Archive for December, 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.