Whistleblower Gets 24% ($33.5 Million) Reward from Judge in False Claims Act Case
21st July 2015

In a very significant development for False Claim Act whistleblowers, a former sales rep for Endo Pharmaceuticals Inc., Peggy Ryan, was awarded 24% share ($33.5 million) by a Judge in a $140 million False Claims Act ("FCA") settlement on July 15, 2015.

The initial whistleblower lawsuit, filed in July 2005, was in connection with Endo’s off-label marketing of Lidoderm, Endo’s pain patch. The lawsuit claimed that Endo violated the FCA by promoting the drug for uses that were not medically accepted and were not approved by the U.S. Food and Drug Administration and caused false claims to be submitted to federal healthcare programs. Such off-label marketing tactics are prohibited by federal regulations and statutes.

In February 2014, the U.S. Government intervened in the action for settlement purposes and Endo ultimately agreed to pay approximately $171.9 million in civil penalties and $20.8 million in criminal forfeiture. The relator’s share comes out of the approximately $140 million federal portion of the civil settlement with the remaining monies being paid to various states.

Since the Government intervened to prosecute the FCA claims against Endo, Ryan was entitled by law to receive between 15 and 25 percent of the federal portion of the settlement amount.  While Ryan felt that because of her significant contributions to the case, she should receive the higher end of the spectrum and filed a motion requesting 24%. However, the government downplayed Ryan’s participation and stated that the 24% Relator’s share that Ryan received was too much and that 19% seemed more fair and reasonable.

The U.S. District Judge presiding over the case, Judge Robert F. Kelly, disagreed with the Government and stated that “[a]n examination of the record exhibits that Ryan provided not only the spark for the investigation, but that she nurtured the flame at the darkest times when the possibility of a favorable outcome seemed most remote,” and that “[w]ithout the assistance of Ryan, the probability of the government recovering any funds for the FCA violations would have been slim at best.” Judge Kelly further stated that “Ryan’s contribution to the recovery of the funds for the FCA violations can be labeled as nothing short of extraordinary.”

The Government, however, sought to minimize Ryan’s contributions and stated that “Ryan’s contributions, although helpful and undisputed, were not extraordinary,” and then went on to tout its own efforts. The Government then argued that because the case did not go to trial, “[t]o grant a relator 24 percent of a settlement regardless of when the case settles would leave the relator who must go through a trial, with all of a trial’s attendant demands, with less incentive to cooperate fully throughout.”

Judge Kelly disagreed with the Government' argument and interpretations of the Relator's FCA share and stated that downplaying Ryan’s role was unjustified and that lowering Ryan’s share since the matter did not go to trial, was counter-intuitive and without statutory support and that such an argument “would punish a relator, such as Ryan, for providing a level of incriminating information that would make the defendant’s prospects of winning at trial less likely.” The Government also unsuccessfully argued (as they have in many other settlements) that given the considerable size of the settlement amount, Ryan should receive a “smaller share” than 24%. Judge Kelly ruled that if Congress meant for limitations to be used in cases with large awards, it would had explicitly included them in the FCA. Further, Judge Kelly stated that the government provided no legal precedent affirming this argument.

This case will no doubt lead more whistleblowers and their counsel to moving in Court to challenge lower Relator's shares offered by the Government, particularly in larger cases.  

The case is U.S. et al. ex rel. Ryan v. Endo Pharmaceuticals Inc., case number 2:05-cv-03450, in the U.S. District Court for the Eastern District of Pennsylvania.