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The federal and state False Claims Acts permit whistleblowers (known as “relators”) to pursue qui tam complaints even in declined cases. A declined case is one where the government has decided not to intervene and take over litigation of the matter. Allowing relators to go forward in declined cases is a key feature of the False Claims Act. The government sometimes declines good cases. For example, this can happen when the government lacks resources or a court has refused to extend the government’s time to complete its investigation. In such instances, the False Claims Act encourages relators to fight on to protect the interests of the taxpayer. In return for taking on that risk, relators are eligible for an increased percentage of the amount recovered. Recent settlements in three False Claims Act cases show the value of relators pursuing declined cases.
Whistleblowers brought a False Claims Act qui tam case against Aegerion and several individuals. The relators were former Aegerion sales representatives. They alleged illegal marketing practices involving Aegerion’s cholesterol drug Juxtapid. The FDA approved Juxtapid only for patients with a rare condition, and it costs over $300,000 per year. After investigation, the government intervened against the company. Aegerion agreed to pay $28.8 million to resolve the civil case, including allegations of kickbacks through use of a patient assistance fund and off label marketing. The company also agreed to plead guilty to two misdemeanor counts of misbranding Juxtapid and to pay a criminal fine and forfeit $7.2 million. However, the Department of Justice declined to intervene as to the individual defendants.
The whistleblowers and their attorneys continued to fight to hold the individuals accountable. In December 2019, after two years of litigation, eight of the individual defendants agreed to pay $6.5 million to the government. As a result, the government’s total recovery (from civil and criminal actions) increased to $42.5 million. The Department of Justice prosecuted the ninth individual criminally. In December 2019, a jury convicted him of nine counts of wire fraud and six counts of aggravated identity theft for defrauding Medicare and private insurers. He has not yet been sentenced.
As we have previously written, two former sales representatives brought a qui tam action against Teva Pharmaceuticals. They alleged that Teva used sham speaker programs to induce physicians to prescribe two of its drugs – Copaxone (a Parkinson’s disease drug) and Azilect (a Multiple Sclerosis drug). After the government declined to intervene, relators went forward with the case. Through discovery, they discovered powerful evidence corroborating their claims that Teva had been paying physicians to induce them to prescribe its drugs. Such conduct is illegal under the Anti-Kickback Statute (“AKS”). It also causes violations of the False Claims Act.
In January, Teva Pharmaceuticals agreed to pay $54 million to the federal and state governments. The settlement came about after years of hard-fought litigation. For their efforts in securing this important victory for taxpayers, the court awarded relators a near-maximum share of 29%.
Agnesian Healthcare is a three-hospital system in Wisconsin with an affiliated physician group. The relator, an orthopedic surgeon, alleged in his 2014 qui tam complaint that the hospital illegally paid the physicians kickbacks and other financial incentives to get them to refer Medicare and Medicaid patients exclusively to Agnesian physicians and facilities.
The relator went forward with his case after authorities declined to intervene. In January, Agensian and its affiliated physician group agreed to pay $10 million to the federal government and the state of Wisconsin to settle allegations that these incentives paid to the physicians violated the Stark Law, the Anti-Kickback Statute, and in turn the federal and Wisconsin False Claims Acts (since repealed).
The False Claims Act is a public-private partnership. In cases where the government intervenes, the FCA provides for a relator share of 15-25%. However, where the government declines to intervene and relators go forward on their own, the award increases to 25-30%. Importantly, this increased share recognizes that litigating a declined case is expensive and burdensome. The settlements described above illustrate how pursuing a declined case can benefit the public while rewarding whistleblowers and their attorneys.