Readers of this False Claims Act whistleblower blog know that we, and many other commentators, have been watching the "off-label" promotion space with great interest lately. While the government has successfully prosecuted pharmaceutical companies and device manufacturers for more than a decade for their efforts to promote their products beyond the boundaries of their FDA-approved labels, industry has recently made some headway with its much-heralded First Amendment defense.
Dialysis giant DaVita has been the subject of several False Claims Act and Anti-Kickback Act investigations over the last few years, and now they are coming to fruition. Last year the company paid $55 million to settle a Texas whistleblower case alleging that DaVita defrauded the Medicare program by overbilling for anemia drug Epogen administered in its dialysis facilities. A separate False Claims Act whistleblower case pending in Florida alleges that DaVita manipulates the dosing of two other drugs commonly given to dialysis patients, Vitamin D and Iron, in order to maximize the company's profit at the expense of Medicare; this case was the subject of a CNN expose last November.
When Congress passed ObamaCare, it included enhanced False Claims Act liability and penalties for those who commit fraud against the Health Insurance Exchanges that are a central component of the health care reform legislation enacted in 2010. The law requires each State to establish an "American Health Benefits Exchange" ("Exchange") by January 1, 2014. See the Patient Protection and Affordable Care Act, March 23, 2010 ("PPACA"), Pub. L. 111-148, Sections 1311-1313, 1321, codified at 42 U.S.C. §§ 18031, 18041, colloquially known as "ObamaCare"). In very basic terms, an Exchange is a state-regulated entity from which certain individuals will be eligible to purchase health insurance that is subsidized by the federal government. The concept is that these Exchanges will offer consumers more choices and bargaining power while allowing private insurance companies to compete for the business; in other words, a competitive marketplace. The government will subsidize insurance premiums for individuals with income up to 400% of the poverty line, as well as single adults. The subsidy will be provided as an advanceable, refundable tax credit, and is based on a formula and the type of plan chosen. Recognizing the potential for fraud, Congress took steps to ensure federal False Claims Act liability for fraud involving any federal monies in the Exchanges, and enacted enhanced damages/ penalties provisions. Among these are adding a penalty of 3-6 times the damages to the standard FCA treble damages and $5,500-$11,000 penalty per false claim or violation. In other words, someone found liable for violating the FCA with respect to the Exchanges would have to pay 6-9 times damages plus the penalties per false claim. Hopefully this enhanced liability will provide a deterrent to would be fraudsters as well as an incentive for whistleblowers to come forward with information of wrongdoing. Both will be necessary to help ensure the success and cost effectiveness of ObamaCare. All of this is explored further in the article attached hereto.
As we have previously discussed, the United States Attorney's Office for the Southern District of New York sued Wells Fargo and Bank of America/Countrywide for residential mortgage fraud using both the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, 12 U.S.C. § 1833a (FIRREA). FIRREA was passed during the financial crisis that was the savings and loan debacle of the late 1980's and proved to be a very effective tool for prosecutors. In the last year or so, the law has been rediscovered, taken from the shelf, dusted off and put back into battle by the Justice Department.
While there has been much criticism of the Justice Department's failure to convict individuals and its apparent "too big to fail" philosophy when it comes to the financial crisis, there is a silver lining: in the United States District Court for the Southern District of New York in Manhattan, there are several cases that have held banks accountable and others are pending. In these cases, the False Claims Act (FCA) and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) are the primary civil statutes being wielded by the government as it seeks to recover the billions of dollars in losses from residential mortgage fraud. So far, these statutes have been used in cases alleging reckless lending that caused large losses on loans insured by the Federal Housing Administration (FHA), the Veterans Administration (VA), and other federal agencies, as well as on loans sold by banks and other lenders to Fannie Mae and Freddie Mac.
A Florida dermatologist and a pathology lab and its owner have settled a False Claims Act qui tam lawsuit for over $27 million. According to the Department of Justice (DOJ), Steven J. Wasserman, M.D., a Florida Dermatologist practicing in Venice, will pay $26.1 million to resolve allegations that he violated the False Claims Act by accepting illegal kickbacks from a pathology laboratory and by billing the Medicare program for medically unnecessary services. In addition, the pathology lab, Tampa Pathology Laboratory (TPL), a clinical laboratory in Tampa, Florida, and Dr. José Suarez Hoyos, a pathologist and the owner of TPL, settled kickback allegations under the FCA for $950,000 to resolve the allegations asserted against them in the same lawsuit. According to DOJ, the settlement with Dr. Wasserman is one of the largest with an individual under the False Claims Act in U.S. history. The whistleblower case was filed in the United States District Court for the Middle District of Florida by Alan Freedman, M.D., a pathologist who formerly worked at TPL. The United States intervened in the case, filing its own complaint in October 2010. According to DOJ, Dr. Freedman will receive a relator's share of at least $4,046,000.
The False Claims Act is being used to go after large drug manufacturers who are paying kickbacks to pharmacies, including Omnicare, to fill prescriptions using the manufacturers' drugs over competitors. In the last two weeks federal prosecutors have announced an FCA settlement with Amgen, and the filing of an FCA complaint against Novartis. The federal Medicare-Medicaid Anti-Kickback Act makes it illegal to offer or receive kickbacks in health care programs such as Medicare or Medicaid, and illegal kickbacks can make any claim for payment to a government health care program a "false claim" in violation of the False Claims Act.
Last month marked ten years since Suzanne Durrell (principal of Durrell Law Office) and Bob Thomas (principal of Thomas & Associates) began collaborating on False Claims Act qui tam cases on behalf of whistleblowers. Last month also marked the one-year anniversary of affiliating their practices under the umbrella of the Whistleblower Law Collaborative, and the launch of the Collaborative's website (www.whistleblowerlawcollaborative.com) and blog (www.bostonwhistleblowerlawyerblog.com).