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1 Wireless Access Code: 9166703926 Download the agenda PDF at:

2 Diminishing Returns: Dealing with Declined Qui Tam Actions CWAG 2012 Annual Meeting Jonathan L. Diesenhaus, Partner July 24, 2012 Litigation / Washington, D.C.

3 3 Qui Tam Provisions Private persons (known as relators) bring a civil action for violation of a State or Federal civil False Claims Act on behalf of the Government –For each violation, complaints seek: $5,500 - $11,000 per claim per statute Treble damages In a Medicaid case, state claims are pendant claims filed and litigated in one federal court Relators file a Sealed Complaint, serve the State and U.S. Attorneys General, provide statement of material evidence and cooperate in investigation Potential for significant rewards to relator –If Government intervenes, the relator can receive 15 - 25 % of the proceeds –If the Government does not intervene, the relator can receive 25 -30 % of the proceeds –Relator entitled to attorney’s fees and costs if case settles or defendant loses

4 4 The State Statutes 29 states and D.C. now have qui tam statutes –Changing landscape due to the incentive included in the Federal Deficit Reduction Act of 2005 13 pre-existing qui tam statutes amended since 2005 –CA, DE, FL, IL, IN, LA, MI, MT, NH, NV, TN, TX, VA 13 states passed qui tam statutes since 2005 –CO, CT, GA, IA, MD, MN, NC, NJ, NY, OK, RI, WI, WA –New Mexico passed a second statute, without repealing the first 23 qui tam states to watch for legislation –CA, HI, IL, IN, MA, MI, NV, NY, RI, TX, VA, WI No longer DRA-compliant; states have two years to amend –CO, DE, FL, LA, MN, MT, NC, NH, NJ, NM, OK Have yet to be deemed DRA-compliant

5 5 Qui Tam Declinations Most qui tam actions are declined. –As of September 2010, 78% of federal qui tam actions were declined. –86% of those declined cases were ultimately dismissed. But declining without also moving to dismiss keeps meritless cases afloat – to the detriment of state and federal authorities and defendants alike DRA incentive requires state statutes allow relators to litigate declined qui tam claims Issue: Balancing the risk and reward of declined qui tam

6 Scenario 1 Qui tam as License to Second-Guess State –U.S. ex rel. Tessitore v. Infomedics, Inc. (D. Mass. 2012) Relator alleges FDA would have withheld drug approval, or ordered “more timely” warnings, had it known of adverse events Government declines; notes “allegations are not sufficiently pled” and that “FDA was [already] aware” of the information relator provided “but did not then take the actions that [relator] hypothesizes it could have” –But rather than move to dismiss, submits statement of interest requesting that any dismissal be without prejudice to the Government Court ultimately dismisses; finds relator’s “fraud-on-the-FDA” theory “unsubstantiated” and “without factual support” Relator knows best? 6

7 Scenario 2 Costly Discovery –U.S. ex rel. King v. Solvay (S.D. Tex.) Relator files qui tam against pharmaceutical company under the federal FCA and every existing state FCA –Alleges that company colluded with state Medicaid advisory committee members to get products included on state “Preferred Drug Lists” –Does not identify any of the “colluding” members All states and federal government decline –Some states do not list the drugs at all Fishing expedition? –If case proceeds past motion to dismiss, discovery of state deliberations will be inevitable 7

8 Is it worth it? Does a “DRA Compliant” Qui Tam Statute Really Bring in More Money? (Example: $100,000 Settlement) 8

9 Things to Consider “The Government may dismiss the action notwithstanding the objections of the person initiating the action if the person has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion.” 31 U.S.C § 3730(c)(2)(A) –Two prevailing standards for Government’s broad power to dismiss: Swift v. U.S. (D.C. Cir. 2003) – unfettered right to dismiss; presumption that decision not to prosecute is “unreviewable” U.S. ex rel. Sequoia Orange Co. v. Sunland Packing Co. (9th Cir. 1998) – “rational relation” between dismissal and “valid governmental purpose ” Traditional reluctance to invoke dismissal authority needs to be reconsidered Suggestions for Discussion –Share investigative findings and conclusions with relator’s counsel –Open door policy to hear defense arguments in favor of AG dismissals –Coordinated response to unfounded and poorly plead suits –Ease the burden on over-taxed agencies and courts 9

10 10 Questions? For questions about this presentation, or about federal or state qui tam legislation or litigation, please contact: Jonathan L. Diesenhaus (202) 637-5416

11 Hogan Lovells has offices in: Abu Dhabi Alicante Amsterdam Baltimore Beijing Berlin Boulder Brussels Budapest* Caracas Colorado Springs Denver Dubai Dusseldorf Frankfurt Hamburg Hanoi Ho Chi Minh City Hong Kong Houston Jeddah* London Los Angeles Madrid Miami Milan Moscow Munich New York Northern Virginia Paris Philadelphia Prague Riyadh* Rome San Francisco Shanghai Silicon Valley Singapore Tokyo Ulaanbaatar* Warsaw Washington DC Zagreb* "Hogan Lovells" or the "firm" refers to the international legal practice comprising Hogan Lovells International LLP, Hogan Lovells US LLP, Hogan Lovells Worldwide Group (a Swiss Verein), and their affiliated businesses, each of which is a separate legal entity. Hogan Lovells International LLP is a limited liability partnership registered in England and Wales with registered number OC323639. Registered office and principal place of business: Atlantic House, Holborn Viaduct, London EC1A 2FG. Hogan Lovells US LLP is a limited liability partnership registered in the District of Columbia. The word "partner" is used to refer to a member of Hogan Lovells International LLP or a partner of Hogan Lovells US LLP, or an employee or consultant with equivalent standing and qualifications, and to a partner, member, employee or consultant in any of their affiliated businesses who has equivalent standing. Rankings and quotes from legal directories and other sources may refer to the former firms of Hogan & Hartson LLP and Lovells LLP. Where case studies are included, results achieved do not guarantee similar outcomes for other clients. New York State Notice: Attorney Advertising. © Copyright Hogan Lovells 2010. All rights reserved. * Associated offices

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