TEXARKANA, Texas (Legal Newsline) - A Texas appeals court refused to dismiss a lawsuit against Baxter International and other drug companies filed by a shell company formed specifically to bring whistleblower cases, saying the fact the federal government opposed the claims doesn’t mean they aren’t valid under Texas law.
Health Choice Advisory filed a salvo of False Claims Act lawsuits against Bayer, Baxter, Amgen and other companies, accusing them of violating state and federal anti-kickback laws by providing educational services to doctors who prescribed their drugs. The defendant companies moved to dismiss the cases, saying HCA was a shell formed by Wall Street investors that was masquerading as a qui tam, or whistleblower, plaintiff to sue over educational programs that actually benefited patients.
The federal government agreed and in 2018 urged courts to dismiss the federal lawsuits filed in its name. The U.S. Court of Appeals for the Fifth Circuit, in a July 7 decision, upheld the dismissal, ruling that the federal government had legitimate reasons to oppose the case including that the education programs benefited public healthcare systems. HCA is owned by National Health Care Analysis Group, a company formed by New Jersey lawyer John Meninno and partners.
“The government concluded that the litigation costs were not justified by the expected value of recovery,” the Fifth Circuit ruled, “particularly given the government’s concerns about the merit of the underlying allegations.”
Despite these victories, a state court judge in Texas rejected Baxter’s motion to dismiss HCA’s suit under the state’s anti-kickback law. Baxter and co-defendant Shire PLC filed a petition for mandamus review at the appellate level. But in an Aug. 6 decision the Sixth Appellate District rejected that request, ruling that HCA had pled sufficient facts to survive a motion to dismiss.
In its decision, the Sixth District acknowledged the federal government had declared HCA’s claims lacked “factual and legal support” and were “an unfounded attack on `common industry practices.’” But federal government lawyers don’t speak for Texas law, the appeals court ruled, and the opinions they filed in federal court specifically disclaimed any claims about state law.
The Texas Medicaid Fraud Prevention Act, like the federal False Claims Act, requires plaintiffs to submit their claims confidentially to the Texas Attorney General for review. Courts must must dismiss a qui tam claim unless the Attorney General opposes dismissal. The Texas AG did just that, urging the appellate court not to hear Baxter and Shire’s mandamus petition, and the appeals court rejected the company’s argument that was too late.
Baxter and Shire also argued HCA’s claims were based upon information that was public and available to the government already. The appeals court noted that the public disclosure bar is intended to protect the government against being forced to share the proceeds of a recovery with lawyers who didn’t actually uncover wrongdoing, but Texas law allows the AG to decide that question on a case-by-case basis.
The state appeals court also disagreed that the federal government’s opposition to HCA’s claims meant they had no basis in law. The government’s opinion actually said the educational programs might violate federal anti-kickback law but the offense was trivial and not worth pursuing.
“This does not establish that the programs are not kickbacks under the TMFPA as a matter of law; in fact, it could actually support the opposite conclusion,” the appeals court concluded.