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

DOJ’s Blue Book Partially Unsealed

A judge recently unsealed portions of the Department of Justice’s criminal discovery manual that provides Department policy for investigating and prosecuting criminal cases. As the DC Circuit explained two years ago, “[i]t contains information and advice for prosecutors about conducting discovery in their cases, including guidance about the government’s various obligations to provide discovery to defendant.” It was developed in large part in response to the horribly flawed prosecution of the late Sen. Ted Stevens – a case in which the judge threw out the conviction because the federal prosecutors hid evidence from the defense team, including contradictory statements by a key witness.    Continue Reading

DOJ Formalizes Guidance for Government Dismissal of Unmeritorious Qui Tam Suits

Memorandum dated January 10, 2018 and authored by Michael Granston, Director of the Commercial Litigation Branch of the Fraud Section of the U.S. Department of Justice, was published on January 24, 2018 (the “Memorandum”). The Memorandum, addressed to DOJ attorneys, describes the factors that government attorneys should consider in deciding whether the government should voluntarily dismiss unmeritorious qui tam suits pursuant to 31 U.S.C. § 3730(c)(2)(A). This policy guidance, which was picked up by the legal press just yesterday, comes after a three-month period in which the DOJ, the relator’s bar, and the defense bar alike have paid more than customary attention to the circumstances under which DOJ might dismiss an unmeritorious qui tam suit. Continue Reading

FCA Materiality: It’s One thing to Proclaim but It’s Another Thing to Prove

In United States, et al., ex rel. Ruckh v. Salus Rehabilitation, LLC, et al., Case No. 8:11-cv-1303-T-23TBM (M.D. Fl. Jan. 11, 2018), a federal district court judge offered a thoughtful, cogent analysis of both the letter and spirit of the Supreme Court’s decision in Universal Health Services, Inc. v. Escobar, 136 S. Ct. 1989 (2016) to reverse a jury’s $350 million verdict in favor of the United States and Florida (as well as the relator). The decision provides valuable guidance concerning how the Escobar holding should be applied to analyzing the actual evidence established under a False Claims Act (“FCA”) case, as distinguished from mere allegations. The lesson is that while Escobar will undoubtedly affect the standard of pleading required in motions to dismiss, its greater potential impact is on motions for summary judgment, where mere allegations without substantiating evidence will be insufficient to survive dismissal. Continue Reading

MWI Lives On One Year After the Supreme Court Denied Certiorari

On January 9, 2017, the Supreme Court denied certiorari in United States ex rel. Purcell v. MWI Corp., No. 16-361, ending one of the longest running False Claims Act cases in history—18 years and 136 days, to be exact. We followed this case closely in previous blog posts here, and here. The case is significant because it held that there is no False Claims Act liability for a contractor’s objectively reasonable interpretation of an ambiguous contract provision. On the one year anniversary of the Supreme Court’s denial of certiorari, this objectively reasonable D.C. Circuit opinion remains good law. Continue Reading

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