Archive for 2015

Supreme Court to Rule on Implied Certification Qui Tam Liability

Whistleblower Case

Whistleblower CaseUpdating on our previous post, on Friday, December 4th, the United States Supreme Court accepted certiorari in the case Universal Health Services v. United States ex rel. Escobar.

As described by the ScotusBlog, the important issues related to qui tam liability presented to the High Court are:

  1. whether the “implied certification” theory of legal falsity under the FCA – applied by the First Circuit below but recently rejected by the Seventh Circuit – is viable; and
  2. whether, if the “implied certification” theory is viable, a government contractor’s reimbursement claim can be legally “false” under that theory if the provider failed to comply with a statute, regulation, or contractual provision that does not state that it is a condition of payment, as held by the First, Fourth, and D.C. Circuits; or whether liability for a legally “false” reimbursement claim requires that the statute, regulation, or contractual provision expressly state that it is a condition of payment, as held by the Second and Sixth Circuits.

In Universal Health Services, the defendant was the owner of a counseling service provider that had prescribed medication for the relators’ daughter’s purported bipolar disorder.  The case was brought on an implied certification theory that the defendant violated state and federal False Claims Acts by submitting claims for reimbursements while its staff members were not properly licensed or supervised as required by law.  Essentially, the relators argued that the defendant’s noncompliance as to certain regulations rendered the reimbursement claims false.

The district court sided with the defendant and dismissed the case for failure to state a claim.  The First Circuit then revived it holding that noncompliance can form the basis of a False Claims Act case and that the relators had stated the qui tam liability theory with particularity.

It is our hope that the Supreme Court agrees with the First Circuit and the majority of other circuits that have considered the issue so that this important theory of qui tam liability can help whistleblowers recover ill-gotten taxpayer money.


Nearly $4 Billion Recovered in 2015 Whistleblower Cases

For the 4th year in a row, the Department of Justice recovered more than $3.5 billion in settlements and judgements in False Claims Act cases for fraud against the government.

“The False Claims Act has again proven to be the government’s most effective civil tool to ferret out fraud and return billions to taxpayer-funded programs,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The recoveries announced today help preserve the integrity of vital government programs that provide health care to the elderly and low income families, ensure our national security and defense, and enable countless Americans to purchase homes.”

These recoveries are often made possible by private individuals represented by whistleblower law firms like James HoyerTaxpayers Against Fraud, a non-profit which works to works to educate the public about whistleblower programs, noted that a higher percentage of successful cases were filed by whistleblowers in 2015.

  • Of the $3.58 billion collected under the federal False Claims Act in FY 2015, a record $ 2.91 billion was awarded in whistleblower-initiated cases.
  • Whistleblowers were awarded a record $597.6 million for their contribution in helping recover this $2.91 billion dollars.
  • Of the total amount awarded to whistleblowers, $334.6 million was awarded to relators in declined cases –  a record amount.

Patrick Burns, co-Executive Director of Taxpayers Against Fraud Education Fund, noted that the law was working exactly as it should.

“Government will never have all the resources it needs to find and pursue every act of fraud. That’s why the False Claims Act incentivizes whistleblowers to come forward with non-public information, and why it allows private lawyers, working for those whistleblowers, to pursue fraud cases on the government’s behalf,” said Burns.

Click here to read more from TAF.

Of the $3.5 billion recovered last year, $1.9 billion came from companies and individuals in the health care industry for allegedly providing unnecessary or inadequate care, paying kickbacks to health care providers to induce the use of certain goods and services, or overcharging for goods and services paid for by Medicare, Medicaid, and other federal health care programs.  The $1.9 billion reflects federal losses only.  In many of these cases, the department was instrumental in recovering additional millions of dollars for consumers and state Medicaid programs.

The next largest recoveries were made in connection with government contracts.  The government depends on contractors to feed, clothe, and equip our troops for combat; for the military aircraft, ships, and weapons systems that keep our nation secure; as well as to provide everything that is needed to fund myriad programs at home.  Settlements and judgments in cases alleging false claims for payment under government contracts totaled $1.1 billion in fiscal year 2015.

The False Claims Act is the government’s primary civil remedy to redress false claims for government funds and property under government contracts, including national security and defense contracts, as well as under government programs as varied as Medicare, veterans’ benefits, federally insured loans and mortgages, highway funds, research grants, agricultural supports, school lunches, and disaster assistance.  In 1986, Congress strengthened the Act by amending it to increase incentives for whistleblowers to file lawsuits on behalf of the government.

Click here to read the entire DOJ news release.



CNBC report on how Big Pharma exploits ‘Orphan Drug’ status for profit

An in depth report by CNBC looks at the issue of big pharma exploiting orphan drug status to generate huge profits for blockbuster medications.  It highlights a new study by Johns Hopkins University School of Medicine which is raising concerns. Here is an excerpt:

A new study from Johns Hopkins University School of Medicine questions whether some of the biggest drug companies and their blockbuster medications are taking advantage of a decades-old act meant to increase research, development and drug approval for people suffering from rare diseases.

Drugs approved by the Food and Drug Administration as “orphan drugs” have seen sales increase from $46.6 billion in 2014 to $54 billion this year in the U.S. alone and are projected by drug industry consultant EvaluatePharma to reach above $60 billion in 2016. Worldwide, orphan drug sales are forecast to total $102 billion this year and $178 billion by 2020.

The 41 percent of all FDA approvals for new drugs in 2014 that were designated orphan drugs compares to six orphan drug approvals of a total 30 new drugs approved by the FDA in 1985 (two years after the Orphan Drug Act, also known as the ODA, was passed).

In 1983, the United States Orphan Drug Act (ODA) was passed in the hope that with more research and a faster approval process, new drugs could be available for “orphan diseases,” meaning those that affect less than 200,000 people. The ODA offers drug makers incentives to find treatments for rare diseases, including grants, tax incentives and extension of exclusive marketing rights to a drug for seven years.

“The loophole means more monopoly power for pharma companies selling common drugs that were snuck through the FDA as orphan drugs,” Dr. Marty Makary of Johns Hopkins, the lead researcher and senior author of the study, told CNBC.

Click here to read the full article.  This is the very issue exposed in the James Hoyer case against Endo Pharmaceuticals, which ended with the company returning some $193 million to the public coffers.



Supreme Court May Soon Consider Liability Theory for Whistleblower Cases

Supreme Court To Consider Whistleblower Cases

Petitions for certiorari are before the Supreme Court of the United States asking that the Court resolve an important issue impacting False Claims Act liability for government contractors. The issue is whether implied certification of compliance with government contracts and regulations can be actionable in a qui tam lawsuit.

The two cases that prompted the petitions involve contractors who submitted claims to the federal government that were not facially false.  Instead, the claims were based on the theory that the defendants falsely implied certification with the law and the underlying government contract that provided the basis for the contractor to make the claim.

First, in United States ex rel. Badr v. Triple Canopy, Inc., 775 F.3d 628 (4th Cir. 2015), the whistleblower alleged that the government was defrauded by the contractor because the company sought reimbursement for guards who did not have the marksman qualifications required by the contract between the government and the company. Second, in United States ex rel. Escobar v. Universal Health Servs., Inc., 780 F.3d 504 (1st Cir. 2015), the whistleblowers alleged that the hospital had been reimbursed for health services that their daughter had received from an unlicensed mental health professional. In both cases, the whistleblowers alleged that the company had “implicitly communicated” compliance with certain contracts and regulations each time it submitted a claim to the government.

At present, there is a split between the circuits as to whether the implied certification theory is viable. The majority recognize some portion of the theory but apply it differently. The Fourth Circuit takes the broadest view of the theory, which is important because this is where most government contractor cases are filed given the proximity to D.C. In that Circuit, any material breach of a contract, statute, or regulation that could be a prerequisite to payment can be the basis of whistleblower cases. Other circuits have applied the theory in a more limited fashion, requiring that there be an express prerequisite in the contract that the company comply with the provision or law in question in order to be paid.

The Seventh Circuit recently weighed in to reject the “so-called doctrine of implied false certification.” United States v. Sanford-Brown Ltd., 788 F.3d 696, 711-12 (7th Cir. 2015). This Circuit found that the action was more akin to a breach of contract than a false claim.

Given how powerful the False Claims Act has become in recent years, the Supreme Court’s opinion on whether the implied certification theory should be permitted will have a tremendous impact on government contractors in terms of how strictly they must comply with their contracts and the governing law. Hopefully the Supreme Court will adopt the majority view of the Fourth Circuit to allow whistleblowers to employ qui tams to protect taxpayer money when companies are being inappropriately reimbursed by the government.


James Hoyer Law Firm Named Whistleblower Lawyers of the Year

TAF Award Group Picture

The James Hoyer team at the TAF Awards Dinner

James Hoyer is honored to have been named Whistleblower Lawyers of the Year by the Taxpayers Against Fraud or “TAF.”  TAF is a national, nonprofit organization dedicated to combating fraud against the government and protecting public resources headquartered in Washington, D.C.

James Hoyer client Peggy Ryan, whistleblower in the off-label marketing case against Endo Pharmaceuticals, was also named Whistleblower of the Year. The Endo case resulted in a $192.7 million settlement for both criminal and civil charges that the company illegally marketed a pain treatment patch called Lidoderm.

“Together, Ryan and her legal team were instrumental in bringing a $193 million dollar case against Endo Pharmaceuticals to resolution, while notching an important victory in the battle for full, fair and justified whistleblower awards,” TAF wrote in its announcement of the award. (Click here to read details on the announcement on TAF’s website.)

Hoyer Accepting Award

Chris Hoyer Accepting Award

“This is an honor we are very proud to accept as advocates fighting to hold companies accountable when they commit fraud against the government,” said Chris Hoyer, founding partner of the James Hoyer law firm. “Too often, American citizens pay the price when companies try to game the system for profit. The False Claims Act gives whistleblowers the power to fight back on behalf of all taxpayers.”

Peggy Ryan was an Endo sales representative hired to sell Lidoderm, a pain patch approved to treat a shingles complication. She became concerned when the company pressured her to sell the drug off-label. Ryan took her concerns to the government in 2005 and assisted the investigation by turning over hundreds of documents and internal voicemails. She also agreed to wear a wire for the FBI, providing government investigators and prosecutors with more than 200 hours of recorded conversations, including incriminating statements by Endo management.

Ms. Ryan was humbled to receive this award. “It’s not an easy decision to become a whistleblower, but it’s even harder to look away when you know wrongs are being committed. Ten years was a long time to see this through, but it was important to do the right thing,” Ms. Ryan said.

“Peggy Ryan was a tireless advocate for the taxpayer,” Hoyer said. “The courage it takes for an

Adam, Chris & Jesse Hoyer

Adam, Chris & Jesse Hoyer

employee to come forward and risk her career to do the right thing is rare and something we all should celebrate.”

In announcing this year’s award, TAF also pointed to the decision by Judge Robert Kelly to award Ms. Ryan close to the maximum reward for her contributions. She received 24% of the civil portion of the settlement, which amounted to $33.6 million. The judge sent a message with his decision as to how important the role of a whistleblower can be in stopping fraud and returning money to the taxpayers. The judge noted the contributions of Ms. Ryan and her legal team in the Endo case were “nothing short of extraordinary.”

An internal documentary produced by the James Hoyer law firm on the Endo case was instrumental in moving the case forward.  Watch the video below to see a video clip from the documentary.

More pictures from the awards dinner are below:

TAF Linclon

Al Scudieri & Elaine Stromgren

Al Scudieri & Elaine Stromgren

Chris Hoyer & Jillian Estes

Chris Hoyer & Jillian Estes

Chris Hoyer, Angie Moreschi, Jesse Hoyer, Jillian Estes & Adam Hoyer

Chris Hoyer, Angie Moreschi, Jesse Hoyer, Jillian Estes & Adam Hoyer

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James Hoyer Part of Global Whistleblower Settlement with For-Profit College EDMC

Jason Sobek - EDMC Whistleblower

Jason Sobek – EDMC Whistleblower

The Department of Justice announced it has reached a landmark, global settlement with Education Management Corporation, the 2nd largest for-profit education company in the country. EDMC agreed to pay $95.5 million to settle allegations that the company violated federal and state False Claims Act laws.

James Hoyer client Jason Sobek, a former EDMC Project Associate Director of Admissions, was one of several whistleblowers who came forward to expose issues regarding how the schools recruited students and reported job placement numbers.

EDMC was accused of using predatory techniques to lure students to sign up, misrepresenting its job placement statistics, and paying employees incentives based on the number of students recruited. EDMC runs several for-profit colleges, including South University, The Art Institutes, Arogsy University, and Brown Mackie College.

“We are gratified that information Jason provided helped lead to the resolution of this case with a landmark, global settlement,” said Chris Casper, James Hoyer Managing Partner. “We are hopeful this will prompt much needed change in practices used by the for-profit college industry.”

The Department of Justice news release explains:

The primary allegation was that EDMC unlawfully recruited students, in contravention of the HEA’s Incentive Compensation Ban (ICB), by running a high pressure boiler room where admissions personnel were paid based purely on the number of students they enrolled.  In addition to resolving these and other FCA claims, the global settlement also encompasses an investigation by a consortium of state Attorneys General, of consumer-fraud allegations involving deceptive and misleading recruiting practices.

In addition to offering information and help to federal investigators, Sobek shared his story with the public to help shed light on EDMC practices, warn students and bring about change.   Among those reports were a story with ABC Network News, WTAE TV in Pittsburgh, and WFTS TV in Tampa.

Sobek’s portion of the settlement amounts to $2.5 million which will be paid out over the course of several years. Under the False Claims Act, whistleblowers are entitled to a percentage of a settlement as a reward for bringing forward information that leads to the recovery of money on behalf of taxpayers.

Click here to read more on the settlement in the Pittsburgh Post-Gazette.

Click here to read more on the settlement in the Pittsburgh Tribune Review.

Click here to read more on the settlement from WTAE TV in Pittsburgh.

Click here to read more on the settlement from CBS News.


Rare Arrest In Big Pharma Whistleblower Case

A former executive with Warner Chilcott,  a division of Allergan, was arrested for allegedly directing employees to engage in illegal sales.  Forbes Magazine contributor Erika Kelton writes about how big of a deal that is, since executives are rarely held accountable for bad deeds by a company.

Here’s an excerpt from her article:

The arrest of former Warner Chilcott executive W. Carl Reichel for allegedly directing employees to engage in illegal sales tactics is big news – even bigger than the $125 million the pharma company paid the government to settle Medicare fraud charges recently.

Rarely has the Justice Department brought criminal charges against a top pharma or healthcare executive – no matter how egregious the Medicare or Medicaid fraud. And those cases haven’t always been successful.

One of the first times that a CEO for national healthcare company was prosecuted in connection with Medicare fraud was in 1992 when Robert E. Draper, president and chief executive of National Health Laboratories of La Jolla, Calif., pleaded guilty to two counts of submitting false claims and was sent to prison. His company paid $111 million for inducing doctors to order unnecessary blood tests, a scheme exposed by a whistleblower represented by my law firm.

Over the past two decades, however, prosecutions of CEOs of major corporations have been few and far between. More often, DOJ has charged mid- and lower-level healthcare company employees – district sales managers, sales reps, etc. – with crimes in connection with whistleblower cases, as they did in the case of Warner Chilcott, which was acquired by Allergan (formerly known as Actavis), in 2013.

Click here to read the entire article in Forbes.


Are Federal Agencies Immune From Whistleblower Cases?

Whistleblower Case

Whistleblower CaseSome potential clients have asked: are federal agencies immune from whistleblower cases?

For example, a federal health agency employee may have witnessed what they perceive the be wasteful spending of Medicare dollars or in some cases outright fraud. As any taxpayer would, they’d like to report what they’ve seen done with taxpayer money, and if found to be true, be rewarded for their efforts.

Unfortunately, the answer to the question of whether they can bring a False Claims Act (FCA) whistleblower case against their federal employer is generally “no.”

This is because “federal agencies are not proper Defendants for a qui tam action under the FCA. Not only is this the equivalent of the United States suing the United States, but the United States has not waived sovereign immunity as to FCA claims.” Taxpayers of the U.S. v. Bush, 2004 WL 3030076, *5 (C.D. Cal. Dec. 30, 2004) (finding FCA contains no waiver of sovereign immunity); Juliano v. Fed. Asset Disposition Ass’n, 736 F. Supp. 348, 351-53 (D.D.C. 1990) (declining to expand FCA to allow a qui tarn suit against a federal agency where not provided for under the statute); see also Balser v. Dep’t of Justice, Office of U.S. Tr., 327 F.3d 903, 907 (9th Cir. 2003) (finding suits against federal agencies are suits against the United States and the United States is immune absent waiver of sovereign immunity).

The Ninth Circuit Court of Appeals has explained:

The Supreme Court has held that states are not “persons” subject to qui tam liability under the FCA. The Stevens Court did not reach the issue of sovereign immunity, construing the FCA to avoid that constitutional question. The Supreme Court did, however, rely on canons of statutory construction related to state sovereignty, such as (1) the presumption that the term “person” does not include the sovereign; (2) the rule that Congress must clearly state its intention to subject states to liability; and (3) the presumption against imposition of punitive (treble) damages on governmental entities. Relying on Stevens, we have held that “states and state agencies enjoy sovereign immunity from liability under the FCA.”

United States ex rel. Ali v. Daniel, Mann, Johnson & Mendenhall, 355 F.3d 1140, 1145 (9th Cir. 2004) (omitting several citations to Vt. Agency of Natural Res. v. United States ex rel. Stevens, 529 U.S. 765 (2000)).

So what can these potential whistleblowers do? Well, they are always free to report their allegations through one of various fraud hotlines that will look into the claims and hopefully recover any ill-gotten or wasted taxpayer money. Unfortunately, the whistleblowers can’t expect a relator’s share for their good deed.


James Hoyer Partner Speaks at Big Pharma Compliance Conference

Jillian Estes-Speaking at Pharma Congress 10-22-15-CROPPED

James Hoyer Partner Jillian Estes – speaking at 16th Annual Pharma Congress, Washington D.C.

James Hoyer Partner Jillian Estes joined other experts in qui tam litigation for a discussion of whistleblower cases against Big Pharma, at the 16th Pharmaceutical Compliance Congress and Best Practices Forum.

This summer, James Hoyer client Peggy Ryan was awarded close to the maximum percentage that a whistleblower can receive in a False Claims Act case against Endo Pharmaceuticals.  Ryan is a former sales rep for Endo and blew the whistle on the company for off-label sales of its Lidoderm pain patch.  Her award was a 24-percent share of the federal government’s civil settlement with Endo, amounting to a $33.6 million reward.

The Endo case was among the cases discussed by Estes at the Pharma Congress held in Washington D.C., the week of October 21st.  Her panel also discussed what a whistleblower law firm looks for when vetting a case– including what attributes make a person the strongest relator.  Other topics included: what factors are considered when deciding to proceed with a case if the government declines to intervene and a shift in the government’s focus from holding companies accountable to holding individuals accountable for their conduct.

The annual conference brings together top drug companies, regulators and watch dogs to discuss and improve best practices for compliance.  It featured presentations by leading government regulators, company compliance professionals, in-house counsel, prominent industry consultants, and whistleblower attorneys, like Estes.

Pharma Congress is sponsored by the Pharmaceutical Compliance Forum, a coalition of industry compliance professionals and legal counsel from more than 50 of the largest research based drug companies.


Millennium Labs Settles for $256 Million in Whistleblower Case

Tampa, FL— A James Hoyer law firm client is among several whistleblowers who came forward to expose wrongdoing by Millennium Health, formerly Millennium Laboratories, which led to a $256 million settlement with the United States government. The company was accused of violating the False Claims Act by billing Medicare, Medicaid and other federal health care programs for medically unnecessary lab tests and offering doctors inappropriate incentives for using its services.

The client worked for Millennium in 2012, as an internal auditor with more than 10 years of experience as a medical coder. As a compliance expert, the client quickly noticed discrepancies with the company’s billing practices. The client’s effort to correct the problems fell on deaf ears, which led to the client filing one of the eight False Claims Act whistleblower cases that ultimately led to the settlement.

“Being a whistleblower is never easy,” said James Hoyer Partner Elaine Stromgren, “It takes courage and conviction to come forward, but it is always gratifying to see those efforts lead to a successful resolution for taxpayers.”

A Department of Justice news release, explained the key allegations against Millennium:

“Millennium caused physicians to order excessive numbers of urine drug tests, in part through the promotion of “custom profiles,” which, instead of being tailored to individual patients, were in effect standing orders that caused physicians to order large number of tests without an individualized assessment of each patient’s needs. This practice violated federal healthcare program rules limiting payment to services that are reasonable and medically necessary for the treatment and diagnosis of an individual patient’s illness or injury. The United States also alleged that Millennium’s provision of free point of care urine drug test cups to physicians—expressly conditioned on the physicians’ agreement to return the urine specimens to Millennium for hundreds of dollars’ worth of additional testing—violated the Stark Law and the Anti-Kickback Statute. The Stark Law and the Anti-Kickback Statute generally prohibit laboratories from giving physicians anything of value in exchange for referrals of tests.”

The head of DOJ’s Civil Division said this case should send a message to companies who violate the rules. “We will not tolerate practices such as the ordering of excessive, non-patient specific tests and the provision of inducements to physicians that lead to unnecessary costs being imposed upon our nation’s health care programs,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer.

As part of the settlement, Millennium, which is one of the largest drug testing laboratories in the country, has entered into a corporate integrity agreement (CIA) with the Department of Health and Human Services-Office of Inspector General.

Under the False Claims Act, whistleblowers who expose problems which lead to a successful recovery on behalf of U.S. taxpayers can receive a portion of the recovery as a reward.