The DOJ just released its annual compilation of False Claims Act (FCA) statistics. Overall, the DOJ recovered $3.8 billion during FY 2013 – an amount second only to last year’s record-breaking recovery of almost $5 billion. Neither of these figures reflects criminal fines and forfeitures or state recoveries for Medicaid fraud, which actually drive up the government’s total fraud recoveries by billions more. This past year also marks the fourth consecutive year that the DOJ has recovered an excess of $3 billion. Interestingly, these numbers do not include the $2.2 billion settlement with Johnson & Johnson announced in November for claims that J&J illegally promoted its drugs Risperdal, Invega, and Natrecor, as well as engaged in a widespread kickback scheme with physicians.
All in all, the FCA is clearly alive and well, and more and more cases get filed each year.
On January 2, 2013, the Department of Justice (DOJ) announced that Abbott Laboratories (Abbott) agreed to pay $5.475 million to settle allegations that Abbott paid physicians kickbacks in exchange for influencing decisions to implant Abbott devices in patients in violation of the False Claims Act (FCA). Although Abbott made no admissions of liability, the DOJ’s press release explained the settlement is in resolution of allegations that Abbott knowingly arranged payments to physicians for teaching assignments, speaking arrangements, and conferences expecting that those physicians’ action would result in the implantation of the Abbott carotid, biliary, and peripheral vascular products in patients at the hospitals with which the physicians were associated.
The recent settlement announced by the DOJ resulted from a qui tam suit filed by two former Abbott employees, Steven Peters and Douglas Gray. Acting as whistleblowers and alleging violation of the FCA on behalf of the government, Peters and Gray claimed that Abbott’s payments made in exchange for physicians’ influencing hospitals to implant Abbott products in patients amounted to kickbacks in violation of FCA and in the submission of false claims to Medicare for procedures in which the Abbott products were used. Peters and Gray will share in the recovery of the government under the settlement, collecting a total of $1 million in damages for themselves.
If you are aware of any similar illegal conduct, contact us now.
In United States ex rel. Bunk v. Gosselin World Wide Moving, N.V., No. 12-1369 (4th Cir. Dec. 19, 2013), the Fourth Circuit reversed a district court’s judgment that awarded nothing on a prevailing $50 million False Claims Act claim for civil penalties.
The panel first ruled that FSA relator Kurt Bunk had “standing” because the harm to the federal government (from a scheme to fix prices and rig bids on charges for moving goods of U.S. military personnel) satisfied the injury-in-fact requirement for constitutional standing to sue.
The court also concluded that the award of zero in civil penalties was improper and ordered the trial court to impose $24 million in FCA penalties against the defendants following a trial at which the relator sought no FCA damages and no proof of economic harm to the United States was ever established. The panel observed that the FCA contains a statutory requirement of at least a $5,500 penalty for each of the 9,136 false invoices at issue — over $50 million! — and that the number seemed harsh in light of the $2 million or so in possible losses to the government. But fortunately the Relator had agreed to take far less — just $24 million. The court held, “Under the circumstances before us, we are satisfied that the entry of judgment on behalf of Bunk for $24 million on the DPM claim would not constitute an excessive fine under the Eighth Amendment. That amount, we think, appropriately reflects the gravity of [price-fixer/bid-rigger] Gosselin’s offenses and provides the necessary and appropriate deterrent effect going forward.” Id. at 44.
The Second Circuit previously held in U.S. v. Caronia that truthful, non-misleading off-label promotion is constitutionally-protected commercial speech. Recently, the United States filed a Statement of Interest in U.S. ex rel. Cestra, et al. v. Cephalon, Inc., 10 Civ. 6457 (S.D.N.Y.) setting forth the government’s views on the application of Caronia to an FCA claim based on alleged off-label marketing and promotion.
In its Statement, the government acknowledged that “the FCA does not prohibit off-label promotion of prescription drugs.” However, the government argues, Caronia does not “preclude a cause of action under the False Claims Act based on a manufacturer’s off-label marketing.” According to the government, the First Amendment is “not implicated in the context of an FCA claim . . . where the defendant causes others to submit false claims for payment to the Government for non-reimbursable prescription drugs.” The government argues that the “central question” is “whether the defendant’s marketing caused the submission of false claims, i.e., claims for off-label uses that are not covered or reimbursable by federal health care programs.”
Cephalon argued, however, that the distinction between the submission of “false claims” and protected First Amendment conduct is artificial because the relator seeks to hold Cephalon responsible for “causing” false claims (i.e., claims for non-reimbursable uses) to be submitted, but conduct that is alleged to have “caused” the submission of the claims is (according to Cephalon) truthful, non-misleading promotion—the same type of conduct that Caronia held to be protected speech. As Cephalon notes, “[b]ecause it is the ‘marketing’ that allegedly ‘causes’ the false claim, and because it is this ‘causation’ that is the alleged violation of the FCA by Cephalon, it is this ‘marketing’ that is sought to be sanctioned.”
It is currently unclear whether the Court will resolve or sidestep this dispute.
The 2013 numbers are in for the Dodd-Frank whistleblower program and they are encouraging. The SEC released its 2013 Annual Report on the program earlier this week which revealed that tips – and rewards – have increased since 2012. The young whistleblower program is gaining steam and if it stays on course, it will no doubt be hugely successful in the coming years, perhaps even rivaling the success of the 150-year-old False Claim Act program.
The Report shows that tipsters are flooding in with reports of potentially fraudulent conduct. Tips went up approximately 8% in 2013, increasing from 3,001 for 2012 to 3,238 for 2013. That amounts to roughly 9 tips a day. The tips poured in from all fifty states, with the bulk coming from California, New York, Texas, and Florida. Tips also originated from the outer territories of Puerto Rico, Guam, and the US Virgin Islands. And tips from abroad were up by 25% from 2012, coming in from 55 countries, with the most originating in the UK, Canada, China, Russia and India. As in 2012, the three most common tips involved Corporate Disclosures and Financials (17.2%), Offering Fraud (17.1%), and Manipulation (16.2%).
Read more here:
A federal judge said on Monday he likely will allow a lawsuit to move forward accusing cyclist Lance Armstrong and his business partners of defrauding the U.S. Postal Service of endorsement money through Armstrong’s use of performance-enhancing drugs.
U.S. District Judge Robert Wilkins said at a court hearing in Washington that he planned to rule in writing within 30 days on requests by Armstrong and the other defendants to dismiss the suit.
“It might get dismissed as to some defendants. I can tell you I doubt it as to all,” Wilkins said. He was not specific about which defendants might still face claims.
Former Armstrong teammate Floyd Landis brought the suit in 2010 under a federal law that allows whistleblowers to report fraud committed against the government in exchange for a reward.
The U.S. Justice Department joined the suit in February, seeking to recover at least some of the $40 million that the Postal Service paid from 1998 to 2004 to have Armstrong and his teammates from Tailwind Sports wear its logo during cycling wins.
Read more from Reuters here:
Global health care giant Johnson & Johnson (J&J) and its subsidiaries will pay more than $2.2 billion to resolve criminal and civil liability arising from allegations relating to the prescription drugs Risperdal, Invega and Natrecor, including promotion for uses not approved as safe and effective by the Food and Drug Administration (FDA) and payment of kickbacks to physicians and to the nation’s largest long-term care pharmacy provider. The global resolution is one of the largest health care fraud settlements in U.S. history, including criminal fines and forfeiture totaling $485 million and civil settlements with the federal government and states totaling $1.72 billion.
“The conduct at issue in this case jeopardized the health and safety of patients and damaged the public trust,” said Attorney General Eric Holder. “This multibillion-dollar resolution demonstrates the Justice Department’s firm commitment to preventing and combating all forms of health care fraud. And it proves our determination to hold accountable any corporation that breaks the law and enriches its bottom line at the expense of the American people.”
The resolution includes criminal fines and forfeiture for violations of the law and civil settlements based on the False Claims Act arising out of multiple investigations of the company and its subsidiaries.
“When companies put profit over patients’ health and misuse taxpayer dollars, we demand accountability,” said Associate Attorney General Tony West. “In addition to significant monetary sanctions, we will ensure that non-monetary measures are in place to facilitate change in corporate behavior and help ensure the playing field is level for all market participants.”
In addition to imposing substantial monetary sanctions, the resolution will subject J&J to stringent requirements under a Corporate Integrity Agreement (CIA) with the Department of Health and Human Services Office of Inspector General (HHS-OIG). This agreement is designed to increase accountability and transparency and prevent future fraud and abuse.
“As patients and consumers, we have a right to rely upon the claims drug companies make about their products,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery. “And, as taxpayers, we have a right to ensure that federal health care dollars are spent appropriately. That is why this Administration has continued to pursue aggressively – with all of our available law enforcement tools — those companies that
Pharmaceutical company ISTA Pharmaceuticals, Inc. pled guilty earlier today to conspiracy to introduce a misbranded drug into interstate commerce and conspiracy to pay illegal remuneration in violation of the Federal Anti-Kickback Statute, the Justice Department announced today. U.S. District Court Judge Richard J. Arcara accepted ISTA’s guilty pleas. The guilty pleas are part of a global settlement with the United States in which ISTA agreed to pay $33.5 million to resolve criminal and civil liability arising from its marketing, distribution and sale of its drug Xibrom.
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In United States ex rel. Keltner v. Lakeshore Medical Clinic, Ltd., a federal district judge denied the Defendant medical clinic’s Rule 9(b) motion to dismiss the False Claims Act complaint for failing to plead fraud with particularity. The Relator in Keltner was a former billing department employee who alleged that the clinic discovered, through internal auditing, regular instances of Evaluation and Management (E/M) upcoding, including the fact that two of its physicians had E/M upcoding error rates greater than 10%. She further alleged that although the clinic corrected the specific claims identified during the audit, it failed to attempt to identify any other problematic claims and at one point stopped auditing completely. The Relator’s theory was that this conduct created the plausible inference that the Defendant submitted false claims to the government for payment, which the Defendant had not timely refunded. The court agreed and found that the Relator’s allegations supported the theory that the Defendant had acted with “reckless disregard for the truth” and had submitted false claims. The court further held that the allegations supported a claim under the less-utilized “reverse” false claims act provisions of the False Claims Act, which allow a relator to sue if a defendant intentionally avoids an obligation to pay the government, such as an “unrefunded overpayment.” Here, because the medical group had been put on notice of the billing errors but had failed to take corrective action regarding possible overpayments, the court found that the clinic “may have unlawfully avoided an obligation to pay money to the government.”
This case presents a good example of the potential interplay between the civil exposure created by “unrefunded overpayments” (pursuant to passage of FERA in 2009) and the False Claims Act. The other key takeaway is that the “head in the sand” defense is not viable under the False Claims Act, and a provider’s failure to investigate audit findings and refund overpayments can support a “reverse” false claims suit.