U.S. District Judge Edward Chen of the Northern District of California. Photo: Jason Doiy/ALM

SAN FRANCISCO—A federal judge overseeing a whistleblower lawsuit against Gilead Sciences Inc. seemed on the verge of granting a request from government lawyers to dismiss the long-running case Thursday afternoon, but stopped just short. 

U.S. District Judge Edward Chen of the Northern District of California said the level of scrutiny he would give to the government’s decision to ask to dismiss the case was “very low.” But Chen said he wants to give the government lawyers an opportunity to provide further detail about their basis for asking to dismiss the case, where two former Gilead employees claim the company illegally charged the government hundreds of millions of dollars for tainted HIV drugs. 

“The question is ultimately whether the government engaged in a non-arbitrary, thorough-enough process to make its decision not arbitrary,” said Chen at a hearing on the government’s motion to dismiss Thursday afternoon.

Former Gilead employees Jeff and Sherilyn Campie filed suit on behalf of the United States in 2011 claiming the company used ingredients from an unapproved facility in China and received illegal reimbursements from the government for products containing those ingredients. After years of litigation, including dismissal by Chen, revival at the U.S. Court of Appeals for the Ninth Circuit, and a cert denial at the U.S. Supreme Court, lawyers with the DOJ’s Civil Division and the U.S. Attorney’s Office for the Northern District of California are asking Chen to dismiss the suit based on the government’s costs of continuing to monitor the case and potential discovery.

The move comes as government lawyers have made a string of dismissal requests in False Claims Act suits since an influential memo was circulated in January 2018 by Michael Granston, director of the commercial litigation branch of DOJ’s fraud section, who is among the government lawyers on the filings in the Gilead case. The so-called Granston memo laid out the factors to consider when deciding whether to ask for dismissal in qui tam cases brought on behalf of the United States where the government has chosen not to intervene. 

Edward Crooke, an attorney with DOJ’s civil division, said at Thursday’s hearing that the Food and Drug Administration conducted a thorough investigation of the underlying allegations and never stopped production at any Gilead facility or pulled any of the company’s drugs from shelves. Crooke noted that he and his colleagues across the country are considering 700 qui tam cases every year and that there are opportunity costs associated with deciding to proceed with one case or another. 

“It’s not just whether this case has merit or whether it could potentially recover funds for the federal government,” Crooke said. Crooke added that Gilead would likely argue that the FDA’s underlying knowledge of the allegations and the agency’s lack of action—as well as the government’s own decision not to pursue reimbursement—would likely be central to Gilead’s defense and the target of discovery in the case.

Ryan Sandrock of Sidley Austin, who represents Gilead in the case, confirmed the company will seek discovery from the government based on what the FDA knew and the decision by the Centers for Medicare & Medicaid Services to continue to pay for the company’s drugs.  

But the Campies’ lawyer, Andrew Friedman, argued that tying the government’s dismissal to the cost of ongoing monitoring and discovery could justify tossing any case, even those with merit.  Friedman noted that the government has to show good cause in cases where it reaches a settlement agreement that qui tam relators object to in False Claim Act cases. “It makes no sense to say the government has carte blanche to make a decision when it’s going to kill the case,” he said.

Friedman added that he would agree that the judge owed a certain level of deference to the government’s decision-making process, but that the record in the Gilead case was devoid of any indication of the reason for the government’s decision to back dismissal beyond its contentions about monitoring and discovery costs. The government, he said, had given no indication that it considered the potential recoveries in the case or his clients’ likelihood of success if they moved forward.

“There’s nothing before the court showing that any cost-benefit analysis had been considered,” he said.

At the conclusion of Thursday’s hearing, Chen gave government lawyers three weeks to submit any additional description of work they did to analyze the costs of the case, the potential benefits, and the underlying merits. He said that he would give the qui tam plaintiffs lawyers an additional two weeks to respond to the government’s filing before issuing an order.

“This is an important decision,” said Chen, adding that he didn’t want to make it in “piecemeal” manner.