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U.S. Court In Louisiana Says State May Intervene In Qui Tam Action


HLD, v. 32, n. 6 (June 2004)

U.S. Court In Louisiana Says State May Intervene In Qui Tam Action

Dr. William St. John LaCorte filed a qui tam action under the False Claims Act (FCA) in federal district court against pharmaceutical company Merck & Co., Inc. (Merck). LaCorte also asserted violations of the Food, Drug and Cosmetic Act, and the Medicaid/Medicare Anti-Kickback Statute. According to LaCorte, Merck failed to offer Medicaid and other federal programs its popular heartburn medication "Pepcid" at the lower price it sold the drug to hospitals.

A magistrate judge recommended the qui tam action be dismissed for failing to plead the fraud with particularity and failing to state a claim under which relief could be granted. The state of Louisiana sought to intervene in the action for its share of the alleged excess Medicaid payments, among other damages to the state's citizens and violations of state law. Merck argued that the FCA prohibits a state from intervening in a pending qui tam action and that the state's motion to intervene was untimely and not in compliance with the requirements of Fed. R. Civ. P. 24(a) and (b).

The U.S. District Court for the Eastern District of Louisiana granted the state's motion to intervene. First, the court concluded that the state had satisfied the requirements of Rule 24 (a). Specifically, the court found the state's motion to intervene was timely even though it waited fourteen months after the case was unsealed to file it. On this point, the court reasoned that the state's intervention would not unduly prejudice Merck, but could prejudice the state if it was not permitted to intervene. The court also found the state asserted interests directly related to the transactions forming the basis of the qui tam suit--namely, in the regulation and administration of its Medicaid program, in the enforcement of state laws, and in protection of the economic health of its citizens. The court also accepted the state's contention that its ability to protect its asserted interests would be impaired if it was not allowed to intervene in the case. The court concluded that the state's interest diverged from that of the relator LaCorte because the state sought retribution and damages under state, not federal, law.

Next, the court rejected Merck's contention that the state was barred from intervening in the instant action under the FCA. Here, the court noted, the state was attempting to intervene so as to bring state law claims, not FCA-type claims, against Merck. Specifically, the state sought to intervene to recover overpayments of state money for Pepcid under the state unfair trade practices and consumer protection law, state antitrust law, the state's medical assistance programs integrity law, state fraud law, and unjust enrichment. For this reason, concerns about parasitic lawsuits that prompted the FCA bar on subsequent intervenors were not present here, the court said.

United States ex rel. LaCorte v. Merck & Co., Inc., No. Civ.A. 99-3807, 2004 WL 595074 (E.D. La. Mar. 23, 2004). 

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