Whistleblower Won’t Get Atty-Client Docs In Debt Deal Suit

Posted April 25th, 2019.

As It Appeared On
Law360

By Lauraann Wood

Law360 (April 25, 2019, 4:59 PM EDT) — Even though Roche Diagnostics Corp. turned over documents showing it consulted lawyers ahead of an allegedly illegal deal to get its diabetes medication back on Humana’s Medicare Advantage formulary, a whistleblower doesn’t have a right to see privileged Roche communications, an Illinois federal judge said Wednesday.

Roche’s discovery disclosures included records showing it communicated with legal teams to draft and enter a deal with Humana Inc., but that doesn’t mean the drugmaker waived its attorney-client privilege for those talks, U.S. Magistrate Judge Jeffrey Gilbert said. A whistleblower who worked for Roche contended the company entered an improper deal that traded Humana’s debt to Roche in exchange for Humana’s including Roche products on the Medicare formulary.

The privileged documents support Roche’s affirmative defenses that it acted in good faith and according to public policy and best practices surrounding the deal, but they have not effectively put the company’s state of mind at issue in the case, the judge said.

“At this early stage, Roche has broadly pled its affirmative defenses and is entitled to an opportunity to establish them using non-privileged evidence if it so chooses,” he said.

Whistleblower Crystal Derrick, Roche and Humana acknowledge that Roche cannot use its attorney-client privilege as “both a sword and a shield,” and Roche has “chosen to sheath the sword” by repeatedly telling the court it does not intend to rely on privileged documents to support its case, Judge Gilbert said.

“The court must and will take Roche at its word,” he said.

But the door is not shut forever. If Roche changes strategies and advances a defense it has said it will not offer, “then its privileged communications with counsel may be implicated and the issue will have to be revisited,” Judge Gilbert said.

Representatives for Roche and Humana did not immediately respond Thursday to requests for comment. Counsel for Derrick declined comment.

The allegations in Derrick’s False Claims Act lawsuit date to March 2013, when Humana told Roche that it would end their contract and take Roche’s products off the formulary for its mail-order pharmacy, RightSource. A formulary is a list that details brand name and generic prescription drugs available through a particular insurer.

The termination was “a significant blow” to Roche, the suit says. Derrick worked for Roche at the time, helping to oversee its account with the insurer.

Two months later, Derrick discovered that Humana had been out of compliance with their formulary agreement, leading to Roche’s paying rebates that it hadn’t been required to pay, the suit says. Humana agreed that Roche had overpaid and asked the drugmaker to qualify that amount.

Roche determined it was owed $45 million, but decided to use that outstanding balance as leverage to instead get back into business with Humana, Derrick alleges. Roche was back on the formulary and Humana was set to pay up to $11 million to settle the debt after a series of negotiations that lacked legal consultation, she claims.

Derrick raised concerns about the deal’s legality to her bosses and was then fired in retaliation shortly after the deal went into effect, she alleges.

The suit alleges that any claims sent to the Centers for Medicare & Medicaid Services after Roche and Humana entered their deal are fraudulent by nature, since they stem from an illegal kickback. The two companies knew the deal was likely illegal, in part because they refused to consult a lawyer, and warned Derrick to keep the arrangement secret, it claims.

U.S. District Judge Elaine Bucklow rejected the companies’ bid to duck Derrick’s suit in June, saying it alleged enough to show there was likely a fraud and that claims were made and more detailed information can be found in discovery.

Derrick sued in June 2014, and the complaint was unsealed in May 2017 after the federal government declined to intervene.

Derrick is represented by Kevin Sharp, Inayat Ali Hemani, Ross Brooks, Michael D. Palmer and Adán Martínez of Sanford Heisler Sharp LLP and Jamie S. Franklin of The Franklin Law Firm LLC.

Roche is represented by Thomas S. Crane and Kevin M. McGinty of Mintz Levin Cohn Ferris Glovsky and Popeo PC and David J. Stetler of the Law Offices of David J. Stetler LLC.

Humana is represented by John E. Kelly and Brian R. Iverson of Bass Berry & Sims PLC and Scott C. Solberg of Eimer Stahl LLP.

The case is Crystal Derrick v. Hoffman-La Roche LTD, et al., case number 1:14-cv-04601, in the U.S. District Court for the Northern District of Illinois.

–Additional reporting by Dani Kass. Editing by Peter Rozovsky.

Read more at: https://www.law360.com/illinois/articles/1153351/whistleblower-won-t-get-atty-client-docs-in-debt-deal-suit?copied=1

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