Settlement in False Claims Act Suit is no bar to suing the Consultant

December 1, 2009

By Jeffrey N. Wasserstein

We missed this interesting decision in the run-up to Thanksgiving.  Now that we’ve recovered from our tryptophan-induced sleepiness, we found this case to be of particular interest.  We previously blogged on the Cell Therapeutics Inc. (“CTI”) case.  To sum up that case, the complaint had alleged that CTI promoted TRISENOX (arsenic trioxide) for off-label uses, which caused doctors to prescribe TRISENOX and submit claims to Medicare for uses not approved or medically accepted.  The Complaint in Intervention also alleged that CTI implemented a plan to convince physicians and Medicare carriers that various off-label uses of TRISENOX were medically accepted and eligible for Medicare reimbursement.  CTI settled with the government for $10.5 million.

CTI then sued the Lash Group, a reimbursement consulting firm, for indemnification and other independent claims, arising out of the reimbursement advice that the Lash Group provided to CTI.  The district court had held that CTI’s qui tam settlement barred a suit for indemnification and other causes of action, since the Lash Group was effectively a co-participant in the scheme to defraud the government.  (The government intervened in the qui tam suit against CTI, but not the Lash Group, which settled with the relator in 2008.) 

On appeal, the Ninth Circuit held that a qui tam settlement was not a bar, since it was a settlement, not a “de facto finding of liability.”  The Court stated that generally, a settlement agreement under the False Claims Act would not necessarily bar non-False Claims Act claims against a third party, and sent the case back down to the district court for further proceedings.  Since pharmaceutical and medical device companies rarely plan reimbursement strategies without outside consultants, this case is important to companies and consultants alike.