Hedge Fund branch sues Allergan and Forest Labs as whistleblower alleging false claims on high drug price due to invalid patent

An organization called Lower Drug Prices for Consumers has filed an interesting case against Allergan and Forest Labs involving Allergan/Forrest Labs U.S. Patent No. 6,545,040 that is listed in the FDA Orange Book as covering the drug Bystolic.  The basic false claims argument is that the market price of Bystolic is high because of the patent coverage but the patent is (allegedly) invalid.  If true, this means that Medicare, Medicaid, and the VA hospitals are all paying more than they should for the drug.  As stated by the complaint: “The current market price for Nebivolol (Bystolic) is a false price because the ‘040 patent is invalid.”

The interesting thing is that the whistleblower in this False Claims Act case appears to be a branch of the hedge fund Foxhill Capital. Foxhill’s Founder and Chief INvestment Officer is Neil Weiner  who touts his  “multi-cyclical experience based on more than 25 years managing hedge funds with expertise encompassing distressed, high yield, capital structure, convertible, and option strategies.” According to his site,  Prior to founding Foxhill in 2005, Neil was a Managing Member/Co-Portfolio Manager at Triage Capital Management from 2000 to 2005. He was instrumental in managing the $1 billion distressed/special situations fund, attracted institutional investors, creating a substantial growth in assets.  Prior to joining Triage, Neil was a Managing Director/Portfolio Manager at LibertyView Capital Management from 1992 to 2000.  Neil was responsible for the several funds with a focus on credit-related and volatility-related strategies and was also a member of the firm’s Executive Committee.   Previously, Neil was a sell-side equity analyst at Salomon Brothers.

The False Claims Act provides special incentives for whistleblowers to uncover fraud against the U.S. Government.  The Act authorizes the whistleblower to file a qui tam lawsuit on behalf of the Government and then receive a cut of any recovered damages. See 31 U.S.C. §§ 3729–3733.  The whistleblower here LDPFC appears to be a branch of the hedge fund Foxhill Capital.

Although the legal theory makes sense, the facts may get in the way: Is the patent invalid (PTAB says its close, but no) and, if it is invalid – did the patentee have knowledge of the invalidity?USA ex rel. Lower Drug Prices for Consumers (LDPFC) v. Allergan and Forest Labs., Case No. 16-cv-09 (E.D.Tex. 2016) http://patentlyo.com/media/2016/10/1-SEALED-USA-Complaint.pdf

Jeffrey Newman represents whistleblowers