The Department of Justice (DOJ) recovers billions of dollars each year under the False Claims Act, enabling whistleblowers, known as qui tam relators, to receive up to 30% of the funds recovered in each case. The potential of that significant windfall attracted Wall Street investors who formed Venari Partners, LLC, doing business as National Healthcare Analysis Group (NHCA). The parties behind NHCA were New Jersey attorney John Mininno, Sweetbriar Capital, LLC, Uptown Investors, L.P., and 110 Partners, LLC. Together, they sought to “uncover, investigate, develop and file high value whistleblower lawsuits . . . [and] build a portfolio of cases that can generate substantial investor returns over 5 to 10 years,” according to Mininno’s public Facebook profile.
DOJ was unimpressed. In court filings, the agency argued that “conduct engaged in by NHCA is quite similar to the conduct sanctioned” in another qui tam case in which the relator’s attorneys engaged in an elaborate scheme of deceptive conduct to obtain information for use in their case. Here, NHCA utilized a database of resumes to identify 70,000 health care workers in hopes of finding “potential informants” for qui tam cases. DOJ asserted that NHCA then contacted individuals from this database under the guise of conducting a “qualitative research study” of the pharmaceutical industry, offering to pay each witness for their participation in an interview session. The witnesses were not told that information shared might be used in lawsuits involving the witnesses’ current or former employers, nor were they told that they would be named as corroborating “witnesses” in those lawsuits, according to the DOJ.
Once NHCA collected the information, it filed 11 qui tam complaints against 38 defendants, alleging essentially the same theories of False Claims Act liability, and asserting claims of fraud against Astrazeneca, Bayer, Biogen, Gilead Sciences, Teva Pharmaceutical Industries, and others. NHCA’s theory of liability was that pharmaceutical companies and commercial outsourcing vendors violated the federal Anti-Kickback Statute by engaging in so-called “white coat marketing” and by providing free “nurse services” and “reimbursement support services.”
Displeased with NHCA’s “fictitious” research studies, and disagreeing with the merits of its underlying allegations, DOJ moved to dismiss all 11 cases under 31 U.S.C. § 3730(c)(2)(A).
NHCA opposed those motions, arguing that it should be permitted to proceed under a provision of the False Claims Act that gives relators the right to continue as a party to the action when the government declines to proceed. The parties have engaged in contentious briefings throughout the country regarding whether DOJ has the right to dismiss NHCA’s actions over its objection, with NHCA arguing that DOJ’s reasons for dismissal are arbitrary and unsubstantiated.
Yesterday, the U.S. District Court for the Eastern District of Pennsylvania granted DOJ’s motion to dismiss, becoming the first court to weigh in on the NHCA/DOJ fight. The court pointed to the government’s investment of “significant time and resources investigating” NHCA’s claims and held that NHCA had “failed to show that the government’s decision is arbitrary and capricious.” The court reasoned that “[p]reserving litigation costs is a valid interest [of the government] even where the claims may have merit . . . [and] the government has the option to end litigation it determines is too expensive or not beneficial.” The court concluded that “[t]he reasons given by the government [for dismissal] are not a cover for an illegitimate reason . . . [but] are concerns that any party to litigation may have when deciding whether to continue pursuing a case.”
Given the substantial investment NHCA has made in its so-called “big-data entrepreneur” business, and the 10 remaining cases that hang in the balance, an appeal by NHCA of the court’s decision should be expected.
Derek M. Adams is a partner at Feldesman Tucker Leifer Fidell LLP in its False Claims Act and litigation practice groups. He previously worked as a Trial Attorney at the Department of Justice, Civil Fraud Section.