In re Shire PLC

• Decision Date: 06 August 2021
• Docket Number: No. 06-21-00016-CV,06-21-00016-CV
• Parties: IN RE SHIRE PLC, Baxter International Inc., Baxalta Incorporated, and ViroPharma Inc.
• Court: Texas Court of Appeals

633 S.W.3d 1

IN RE SHIRE PLC, Baxter International Inc., Baxalta Incorporated, and ViroPharma Inc.

No. 06-21-00016-CV

Court of Appeals of Texas, Texarkana.

Date Submitted April 28, 2021

Date Decided: August 6, 2021

Sam F. Baxter, Jennifer Truelove, Marshall, for Real party in interest Health Choice Advisory, LLC.

Lynne Kurtz-Citrin, Cynthia Lu, Susan J. Arenella, Austin, for Real party in interest State of Texas.

Melvin D. Bailey, Samantha Porphy Ade, Austin, Mark A. Jensen, Paul Alessio Mezzina, Brandt Leibe, Houston, Melissa R. Smith, Marshall, for Relator.

Before Morriss, C.J., Burgess and Stevens, JJ.

OPINION

Opinion by Justice Burgess

In the trial court below, the real party in interest, Health Choice Advisory, LLC (HCA), brought a qui tam action under the Texas Medicaid Fraud Prevention Act (TMFPA) against Shire PLC, Baxter International Inc., Baxalta Incorporated, and ViroPharma Inc. (collectively Shire). Shire moved the trial court to dismiss the action under Rule 91a of the Texas Rules of Civil Procedure. The trial court denied the motion, and Shire filed this petition for a writ of mandamus asking us to compel the trial court to grant its motion to dismiss. For the reasons discussed below, we deny the petition.

I. Factual and Procedural History

A. The TMFPA and the Present Action

The TMFPA states,

A person commits an unlawful act if the person:

....

(5) except as authorized under the Medicaid program, knowingly pays, charges, solicits, accepts, or receives, in addition to an amount paid under the Medicaid program, a gift, money, a donation, or other consideration as a condition to the provision of a service or product or the continued provision of a service or product if the cost of the service or product is paid for, in whole or in part, under the Medicaid program....

TEX. HUM. RES. CODE ANN. § 36.002(5). This provision is known as the "anti-kickback section" of the TMFPA.

Section 36.011(a), subsections (2) and (3), provide that "a person acts ‘knowingly’ " under the TMFPA "if the person ... (2) acts with conscious indifference to the truth or falsity of the information[ ] or (3) acts in reckless disregard of the truth or falsity of the information." TEX. HUM. RES. CODE ANN. § 36.0011(a)(2)–(3). Section 36.101 of the TMFPA allows private persons to institute suits for civil remedies for violations of the Act "in the name of the person and of the state." TEX. HUM. RES. CODE ANN. §§ 36.101(a), 36.052. The petition in suits instituted by private persons must be filed in camera and served on the Texas Attorney General, and the suit must remain under seal until the earlier of the date on which the Attorney General elects to intervene and prosecute the action or 180 days after the date the petition was filed. TEX. HUM. RES. CODE ANN. § 36.102(a), (b) (Supp.), § 36.104(a), (b).

In its petition in this case, HCA alleged that Shire violated the anti-kickback section of the TMFPA by implementing two marketing programs that incentivized medical providers to prescribe certain pharmaceutical products covered by the Texas Medicaid Program. According to HCA, Shire provided nursing and support staff services to medical providers in exchange for the providers prescribing the covered products; it also alleged that, by virtue of these programs, Shire reduced the medical providers’ attendant expenses, thereby increasing their profit margins for prescribing the covered products. HCA further alleged that, by increasing the providers’ profit margins, these two programs constituted illegal kickbacks to the medical providers. Specifically, HCA alleged that, "in typical quid pro quo fashion," the medical providers would have to prescribe the covered products to obtain the identified support services.¹

B. The Motion to Dismiss

Shire moved to dismiss this suit in the trial court under Rule 91a of the Texas Rules of Civil Procedure. It alleged that HCA is "an affiliate of the National Health Care Analysis Group (NHCA Group), an agency created by investors and former Wall Street Investment Bankers for the purpose of pursuing false claims act litigation." Shire further argued that in "2016 and 2017, acting through various shell companies, NHCA Group filed numerous, virtually identical qui tam actions across the country, against dozens of pharmaceutical companies." Shire continued, "The plaintiffs in those actions made the same allegations HCA makes here: that the defendants’ nurse-educator and reimbursement-support services amounted to illegal kickbacks that resulted in the submission of fraudulent claims to federal and state healthcare programs." Shire then alleged (1) that "[t]he United States, however, flatly rejected NHCA Group's theory and exercised its authority under the False Claims Act [(FCA)]to dismiss the federal claims brought by NHCA Group's affiliates" and (2) that, "[i]n moving to dismiss those claims, the United States, through the Department of Justice, explained that the allegations lacked both ‘factual and legal support’ and were an unfounded attack on ‘common industry practices’ that are ‘appropriate and beneficial to federal healthcare programs and their beneficiaries.’ "

Shire asserted two arguments to the trial court in support of its motions to dismiss. First, it argued that dismissal was required by the "public disclosure bar" of the TMFPA "because [RPI's] claims are based on allegations or transactions that were publicly disclosed—and thus available to state prosecuting authorities—well before HCA filed its petition in this case."² Second, it argued that "the petition has no basis in law for purposes of Rule 91a because it does not allege facts sufficient to show that Shire's product-support services were illegal kickbacks or that Shire acted with the scienter required to violate the TMFPA." The trial court denied Shire's motion to dismiss under Rule 91a.

C. The Petition for a Writ of Mandamus

Shire then petitioned this Court for a writ of mandamus, asking us to order the trial court to grant its motion. In its petition, Shire contends that this Court has jurisdiction to review its petition because "[t]he Texas Supreme Court has held that mandamus is available to review a trial court's denial of a motion to dismiss under Texas Rule of Civil Procedure 91a," that the trial court abused its discretion by failing to grant its motion to dismiss, and that it lacks an adequate remedy by appeal. In its petition, Shire reiterates the arguments it made to the trial court, but for ease of discussion, we will discuss them as three arguments rather than two: (1) that HCA's claims have no basis in law because they are barred as a matter of law by the TMFPA's public disclosure bar, (2) that—based on federal authorities interpreting a similar federal statute—the marketing schemes at issue here are not kickbacks under the TMFPA as a matter of law, and (3) that HCA failed to properly plead scienter as required by the TMFPA.

II. Standard of Review and Issue Presented

The Texas Supreme Court has held that mandamus is available to review a trial court's denial of a Rule 91a motion to dismiss. In re Essex Ins. Co. , 450 S.W.3d 524, 526 (Tex. 2014) (per curiam) (orig. proceeding). A party is entitled to a writ of mandamus when it demonstrates that the trial court abused its discretion and that it does not have an adequate remedy at law. Walker v. Packer , 827 S.W.2d 833, 840–41 (Tex. 1992). A trial court abuses its discretion when "it reaches a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of law." Id. at 839 (quoting Johnson v. Fourth Court of Appeals , 700 S.W.2d 916, 917 (Tex. 1985) (orig. proceeding), disapproved of by In re Columbia Med. Ctr. of Las Colinas, Subsidiary, L.P. , 290 S.W.3d 204 (Tex. 2009) (orig. proceeding) ).

In other words, because "[a] trial court has no ‘discretion’ in determining what the law is or applying the law to the facts[,] ... a clear failure by the trial court to analyze or apply the law correctly will constitute an abuse of discretion." Id. at 840. In addition, the mere fact that "an appellate remedy ... may involve more expense or delay than obtaining an extraordinary writ" does not establish that the appellate remedy is inadequate. Id. at 842. Rather, "[t]he most frequent use we have made of mandamus relief involves cases in which the very act of proceeding to trial—regardless of the outcome—would defeat the substantive right involved." In re McAllen Med. Ctr., Inc. , 275 S.W.3d 458, 465 (Tex. 2008) (orig. proceeding). The failure to establish either element will defeat a petitioner's request for mandamus relief.

To determine whether the trial court abused its discretion by denying Shire's Rule 91a motion to dismiss, we must first decide whether the trial court was required to grant that motion. To do that, we must identify the type of case Rule 91a was adopted to address and determine whether this case falls within that category. Because no dismissal rule existed prior to the adoption of Rule 91a, we must also determine where Rule 91a fits within the continuum of pretrial procedures in the Texas Rules of Civil Procedure. We begin our analysis by reviewing the history of pleadings challenges leading to the adoption of Rule 91a.³

III. Evolution of Dismissal and Challenges to Pleadings in Texas

A. General Demurrers and Special Exceptions

Professor Elaine A. Grafton Carlson explains in the treatise Texas Civil Practice that, originally in Texas, a defendant could file a "general demurrer" to the plaintiff's petition. 2 ROY W. MCDONALD & ELAINE A. GRAFTON CARLSON , Texas Civil Practice § 9.24[b] (2d ed. 2021) (Westlaw). A "general demurrer asserted that ‘the plaintiff's petition [was] wholly insufficient in law to state any cause of action against the defendant.’ " Id. Upon the filing of a general demurrer, "the trial judge was often required to determine ... whether the defect, on the one hand, was trivial and subject to cure by amendment, or on the other, was fatal...