Recommended Reading: New Empirical Analysis of False Claims Act Whistleblower Litigation

By Kate Greenwood
[Cross-posted at Health Reform Watch]

Late last year, the Columbia Law Review published David Freeman Engstrom’s Private Enforcement’s Pathways: Lessons from Qui Tam Litigation, the fourth in a series of articles Professor Engstrom has written on the growth and evolution of qui tam litigation. (My colleague Associate Dean Kathleen Boozang wrote about the first three at Jotwell, here.) Private Enforcement’s Pathways, like the articles that precede it, brings a welcome dose of data and empirical analysis to a controversial area of the law, the debate over which has at times generated more heat than light.

Professor Engstrom’s analysis rests on a database he built containing information on the roughly 6,000 unsealed FCA cases that have concluded in a litigated judgments or settlement since 1986. In response to Freedom of Information Act requests, the Department of Justice provided information on the judicial district in which each case was filed, the date that DOJ decided whether or not to join each case, and the outcome of each case (including the amount, if any, that the government recovered and the whistleblower’s share of that recovery). DOJ also provided the date of filing for the 3,000 cases filed since 1986 that remain under seal, as well as for the 6,000 unsealed cases. From PACER, Professor Engstrom retrieved information on the parties, law firms, and individual lawyers involved in each unsealed case.

Based on his analysis of the data, Professor Engstrom “largely rejects widespread claims that qui tam litigation is in the midst of an inefficient ‘explosion’ of enforcement effort, or … that qui tam enforcement activity has ‘lurched’ from one extreme to the other in response to a changing litigation environment.” Instead, he notes, “the data suggest a steady maturation of the regime.” Professor Engstrom also concludes that although “mean recoveries have roughly doubled since 2000 (and nearly quadrupled since 1990) … a substantial portion of this growth is attributable to a handful of especially large settlements of $500 million or more … most of them against pharmaceutical companies[.]” This, of course, is small comfort for pharmaceutical companies. Pharmaceutical and medical device companies complain that the size of the recoveries, combined with the threat of exclusion from participation in federal healthcare programs, mean that, in FCA cases brought against them, the whistleblower and the government hold all of the cards.

In addition to the size of False Claims Act recoveries, Professor Engstrom explains, critics contend that the FCA’s qui tam regime has led to companies being targeted for “arguable, gray-area misconduct” and for “relatively minor regulatory infractions,” the implication being that these are suits that the government would not otherwise bring. Professor Engstrom’s addresses these contentions, about the nature of the cases being brought, in the second half of his article. Because they prove more difficult to evaluate empirically, he augments his number crunching with three case studies, two of which—the Medicare drug pricing cases and the healthcare kickback and self-referral cases—involve life sciences companies as defendants. While acknowledging that his analysis “plainly falls short of a definitive showing that qui tam litigation has or has not evaded meaningful public control,” Professor Engstrom finds some evidence of a tendency among qui tam enforcers to take advantage of legislative inertia and the DOJ’s increasingly hands-off approach to “push legal mandates down interpretive pathways they would not travel with purely public enforcement.”

Professor Engstrom’s discussion of the potentially changing nature of FCA cases was particularly interesting to me, because I have followed with interest the debate over constitutional and other issues raised by the ban on off-label drug and device promotion and its enforcement via the False Claims Act. Life sciences companies contend that the ban on off-label promotion is an example of a gray area that has been exploited by qui tam relators, with sub-optimal results. While the DOJ’s heavy involvement in these cases makes it hard to complain about a lack of public control, companies argue that the way that the ban has been defined through FCA litigation fails to comport with congressional intent. The industry has repeatedly asked the Food and Drug Administration to weigh in, via regulation or guidance, on the contours of the ban, perhaps in the belief that the FDA will track what they believe the intent of Congress to have been more closely than the DOJ has. The FDA has responded by issuing a number of new and newly-revised draft guidances, with further action promised.

Professor Engstrom’s article provides a very helpful frame for understanding the complex interplay between the life sciences industry and its private and public enforcers. Its value goes well beyond that, though, and I recommend it to anyone interested in the “longstanding debate about the merits and demerits of private enforcement of public law and the complex relationship between litigation and democracy.”

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