Upswing in DOJ Qui Tam Dismissals

The Department of Justice (DOJ) appears to be taking to heart the policy articulated in what has come to be called the Granston Memo, as it has recently sought dismissal of 11 False Claims Act (FCA) cases in various federal courts across the country, in part on the grounds that the allegations “lack sufficient merit.” The Granston Memo, issued in January of last year, encouraged DOJ attorneys to seek dismissal of qui tam FCA suits “to advance the government’s interests, preserve limited resources, and avoid adverse precedent.” The 11 suits of which DOJ seeks dismissal all share the same legal theory: drugmakers who arrange patient education on proper drug usage and who assist with prior authorizations are essentially providing an illegal kickback to the prescribing physicians in violation of the Anti-Kickback Statute. DOJ filed the most recent motion to dismiss in U.S. ex rel. Health Choice Group, LLC v. Bayer Corp. et al., Case No. 5:17-CV-126 (E.D. Tex.), calling into question the entire legal theory. DOJ asserted that “given the vast sums the government spends on the medications at issue, federal healthcare programs have a strong interest in ensuring that, after a physician has appropriately prescribed a medication, patients have access to basic product support relating to their medication,” and cited “substantial costs in monitoring the litigation and responding to discovery requests” as part of its reasoning for dismissal. In the motion, the government named the 10 other cases it claims are connected and of which it has similarly supported dismissal. The National Healthcare Analysis Group (NHAG), a company that mines data to target healthcare companies with suspicious Medicare billing through qui tam FCA suits, is connected to all 11 cases. Continue Reading

Health Care Suits at Center Stage in DOJ’s FCA Recovery Report for FY 2018

The Department of Justice (DOJ) recently released its annual statistical report on recoveries and new matters under the False Claims Act (FCA). The aggregate reported recovery of $2.8 billion for fiscal year (FY) 2018 is the lowest such total since FY 2009 and is 17% lower than last year’s total and less than half of FY 2014’s all-time high recovery of over $6.1 billion. As the table below shows, however, DOJ’s and private qui tam relators’ levels of enforcement activity on behalf of the Departments of Health and Human Services (HHS) and Defense (DOD) in FY 2018 remained consistent with recent trends. Continue Reading

District Court Determines that the Eleventh Time is NOT the Charm

The United States District Court of the Eastern District of Pennsylvania recently issued a decision unsealing a False Claims Act case over the objections of the government, the relator and the defendant.[1] In United States ex. Rel. Brasher v. Pentec Health, Inc. No. 13-05745, 2018 WL 5003474 (E.D.P.A. Oct. 16, 2018), a case initially filed five years ago, the government filed a motion to continue the seal – which happened to be its eleventh such motion – arguing that additional time was necessary, in part, to finalize its decision whether to intervene in the action, as well as to pursue settlement options. The Court disagreed. Continue Reading

Supreme Court To Address False Claims Act Statute of Limitations

The False Claims Act’s statute of limitations is, easily, the most confusing portion of the False Claims Act. On November 16, the Supreme Court granted certiorari in case that has the potential to bring some clarity to the FCA’s statute of limitations.

The FCA has two statute of limitations. Normally, a case must be brought within 6 years of “the date on which the violation of [the False Claims Act] is committed.” 31 U.S.C. § 3731(b)(1). The Act’s second statute of limitations provision allows for FCA cases to be brought “more than 3 years after the date when facts material to the right of action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances, but in no event more than 10 years after the date on which the violation is committed.” 31 U.S.C. § 3731(b)(2). Continue Reading

OIG Report on Topical Compounded Drug Prescribing, Marketing and Billing Practices Signals Heightened Administrative and Enforcement Scrutiny

When commercially available medications’ standard dosage forms or amounts don’t quite fit a patient’s particular needs, the patient may benefit from customized compounded drugs. Medicare Part D, the prescription drug program, allows the private company sponsors that administer the benefit to cover compounded drugs under certain circumstances.[1]

In recent years, Part D reimbursement to pharmacies for compounded drugs has increased significantly. A 2016 report by the Office of the Inspector General for the Department of Health and Human Services (“OIG”) found that from 2006 to 2015, payment for compounded drugs under Part D had grown more than sevenfold—compared to a less-than-threefold increase in Part D spending as a whole over the same period.[2] Topical compounded medications in particular, the 2016 report noted, drew over 34 times as much Part D funding in 2015 as in 2006.

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Seventh Circuit Affirms Dismissal Of An Opportunistic Relator’s False Claims Act Lawsuit That Alleged Violations Of The Trade Agreements Act

Each year, billions of dollars in damages are paid to the government as a result of False Claims Act (FCA) settlements and judgments. A significant percentage of those damages are paid out to whistleblowers – known as “relators” in FCA parlance – who are statutorily entitled to recover between 10 and 30 percent of the proceeds depending on the extent they contributed to the prosecution of the case. And where there is money to be had, there are opportunistic relators looking for an easy payday. Continue Reading

The Supreme Court Discusses When A Statute May Be Unconstitutionally Vague – Will It Be Extended to False Claims Act Cases?

And it is even more difficult still if the defendant had – and acted in accordance with – a reasonable interpretation of the vague or ambiguous statute, regulation or contract provision. A concurring opinion in a Supreme Court decision issued this week indicates that civil liability in such situations may also be Constitutionally suspect. Continue Reading

Materiality Part IV: Labels Matter, But Not As Much As They Used To

Before Escobar, some courts held that implied certification cases could survive a motion to dismiss only if the statute, regulation, or contractual provision that was allegedly violated was a “condition of payment,” as opposed to a “condition of participation.” The idea was that payments to contractors in connection with government programs (e.g., Medicare) were conditioned on compliance with conditions of payment, but not conditions of participation. Under this line of reasoning, there could be no liability under an implied certification theory for violations of conditions of participation, but violations of conditions of payment could result in False Claims Act liability under the implied certification theory. Continue Reading

In Case Alleging Nationwide Pharmacy Fraud, Kmart Scores Narrow Settlement

On Thursday, March 8, Kmart Corporation inked a settlement of a False Claims Act investigation[1] in which the qui tam relator initially alleged systematic pharmacy billing fraud across twenty-seven states for $525,000.[2]

Brought by a pharmacist formerly employed at a Kmart in Lakeport, California, the original complaint alleged among other things that, instead of using a state-made drug utilization review alert system, Kmart relied on its own electronic systems that were not sufficiently sophisticated to provide detailed alerts such that pharmacy personnel would understand the need for physician or pharmacist input on certain drug fills.[3] The whistleblower alleged that, due in part to these configuration deficiencies and in part to understaffing, pharmacy personnel made a practice of pushing prescriptions through rather than completing consultations and other procedures required by Medi-Cal, California’s Medicaid system.[4] Continue Reading

Materiality Part III: It Is Not Enough That The Government Could Refuse Payment—The Question Is Whether The Government Would Refuse Payment

In Part II of our series, we discussed government knowledge. When the government knows of a claim’s falsity, but nevertheless pays the claim, the falsity of the claim is not material to the government’s decision to pay. In other words, the falsity of the claim must not matter to the government and, consequently, there can be no liability under the implied certification theory.

But what about the situation in which the government could have refused payment, but did not have actual knowledge relating to the claim’s alleged falsity? Could the fact that the government retains the option to refuse payment be sufficient to establish materiality? Escobar says no. In so holding, Escobar rejected the Government’s and First Circuit’s pre-Escobar view of materiality (that any statutory, regulatory, or contractual violation is material so long as the defendant knows that the Government would be entitled to refuse payment were it aware of the violation). Continue Reading

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