In a case that has already been rejected by federal courts and the Department of Justice, a biopharmaceutical group has asked the Texas Supreme Court for writ of mandamus ordering a Harrison County district court to dismiss the case on both issue-preclusion and claim-preclusion grounds.
In re Gilead Sciences, Inc. (No. 24-0281; filed April 10, 2024) arose from one of a series of Medicare fraud qui tam cases initially filed in various federal courts in the late 2010s. As described by Gilead’s petition, these suits allege that pharmaceutical manufacturers “(i) employed nurses to share truthful information about its medicines, and (ii) provided a patient-assistance program to help patients obtain insurance coverage for prescribed medicines.” HCA, on the other hand, characterizes the defendants’ conduct as “‘unlawful marketing schemes,’ deploying ‘nurse educators,’ who were ‘in reality acting as undercover sales reps,’ to push” various types of drugs.” (See Forbes article cited below.)
A late 2018 article published by Forbes entitled “DOJ: A Company Created to File Lawsuits Has Wasted 1,500 Hours of the Government’s Time” (December 19, 2018; https://www.forbes.com/sites/legalnewsline/2018/12/19/doj-a-company-created-to-file-lawsuits-has-wasted-1500-hours-of-the-governments-time/?sh=1dc2551f290b) details the operations of HCA, describing the plaintiff in each of these suits, Health Choice Advocates, LLC, as a front-group established by “investors and former Wall Street Investment Bankers.” According to the entity’s own spokesman, John Mininno, HCA and its affiliate LLCs mined Medicare and Medicaid claims data to pursue “a massive business opportunity.” This “business opportunity” led to the filing of 11 separate qui tam actions in seven jurisdictions against 38 pharmaceutical companies. The Department of Justice determined that “based on its extensive investigation of all of the various Venari Partner (Mininno and his NHCA group) complaints, the government has concluded that the relators’ allegations lack sufficient factual and legal support” and moved to dismiss the cases.
Another article, published by Reuters and entitled “DOJ doubles down in brief to discredit ‘Wall Street-backed’ False Claims Act Whistleblower” (February 25, 2019; https://www.reuters.com/article/idUSKCN1QE2IW/), quotes the DOJ’s description of HCA’s business model as follows:
NHCA Group created a database of resumes, ‘scraped and extracted from publicly-available sources,’ which the organization uses to identify ‘potential informants’ . . . NHCA Group then contacts these invidividuals under the guise of conducting a ‘research study’ of the pharmaceutical industry. More specifically, NHCA Group offers to pay these individuals to participate in what it calls a ‘qualitative research study’; however, the information is actually being collected for use in qui tam complaints filed by the NHCA group through its pseudononymous limited liability companies. On its website, NHCA Group makes no mention of its role behind dozens of qui tam actions, instead holding itself out to the public as a ‘healthcare research company.’
In its motion to dismiss the cases, DOJ went on to state that “[i]n preparing its numerous complaints, NHCA Group appears to have utilized the same model or template, resuilting in what are essentially cloned complaints . . . When viewed side-by-side, it is apparent that certain allegations are repeated from one complaint to the next, including seemingly particularized allegations.” Some of the plaintiff’s lawyers involved in filing the suits include Mark Lanier, McKool Smith (Marshall), Patton Tidwell (Texarkana), Howry Breen (Austin), Joseph Trautwein (Pennsylvania), Busse, Busse & Grasse (Chicago), Norman Rifkind (Chicago), Quantum Legal (St. Louis), and Beasley Allen (Montgomery, Alabama). Many of the federal cases, which were filed in district courts in Pennsylvania, Massachusetts, Washington, Texas, and Illinois), were nonsuited before any court ruled on DOJ’s motions to dismiss, while the courts have dismissed others. Spurned at the federal level, HCA has now turned its attention to state courts, beginning with copycat suits in New Jersey and Texas. HCA’s New Jersey venture ended in disappointment, as both the trial and appellate courts ruled that the prior dismissals of two federal suits precluded the state suit.
Health Choice Advocates, LLC v. Gilead, et al., the case now before SCOTX on a petition for writ of mandamus, was originally filed in the Eastern District of Texas. In addition to Gilead, other defendants who have been sued in this and related litigation include Amgen, Biogen, Bayer, Teva Pharmaceuticals, Astra Zeneca, EMD Serono, AbbVie, and Eli Lilly. Aside from the substantive legal issues of claim preclusion, we have grave concerns about Texas courts being used for the benefit of private investors in a speculative venture. HCA’s side of the story—that it is a legitimate whistleblower seeking to recover millions of dollars in taxpayer money—may be the case, despite DOJ’s conclusion to the contrary. But even assuming that it is, the concern remains. In a qui tam action in which the state intervenes, as the Office of the Attorney General has done here, the relators stand to recover anywhere from 15% to 25% of the ultimate take. Who would get it? Well, the short answer is that, other than the plaintiff’s attorneys, we don’t know. At the very least, there ought to be public disclosure of who HCA’s investors actually are and how much they can expect to receive from their “investment.”
Perhaps requiring such disclosure is something the Legislature might address next session. It might also address whether a for-profit entity created by third-party investors to pursue lawsuits against real job-creating Texas businesses should have the right to make money off of our taxpayer-funded courts and our judges. Somehow we doubt that’s what the framers meant when they put the Open Courts doctrine into the Texas Constitution. In fact, they would likely have considered such a practice as champerty, which no less an authority than William Blackstone called “an offense against public justice, as it keeps alive strife and contention, and perverts the remedial process of the law into an engine of oppression.” Or, as the Ohio Supreme Court in a 2003 decision, “a lawsuit is not an investment vehicle. Speculating in lawsuits is prohibited by Ohio law. An intermeddler is not permitted to gorge upon the fruits of litigation.” (See https://www.law.cornell.edu/wex/champerty). From our perspective, while this suit should be dismissed on claim preclusion grounds, it should also be condemned for the bad public policy it represents. If there is a weakness in the qui tam statute that allows well-heeled investors to pass themselves off as taxpayer champions, then we need to take another look at the statute and at the whole qui tam concept.
