CHICAGO – U.S. District Judge Staci Yandle should have dismissed a private suit claiming CVS and other companies cheated the government, Seventh Circuit appellate judges ruled on Aug. 17.
They found Yandle, who presides at the Southern District of Illinois, committed error last year when she ruled that the plaintiff could proceed against the wishes of the government.
They further found that conduct in the complaint was lawful and beneficial to the public.
Plaintiff “Cimznhca” would have received a bonus from any funds it helped the U.S. and 30 states recover.
The first four letters of plaintiff's name stand for Cimzia, a medicine for Crohn’s disease. The last four letters stand for National Health Care Analysis, an entity that created entities to file suits over 12 drugs in eight courts in 2016 and 2017.
Cimzncha sued under the False Claims Act, a Civil War measure awarding bonuses to citizens who exposed crooked contractors.
In each suit a plaintiff, more properly a “relator,” claimed a group of defendants provided kickbacks to doctors.
In the Cimzia suit, attorney Richard Burke of St. Louis named CVS, Rx Crossroads, Omnicare Inc., and UCB Inc. as defendants.
The lawsuit alleged defendants provided remuneration in the form of free nursing support and reimbursement services, and that doctors didn’t prescribe Cimzia because they believed it would help their patients but because defendants pursued and enticed them.
Burke notified the government of the suit as false claim relators must do, and the government declined its right to intervene.
For the U.S. government, assistant attorney general Joseph Hunt moved to dismiss it in 2018.
Hunt wrote that the government discussed claims with counsel for plaintiffs, reviewed information they provided, and consulted with experts on allegations against 38 defendants that implicated more than 73 million prescriptions for Medicare Part D alone. The government concluded that further expenditure of resources wasn’t justified.
Hunt tried to place National Health Care Analysis in shady light.
He quoted investor John Minnino telling a magazine he established the group with backing from a Wall Street angel.
Hunt wrote that the group extracted resumes from public sources and used them to identify potential informants.
“It then contacts these individuals under the guise of conducting a qualitative research study of the pharmaceutical industry, offering to pay each witness for their participation in a standardized interview session,” he wrote.
The group held itself out as a research company and stated on its website that it had no particular bias one way or the other about the industry, according to Hunt.
He moved to dismiss Cimznhca’s claim with prejudice and the government’s claim without prejudice.
At a hearing last year, Yandle asked local assistant U.S. attorney Nathan Stump for figures showing the claim didn’t justify the cost of pursuing it.
He didn’t have any.
She asked why she shouldn’t dismiss the government’s claim with prejudice, and he said it might foreclose prosecution on fraud touching upon a portion of it.
“You want me to dismiss it without prejudice as to the government, so that the government has the opportunity to come back later and pursue allegations which at this point they have declared to be without merit and absorb costs which at this point they have declared to be unjustified, just to do it in a way where the relator is cut out,” Yandle said.
Stump responded: “I’m not saying, judge, dismiss it against them so we can turn around and do it ourselves.”
Yandle said: “That’s kinda what you’re saying.”
She denied the motion, finding the government failed to fully investigate allegations in this case versus conducting a general collective investigation.
She wrote that the government devoted six and a half pages of its briefing and all exhibits to deriding the relator’s business model and litigation activities.
“Under the circumstances, one could reasonably conclude that the proffered reasons for the decision to dismiss are pretextual and the government’s true motive is animus toward the relator,” Yandle wrote.
Seventh Circuit judges found no animus on the government’s part but took a dim view of the relators on their own part.
“These relators created as investment vehicles for financial speculators should not be permitted to indiscriminately advance claims on behalf of the government against an entire industry that would undermine practices the federal government has determined are appropriate and beneficial to federal health care programs and their beneficiaries,” Circuit Judge David Hamilton wrote.
“Wherever the limits of the government’s power lie, this case is not close to them.”
He wrote that Yandle faulted the government for failing to estimate potential costs and benefits of the suit as opposed to a more general review.
“No constitutional or statutory directive imposes such a requirement,” he wrote.
“This is not government irrationality. It oppresses no one and shocks no one’s conscience.”
Circuit Judge Ilana Rovner concurred.
Circuit Judge Michael Scudder specially concurred to set himself apart from a “sophisticated discussion of constitutional avoidance” in Hamilton’s opinion.
“I would rather confront that question in a case where the outcome hinged on the answer,” Scudder wrote.