnicare could have been caused by Johnson & Johnson, because under the company’s certification in signing up to be a Medicaid provider, compliance with the Antikickback Statute was “not merely a condition of participation in federal health care programs, but is also material to the government’s decision to pay any claim resulting from a kickback.”
• The kickback allegations were pleaded with sufficient particularity

The court also addressed several state issues:

• Nevada – The court found that a broad release in an earlier settlement agreement barred the state’s claims in this action.
• Texas – At the time the qui tam was filed, Texas’ qui tam statute had a rule requiring dismissal if the state did not intervene within 60 days; although the rule was changed, it was not retroactive and in the absence of an intervention, the claims had to be dismissed.
• Illinois – The court dismissed Lisitza’s claims, which were brought under a state criminal statute, on the grounds that he had no standing to bring them
• Kentucky – The court denied the companies’ arguments that they were not “providers” under state law, that state law provided no private right of action, and that the state Attorney General had no right to bring suit under the state’s consumer protection act.
• Indiana – Judge Stearns found Indiana’s state-law RICO claims to be inadequately pleaded, but upheld its Medicaid fraud and antikickback statutory claims.
• Virginia – Applying federal False Claims Act law as a guide, the court refused to dismiss the state’s FCA claims. Judge Stearns likewise rejected the company’s argument that the claims were barred by a statute of limitations, accepting the state Attorney General’s claim that no statute of limitations existed on the state’s act until 2007 (although the court wrote that this “seems implausible”).