Someost: DOJ's dismissal of whistleblower's fraud case against drugmakers upheld

The U.S. Department of Justice building is pictured in Washington, U.S., March 21, 2019. REUTERS/Leah Millis

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1st Circuit upholds Department of Justice's dismissal of whistleblower lawsuit
Federal appeals courts split on how department can seek dismissal

(Reuters) - A whistleblower, accusing manufacturers of multiple sclerosis drugs and pharmacy benefit managers of colluding to defraud Medicare, failed on Friday to convince a federal appeals court to revive his lawsuit that the U.S. Department of Justice had successfully moved to get tossed.

The 1st U.S. Circuit Court of Appeals in Boston upheld a lower court judge's decision to dismiss at the department's request a lawsuit that former investment fund executive John Borzilleri filed against companies like Bayer AG and Pfizer Inc.

In doing so, the 1st Circuit added its voice to an increasingly complex split among appellate courts over what is required for the department to dismiss a case over a whistleblower's objections.

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U.S. Circuit Judge Kermit Lipez said in the 1st Circuit's view, the government must provide reasons for seeking the dismissal so the whistleblower at a hearing can attempt to convince it to withdraw the motion.

But Lipez said a judge should grant the government's motion unless "the government is transgressing constitutional limitations or perpetrating a fraud on the court."

Lipez said Borzilleri's arguments, though, amounted ultimately to "no more than disagreements with the government's judgment" about the potential for success in his case.

Mary Ann Smith, Borzilleri's lawyer, and the companies' lawyers did not respond to requests for comment. The Justice Department had no comment.

In a lawsuit filed in Rhode Island in 2014, Borzilleri alleged seven makers of MS drugs and several pharmacy benefit managers colluded to defraud Medicare and drive up the price of the medications.

He filed that complaint and a similar case in New York, which was dismissed in 2020, under the False Claims Act, which allows whistleblowers to sue companies on the government's behalf to recover taxpayer funds paid out based on fraudulent claims.

The department may intervene in such cases after an investigation, or opt against doing so, allowing the whistleblower to pursue the case. Whistleblowers are entitled to a cut of any recovery.

The department sought the dismissal of Borzilleri's cases after adopting a policy during former Republican President Donald Trump's administration of more frequently seeking to have "meritless" or "parasitic" whistleblower lawsuits tossed.

In moving to dismiss the cases, the department said its investigation found his claims were unsubstantiated.

It also noted the wealth management firm Shepherd Kaplan Krochuk, which employed Borzilleri, had in a lawsuit accused him of shorting the stocks of some of the companies he had named as defendants. That litigation is ongoing.

The case is U.S. ex rel. Borzilleri v. Bayer Healthcare Pharmaceuticals Inc, 1st U.S. Circuit Court of Appeals, No. 20-1066.

For the United States: Amy Romero of the U.S. Attorney's Office for the District of Rhode Island

For Borzilleri: Mary Ann Smith

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