The New Jersey Superior Court ruled that the state attorney general cannot subpoena former employees of a pharmacy benefits company that is the target of a False Claims Act suit because the deadline for the state to intervene had passed. The attorney general failed to declare intent to intervene within 60 days and did not act even after receiving 600 days of extensions. While the attorney general has power to investigate under the NJ False Claims Act, that authority expires when the right to intervene expires. The court found the attorney general's interpretation that investigations could continue indefinitely to be unsupported and absurd.

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Court Says NJ Took Too Long For Subpoenas In
FCA Claim
By Patrick Boyle
Law360, Washington (March 18, 2016, 9:23 PM ET) -- The New Jersey Superior Court
ruled Friday that the state attorney general cannot subpoena two former employees of a
pharmacy benefits company that's the target of a False Claims Act suit because the
deadline had long passed for the state to intervene in the case.
Attorney General John Hoffman not only failed to declare his intention to intervene within
60 days after a whistleblower added New Jersey to his qui tam lawsuit against Medco
Health Solutions Inc., but didn't act even after getting approximately 600 days of
extensions, thus losing his right to issue subpoenas under the state's False Claims Act, the
appellate division of the Superior Court said.
"Even if we were to agree that appellants [the former employees] engaged in delaying
tactics — as to which we are not convinced but need not decide — it neither explains nor
excuses the attorney general's failure to proceed more expeditiously for such an
extraordinarily lengthy period of time," the three-judge panel said in overturning the
decision by a Superior Court chancery judge upholding the subpoenas.
The ruling involves a 2011 suit filed in Delaware federal court by Paul Denis, a former
Medco executive who alleges the company schemed to defraud government insurance
programs by hiding discounts it received on AstraZeneca drugs. Aside from suing on behalf
of the federal government, Denis added California, Florida and New Jersey.
The addition of New Jersey in 2013 gave the attorney general 60 days to decide whether
to intervene and take control of the state's claims, as dictated by the New Jersey False
Claims Act, the court said. The attorney general never made a decision; instead, the court
said, he repeatedly asked for extensions until the district court in Delaware issued a final
deadline of June 2, 2015, which also passed.
The panel chided the attorney general's office for then issuing subpoenas on two former
Medco employees, John Henderson and Arthur Nardin, on July 22, 2015 — seven weeks
after the final deadline and after the suit was unsealed. The men refused to comply with
the subpoenas. The office also served a subpoena on Medco, although the date is not
clear.
The court said that while the NJFCA gives the attorney general the power to investigate
allegations in order to bring a civil action in state or federal court, the attorney general's
authority to issue administrative subpoenas under the act expired when his right to
intervene in the qui tam action expired.
The attorney general's office — headed since March 14 by Acting Attorney General Robert
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2. Lougy — argued that the act gives it broad powers to investigate alleged false claims and
that those powers don't end with the unsealing of a qui tam complaint or the state's
decision not to intervene in the federal case.
The court countered that such a broad interpretation of the powers granted by act relies
only on certain language in the law while ignoring provisions that set time limits for the
state to intervene.
"The argument that the attorney general could continue an investigation for so long as he
cared, notwithstanding the passage of the deadline, implies that the attorney general
could seek leave to intervene in the qui tam action at any time up until the entry of final
judgment," the court said. "There is no support in this legislative framework for such an
absurd result."
The court added that the attorney general's repeated requests for extensions to take
action on Denis' FCA suit shows that the office believed it had to comply with the law’s
time limits.
"We are pleased that the appellate division swiftly rejected the attorney general's
argument that it can continue to issue administrative subpoenas to investigate the
allegations in a qui tam action after the statutory deadline to intervene or decline
intervention in that action has passed and the action has been unsealed," Kevin H. Marino,
the attorney for Nardin, said in a statement.
Denis claims that Medco negotiated for discounts on acid reflux medication Nexium and
beta blocker Toprol-XL in exchange for including AstraZeneca PLC's products on lists of
drugs that doctors could prescribe to Medco client patients. Once the manufacturer rebates
were in place, Medco misclassified them to avoid passing the savings on to customers,
keeping what was essentially a kickback, the suit states.
By allegedly hiding the millions of dollars the company saved and allowing state and
private health care plans subsidized by Medicare Part D to pay inflated prices for the drugs,
Denis said Medco violated the FCA, the Anti-Kickback Statute and similar state laws.
The federal government and California have declined to intervene.
The attorney general's office and an attorney for Henderson did not respond to requests
for comment.
Nardin is represented by Kevin H. Marino of Marion, Tortorella & Boyle P.C.
Henderson is represented by Elizabeth J. Hampton of Fox Rothschild LLP.
Medco Health Solutions and Express Scripts Holding Co., which owns Medco, are
represented by Lawrence S. Lustberg of Gibbons P.C.
New Jersey is represented by Deputy Attorney General Janine Matton.
The case is In the Matter of the Enforcement of New Jersey False Claims Act Subpoenas,
case numbers A-0749-15T2 and A-0756-15T2, in the Superior Court of the State of New
Jersey, Appellate Division.
The underlying case is Doe v. Medco Health Solutions Inc. et al., case number 1:11-cv-
00684, in the U.S. District Court for the District of Delaware.
--Editing by Catherine Sum.
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