Earlier this month, the U.S. Department of Justice (“DOJ”) announced a $5.9 million FCA settlement resolving allegations that Genotox Laboratories Ltd., a toxicology and pharmacogenetics testing laboratory: 1) violated the Anti-Kickback Statute (“AKS”), and thereby caused the submission of false claims, through commission-based compensation arrangements with its independent contractors, and 2) submitted claims to federal healthcare programs for unnecessary drug tests. In parallel proceedings, the U.S. Attorney’s Office for the Western District of Texas and Genotox entered into an eighteen-month Deferred Prosecution Agreement to resolve a criminal investigation into the same conduct. The settlement highlights DOJ’s ongoing interest in pursuing independent contractor arrangements that do not fit within a safe harbor to the AKS, where such relationships are also accompanied by conduct that traditionally attracts enforcement scrutiny, such as submission of claims for medically unnecessary services.
https://fcablog.sidley.com/wp-content/uploads/sites/5/2022/08/sidleyLogo-e1643922598198.png00Jaime L.M. Joneshttps://fcablog.sidley.com/wp-content/uploads/sites/5/2022/08/sidleyLogo-e1643922598198.pngJaime L.M. Jones2023-04-13 15:24:442023-04-13 15:24:44DOJ Reaches Settlement with Laboratory Over Commission-Based Compensation Arrangements with Independent Contractors, Medical Necessity
On March 28, 2023, the Sixth Circuit issued a notable decision rejecting broad theories from DOJ and relators about (1) the definition of remuneration under the Anti-Kickback Statute (AKS) and (2) the causation requirement for AKS violations that trigger FCA liability. See United States ex rel. Martin v. Hathaway, No. 22-1463 (6th Cir. 2023). On the first, the court held that “remuneration” under the AKS “covers just payments and other transfers of value,” not “any act that may be valuable to another.” On the second, the court held that FCA liability attaches only if the claim would not have been submitted but for the AKS violation.
https://fcablog.sidley.com/wp-content/uploads/sites/5/2022/08/sidleyLogo-e1643922598198.png00Kristin Graham Koehlerhttps://fcablog.sidley.com/wp-content/uploads/sites/5/2022/08/sidleyLogo-e1643922598198.pngKristin Graham Koehler2023-04-03 10:18:312023-04-03 10:18:31Sixth Circuit Adopts Limited Definition of AKS “Remuneration,” Robust Standard for Causation in AKS Qui Tams
A relator who scours public patent filings to “uncover” an alleged fraud against the government cannot avoid the False Claims Act’s public disclosure bar by claiming to be an original source, the Northern District of California held this week.
https://fcablog.sidley.com/wp-content/uploads/sites/5/2022/08/sidleyLogo-e1643922598198.png00Gordon D. Toddhttps://fcablog.sidley.com/wp-content/uploads/sites/5/2022/08/sidleyLogo-e1643922598198.pngGordon D. Todd2023-03-20 11:25:162023-03-20 11:26:43Court Finds That Qui Tam Relator Who Built Case From Patent Records Is Not an Original Source
In a decision issued last week, the Second Circuit was faced with the novel legal theory that use of flawed artificial intelligence systems can constitute a “worthless service” for purposes of FCA liability. SeeDoe v. eviCore Healthcare MSI, LLC, No. 22-530-CV, 2023 WL 2249577 (2d Cir. Feb. 28, 2023). The Second Circuit affirmed the district court’s dismissal for failure to satisfy the heightened Rule 9(b) pleading standard but did not reach the merits, leaving open the question of whether such a theory is viable under the FCA.
https://fcablog.sidley.com/wp-content/uploads/sites/5/2022/08/sidleyLogo-e1643922598198.png00Jaime L.M. Joneshttps://fcablog.sidley.com/wp-content/uploads/sites/5/2022/08/sidleyLogo-e1643922598198.pngJaime L.M. Jones2023-03-06 17:02:232023-03-06 17:02:23Second Circuit Leaves Open Novel Legal Theory that Flawed AI is a “Worthless Service”
Earlier this month the U.S. Attorney’s Office for the District of Massachusetts announced a $100,000 FCA settlement resolving novel allegations that a pharmaceutical company violated the Anti-Kickback Statute (“AKS”), and thereby caused the submission of false claims, through incentive compensation payments to its employees for conduct outside the scope of the employee relationship.
On February 7, 2023, Principal Deputy Assistant Attorney General, Brian M. Boynton, announced that the Civil Division recovered over $2.2 billion in settlements and judgments under the False Claims Act (“FCA”) for fiscal year 2022. Detailed statistics on FCA recoveries from 1986 through FY 2022 are available here.
https://fcablog.sidley.com/wp-content/uploads/sites/5/2022/08/sidleyLogo-e1643922598198.png00Jaime L.M. Joneshttps://fcablog.sidley.com/wp-content/uploads/sites/5/2022/08/sidleyLogo-e1643922598198.pngJaime L.M. Jones2023-02-09 14:03:102023-02-09 14:04:04FY 2022 FCA Recovery Statistics Show Increase in DOJ and Whistleblower Actions, Which Continue to Target the Healthcare and Life Sciences Industries
On January 24, 2023, the United States District Court for the Middle District of Florida denied a motion to dismiss a qui tam suit premised on Anti-Kickback Statute (“AKS”) allegations, explaining that it could not dismiss the case because DOJ and several interested states had filed oppositions to application of the public disclosure bar. See United States ex rel. Marcus v. BioTek Labs, LLC, No. 8:18-cv-2915 (M.D. Fla. Jan. 24, 2023).
https://fcablog.sidley.com/wp-content/uploads/sites/5/2022/08/sidleyLogo-e1643922598198.png00Jaime L.M. Joneshttps://fcablog.sidley.com/wp-content/uploads/sites/5/2022/08/sidleyLogo-e1643922598198.pngJaime L.M. Jones2023-02-02 12:19:482023-02-02 12:19:48Court Rejects Application of the Public Disclosure Bar Due to DOJ’s Opposition
On January 30, 2023, the Department of Justice published new inflationary adjustments to the False Claims Act’s civil monetary penalties. Under the Balanced Budget Act of 2015, inflationary adjustments are based on the Bureau of Labor Statistics’ Consumer Price Index and are required to occur annually by January 15. However, this most recent increase takes effect only eight months after the last adjustment. Since December 2021, CMP inflationary increases have occurred more frequently than in years prior, as DOJ likely tries to capitalize on the rising inflation rates to secure higher penalties. The revised penalties will be assessed for violations that occurred prior to the adjustment, but that are assessed after January 30, 2023. As of January 30, 2023, the minimum False Claims Act penalty increased from $12,537 to $13,508 per claim. The maximum penalty has increased from $25,076 to $27,018 per claim (see here).
https://fcablog.sidley.com/wp-content/uploads/sites/5/2022/08/sidleyLogo-e1643922598198.png00Scott D. Steinhttps://fcablog.sidley.com/wp-content/uploads/sites/5/2022/08/sidleyLogo-e1643922598198.pngScott D. Stein2023-02-01 16:38:262023-02-01 16:39:59DOJ Announces Increases to FCA Penalties Due to Inflationary Adjustments
DOJ Reaches Settlement with Laboratory Over Commission-Based Compensation Arrangements with Independent Contractors, Medical Necessity
Earlier this month, the U.S. Department of Justice (“DOJ”) announced a $5.9 million FCA settlement resolving allegations that Genotox Laboratories Ltd., a toxicology and pharmacogenetics testing laboratory: 1) violated the Anti-Kickback Statute (“AKS”), and thereby caused the submission of false claims, through commission-based compensation arrangements with its independent contractors, and 2) submitted claims to federal healthcare programs for unnecessary drug tests. In parallel proceedings, the U.S. Attorney’s Office for the Western District of Texas and Genotox entered into an eighteen-month Deferred Prosecution Agreement to resolve a criminal investigation into the same conduct. The settlement highlights DOJ’s ongoing interest in pursuing independent contractor arrangements that do not fit within a safe harbor to the AKS, where such relationships are also accompanied by conduct that traditionally attracts enforcement scrutiny, such as submission of claims for medically unnecessary services.
(more…)
Jaime L.M. Jones
Chicago
jaimejones@sidley.com
Brenna E. Jenny
Washington, D.C.
bjenny@sidley.com
Ahsin Azim
Washington, D.C.
aazim@sidley.com
Sixth Circuit Adopts Limited Definition of AKS “Remuneration,” Robust Standard for Causation in AKS Qui Tams
On March 28, 2023, the Sixth Circuit issued a notable decision rejecting broad theories from DOJ and relators about (1) the definition of remuneration under the Anti-Kickback Statute (AKS) and (2) the causation requirement for AKS violations that trigger FCA liability. See United States ex rel. Martin v. Hathaway, No. 22-1463 (6th Cir. 2023). On the first, the court held that “remuneration” under the AKS “covers just payments and other transfers of value,” not “any act that may be valuable to another.” On the second, the court held that FCA liability attaches only if the claim would not have been submitted but for the AKS violation.
(more…)
Kristin Graham Koehler
Washington, D.C.
kkoehler@sidley.com
Jaime L.M. Jones
Chicago
jaimejones@sidley.com
Joshua J. Fougere
Washington, D.C.
jfougere@sidley.com
Brenna E. Jenny
Washington, D.C.
bjenny@sidley.com
Joseph R. LoCascio
Chicago
joseph.locascio@sidley.com
Court Finds That Qui Tam Relator Who Built Case From Patent Records Is Not an Original Source
A relator who scours public patent filings to “uncover” an alleged fraud against the government cannot avoid the False Claims Act’s public disclosure bar by claiming to be an original source, the Northern District of California held this week.
(more…)
Gordon D. Todd
Washington, D.C.
gtodd@sidley.com
Kimberly Leaman
Washington, D.C.
kimberly.leaman@sidley.com
Christopher S. Ross
Washington, D.C.
christopher.ross@sidley.com
Second Circuit Leaves Open Novel Legal Theory that Flawed AI is a “Worthless Service”
In a decision issued last week, the Second Circuit was faced with the novel legal theory that use of flawed artificial intelligence systems can constitute a “worthless service” for purposes of FCA liability. See Doe v. eviCore Healthcare MSI, LLC, No. 22-530-CV, 2023 WL 2249577 (2d Cir. Feb. 28, 2023). The Second Circuit affirmed the district court’s dismissal for failure to satisfy the heightened Rule 9(b) pleading standard but did not reach the merits, leaving open the question of whether such a theory is viable under the FCA.
(more…)
Jaime L.M. Jones
Chicago
jaimejones@sidley.com
Brenna E. Jenny
Washington, D.C.
bjenny@sidley.com
Joseph T. McNally
Chicago
jmcnally@sidley.com
DOJ Reaches Settlement with OraPharma, Inc., Pushing Novel AKS Theory
Earlier this month the U.S. Attorney’s Office for the District of Massachusetts announced a $100,000 FCA settlement resolving novel allegations that a pharmaceutical company violated the Anti-Kickback Statute (“AKS”), and thereby caused the submission of false claims, through incentive compensation payments to its employees for conduct outside the scope of the employee relationship.
(more…)
Jaime L.M. Jones
Chicago
jaimejones@sidley.com
Brenna E. Jenny
Washington, D.C.
bjenny@sidley.com
Jane E. Fisher
Chicago
jane.fisher@sidley.com
FY 2022 FCA Recovery Statistics Show Increase in DOJ and Whistleblower Actions, Which Continue to Target the Healthcare and Life Sciences Industries
On February 7, 2023, Principal Deputy Assistant Attorney General, Brian M. Boynton, announced that the Civil Division recovered over $2.2 billion in settlements and judgments under the False Claims Act (“FCA”) for fiscal year 2022. Detailed statistics on FCA recoveries from 1986 through FY 2022 are available here.
(more…)
Jaime L.M. Jones
Chicago
jaimejones@sidley.com
Brenna E. Jenny
Washington, D.C.
bjenny@sidley.com
Matt Bergs
Chicago
mbergs@sidley.com
Court Rejects Application of the Public Disclosure Bar Due to DOJ’s Opposition
On January 24, 2023, the United States District Court for the Middle District of Florida denied a motion to dismiss a qui tam suit premised on Anti-Kickback Statute (“AKS”) allegations, explaining that it could not dismiss the case because DOJ and several interested states had filed oppositions to application of the public disclosure bar. See United States ex rel. Marcus v. BioTek Labs, LLC, No. 8:18-cv-2915 (M.D. Fla. Jan. 24, 2023).
(more…)
Jaime L.M. Jones
Chicago
jaimejones@sidley.com
Brenna E. Jenny
Washington, D.C.
bjenny@sidley.com
Joseph R. LoCascio
Chicago
joseph.locascio@sidley.com
DOJ Announces Increases to FCA Penalties Due to Inflationary Adjustments
On January 30, 2023, the Department of Justice published new inflationary adjustments to the False Claims Act’s civil monetary penalties. Under the Balanced Budget Act of 2015, inflationary adjustments are based on the Bureau of Labor Statistics’ Consumer Price Index and are required to occur annually by January 15. However, this most recent increase takes effect only eight months after the last adjustment. Since December 2021, CMP inflationary increases have occurred more frequently than in years prior, as DOJ likely tries to capitalize on the rising inflation rates to secure higher penalties. The revised penalties will be assessed for violations that occurred prior to the adjustment, but that are assessed after January 30, 2023. As of January 30, 2023, the minimum False Claims Act penalty increased from $12,537 to $13,508 per claim. The maximum penalty has increased from $25,076 to $27,018 per claim (see here).
Scott D. Stein
Chicago
sstein@sidley.com
Catherine Stewart
Chicago
cstewart@sidley.com
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