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.
In Glynn v. Edo Corp., 710 F.3d 209 (4th Cir. 2013), the Fourth Circuit recently clarified what constitutes “protected activity” under the anti-retaliation provision of the False Claims Act, 31 U.S.C. § 3730 (h)(1). As background, to prove a FCA retaliation claim, a whistleblower must show, inter alia, that he was engaged in “protected activity” by acting in furtherance of a whistleblower lawsuit. Courts have historically grappled with the concept of what constitutes “protected activity,” and some courts have identified only a narrow class of conduct, while others have taken a more liberal point of view. In Glynn, the Fourth Circuit adopted the former approach and held that the Plaintiff had failed to prove that he was retaliated against for engaging in “protected activity” because his evidence failed to “raise a distinct possibility of a viable FCA action” or prove that any false certification was “material.” The court then affirmed summary judgment in the Defendant employer’s favor.
The relator in Glynn worked as an engineer for Impact Science & Technology (“IST”). IST designs and manufacturers Mobile Multi-Band Jammer systems (“MMBJs”), which are systems that are used to jam the frequencies used to detonate IEDs. Glynn alleged IST terminated him for reporting purportedly fraudulent conduct to the government, specifically that IST was “shipping systems that … were putting our troops in jeopardy” and that IST had failed to implement a quality assurance plan (“QAP”) as contractually required.
The Fourth Circuit rejected the whistleblower’s arguments that he was engaged in “protected activity” and explained that the insignificance of the defect identified by the whistleblower meant that the product still met the Government’s standards; that any false certifications of compliance were not material because the defect was so minor and because the failure to create a QAP was likely just an administrative failure; and that simply “perking” the Government’s ears by initiating an investigation was inadequate to constitute “protected activity.”
The Justice Department (“DOJ”) recently received a signifcant rebuke from the Eighth Circuit Court of Appeals. After releasing Hewlett-Packard Company from further FCA liability in return for a $55 million settlement, the Eighth Circuit Court of Appeals held that DOJ would have to pay a large portion of that settlement to the Relators, which far exceded the limited “share” payment DOJ wanted to make. The court squarely rejected the government’s myriad arguments on the issue — including that Relators were not entitled to any recovery on certain qui tam allegations because they lacked the particularity required by Rule 9(b). This ultimately means that DOJ has to pay the Relators $8.8 million, as opposed to the $1.9 million it wanted to pay.
Williston Rescue Squad Inc. has agreed to pay the United States $800,000 to resolve allegations that it violated the False Claims Act by making false claims for payment to Medicare for ambulance transports, the Justice Department announced today. Williston, based in Williston, S.C., provides ambulance transport services in the southwestern part of South Carolina.
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The Internal Revenue Service announced Wednesday that it paid out $125 million to whistleblowers in the 2012 fiscal year, an apparent record, up from just $8 million last year. The boom was driven largely by one man: Bradley Birkenfeld, a former banker at UBS who provided information on the firm’s vast business of helping wealthy Americans hide their assets abroad and received a record $104 million reward for his efforts.
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The Department of Justice has filed a complaint-in-intervention in a False Claims Act case filed against Life Care Centers of America.
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Federal and state governments are clearly “feeling their oats” in the area of False Claims Act (FCA) enforcement. FCA enforcement has never been more lucrative, with recoveries doubling to $9 billionover the last year. A large bulk of that profit has come from settlements, meaning that prosecutors’ theories and tactics face no judicial scrutiny. Big profits + little oversight = aggressive pursuit of increasingly novel FCA claims.
Challenges to government’s FCA theories and positive outcomes are increasingly few and far between, so we will actively assess and promote them whenever they arise. The U.S. Court of Appeals for the Sixth Circuit’s October 5 U.S. ex rel Williams v. Renal Care Group opinion firmly rejected federal efforts to expand key aspects of the FCA and offers some important lessons for FCA targets.
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Hospital bills are being audited as the U.S. tries to identify whether new electronic records were used to “game the system” and overcharge the Medicare health program.
Some hospitals may be “cloning” patient records and “upcoding” their bills — charging for higher intensity services than are given — to raise payments from the government, Kathleen Sebelius, secretary of the U.S. Department of Health and Human Services, and Attorney General Eric Holder said in a letter yesterday to five trade associations. Hospitals caught misusing the electronic systems may be prosecuted for fraud or lose Medicare payments, the officials said.
To read more from Bloomberg, click here.