D.C. Circuit Applies But-For Causation Standard, Weak Materiality Test to FCA Claims, While Concurrence Questions Viability of Fraudulent Inducement Theory
On July 6, 2021, the D.C. Circuit Court of Appeals affirmed in part and reversed in part a district court’s dismissal of the qui tam suit against IBM in United States ex rel. Cimino v. Int’l Bus. Machines Corp., No. 19-7139. The relator alleged that IBM and the Internal Revenue Service (“IRS”) had entered into a software license agreement, but that upon learning that the IRS was uninterested in renewing the agreement, IBM fraudulently induced the IRS to extend the contract. In particular, IBM allegedly collaborated with the auditor of the agreement, resulting in an audit finding that the IRS owed IBM $292 million for noncompliance with the contract’s terms. IBM then offered allegedly to waive that fee in exchange for the IRS renewing the agreement. The relator further alleged that once the new agreement was in place, IBM nonetheless collected $87 million of the noncompliance penalty by disguising that amount as fees for products and services that were never provided. According to the relator, this scheme yielded FCA liability in two ways: first, IBM fraudulently induced the IRS to renew the agreement; second, IBM submitted false claims by billing $87 million for unprovided products and services.
Drug Diagnosis Code Data Sought by HHS OIG May Cue Enforcement
Leadership from HHS-OIG recently advocated for new mandates that physicians include a diagnosis code with each prescription and that claims data capture this information. This followed on the heels of a Congressional Research Service report suggesting that Congress should pass legislation requiring healthcare providers to include diagnostic information in prescriptions. As Sidley lawyers Jaime L.M. Jones, Brenna E. Jenny, and Matt Bergs discuss in an article published in Bloomberg Law entitled Drug Diagnosis Code Data Sought by HHS OIG May Cue Enforcement, HHS-OIG may see diagnosis code data as a tool to engage in nuanced investigations into pharmaceutical companies for off-label promotion of prescription drugs, leveraging law enforcement’s increasingly sophisticated capacity to use data analytics to identify targets for investigation.
A copy of the article is available here.
DOJ Announces “First in the Nation” Fraud Charges for Abuse of Pandemic Telehealth Flexibilities
Yesterday DOJ announced another round of coordinated law enforcement actions to combat healthcare fraud related to COVID-19. One of these indictments features “first in the nation charges for allegedly exploiting the[] expanded” opportunities to receive Medicare reimbursement for telehealth services during the COVID-19 public health emergency.
Sunshine Act Enforcement No Longer Just on the Horizon
DOJ recently announced its second FCA settlement within the past half year that resolves alleged Anti-Kickback Statute (“AKS”) violations and corollary failures to satisfy Sunshine Act reporting obligations. Before this pair of settlements, neither DOJ nor CMS has publicly announced any targeted efforts to enforce the Sunshine Act, and these settlements seem to be on the cutting edge of an emerging government enforcement priority.
DOJ Continues Focus on COVID-19 Fraud with Formation of Task Force and Warning to Vaccine Providers
This week DOJ announced the formation of a COVID-19 Fraud Enforcement Task Force “to marshal the resources of the Department of Justice in partnership with agencies across government to enhance enforcement efforts against COVID-19 related fraud.” In addition to components of DOJ, key agencies overseeing pandemic relief programs will participate, as well as the Special Inspector General for Pandemic Relief and the Pandemic Response Accountability Committee.
How Life Sciences Firms Can Reduce DOJ Enforcement Risks
Sidley lawyers Jaime L.M. Jones, Brenna E. Jenny, and Jack Pirozzolo recently published an article in Bloomberg Law entitled How Life Sciences Firms Can Reduce DOJ Enforcement Risks. Scrutiny of life sciences companies, from their relationships with physicians to their promotional practices, has become one of the few constants in the evolving government enforcement landscape. But life sciences companies can mitigate this risk by making targeted updates to their compliance programs to address areas of particular interest to the Department of Justice.
A copy of the article is available here.
District Court Concludes Accurate PDE Data Can be “False Claims” Under the FCA
A district court in the District of New Jersey recently amended its dismissal of a qui tam suit to allow the relator to file a fourth amended complaint against a pharmacy asserting a new theory of liability that prescription drug event (“PDE”) data are “claims” under the FCA and accurate PDE data can be “false claims” under the FCA where a pharmacy pays kickbacks to its customers. United States ex rel. Silver v. Omnicare Inc., No. 11-cv-01326, (D.N.J. Apr. 13, 2021).
DOJ Tries to Take Materiality Off the Table for Drug Company Motions to Dismiss
In a recent Statement of Interest, DOJ articulated a problematic, and incorrect, theory of materiality in an apparent effort to make it virtually impossible for defendants to defeat bare allegations of materiality at the motion to dismiss stage in cases that involve allegedly false claims for prescription drugs.
COVID-19 Uninsured Program Under the Microscope
DOJ has repeatedly emphasized its commitment to pursuing fraud relating to the COVID-19 public health emergency (as discussed further here). But so far, little has been made public regarding enforcement scrutiny of payments from the Department of Health and Human Services Provider Relief Fund, which includes a designated fund for reimbursing providers for COVID-19 testing, treatment, and vaccination for the uninsured (“COVID-19 Uninsured Program”).
However, HHS officials recently announced that they had referred to the HHS Office of Inspector General a provider that is an outlier on reimbursement for treatment claims from the COVID-19 Uninsured Program. Providers that have received payments from the COVID-19 Uninsured Program should take steps to ensure that they are in full compliance with the terms and conditions for payment, including the balance billing restriction.
Sidley lawyer Brenna Jenny recently authored an article, available here, discussing this enforcement development.
Preparing for FCA Scrutiny of Pandemic Billing Flexibilities
Sidley lawyers Jaime L.M. Jones, Brenna E. Jenny, and Catherine D. Stewart recently published an article in Bloomberg Law entitled Tips for Responding to a DOJ Inquiry Into Pandemic Billing. The Department of Health and Human Services extended significant billing flexibility to providers during the COVID-19 public health emergency, and law enforcement can be expected to closely examine how providers have exercised those more relaxed rules. The article offers tips for the in-house legal and compliance functions of healthcare providers as to how they can best position their organizations for successfully engaging with DOJ and state attorneys general on False Claims Act investigations relating to the use of pandemic billing flexibilities.
A copy of the article is available here.