By

Catherine Starks

13 July 2018

Court Holds That Negotiated Settlement of A Contractual Dispute Implicated The Anti-Kickback Statute

On June 7, 2018, a federal judge in Chicago denied motions to dismiss filed by defendants Roche Diagnostics Corporation (“Roche”) and Humana, Inc. (“Humana”) in a qui tam lawsuit alleging that the defendants’ settlement for allegedly overpaid contractual rebates constituted unlawful remuneration under Anti-Kickback Statute. (more…)

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07 March 2018

DOJ Pursues Private Equity Firm for Portfolio Company FCA Violations

On February 16, 2018, the U.S. Department of Justice (“DOJ”) filed a complaint in intervention against a compounding pharmacy, Patient Care America (“PCA”), alleging that the pharmacy violated the False Claims Act (“FCA”) by, among other things, paying illegal kickbacks to induce prescriptions for drugs reimbursed by TRICARE, the federal healthcare program for active duty military personnel, retirees, and their families.  What is notable about this particular case, however, is that DOJ is also pursuing claims against a private equity firm that had a substantial ownership stake in the pharmacy, based on allegations that principals in the fund were actively involved in the management of the pharmacy and helped implement the purportedly illegal strategy at issue in the complaint. (more…)

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30 March 2016

Professional Medical Society Files Qui Tam Against Physicians, Anesthesia Service Providers, and Surgery Centers

In what may be a first-of-its-kind suit, a professional medical association has filed a qui tam against physicians and other medical providers for allegedly engaging in a kickback scheme designed to divert referrals from the association’s members.  The complaint, filed by the Florida Society of Anesthesiologists, alleges that the defendants—a number of physicians, anesthesiology companies, and ambulatory surgical centers (“ASCs”)—violated the federal False Claims Act and the Florida False Claims Act by defrauding the Medicare and Medicaid programs.[1]   Citing the Department of Health and Human Services Office of Inspector General Advisory Opinion Number 12-06, the complaint and alleges that defendant anesthesiology companies and their physician owners, many of whom were gastroenterologists, allegedly paid kickbacks in the form of shared profits to ASCs that referred business to the anesthesiology companies and that were owned by the same physicians.

(more…)

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27 February 2015

Sixth Circuit Holds that Disclosures Made Through a Government Investigation and Audit Do Not Trigger the Public Disclosure Bar

Posted by Jaime L.M. Jones and Catherine Starks

In a February 25, 2015 opinion, the Sixth Circuit became the fifth circuit court effectively to narrow the scope of the FCA’s public disclosure bar by holding that disclosures to the government do not trigger the protections of that provision. The Sixth Circuit also expanded upon prior rulings in this regard, clarifying that even disclosures to government contractors and private consultants during the course of an administrative audit and investigation will not lead to the application of the public disclosure bar to FCA liability.

The relator in Whipple v. Chattanooga-Hamilton County Hospital Authority alleged that the defendant hospital submitted false claims for reimbursement based on a variety of improper billing practices he observed during his employment with the hospital. After the relator left the hospital’s employ, a Medicare contractor acting on behalf of the Department of Health and Human Services Office of Inspector General (“OIG”) audited the hospital in response to an anonymous complaint regarding improper billing practices. OIG subsequently opened an administrative investigation into whether the errors and potential overpayments identified by the contractor’s review violated criminal law and consulted with the United States Attorney’s Office for the Eastern District of Tennessee before declining to pursue the matter further. To conduct its own internal investigation of the allegations, the hospital retained an outside billing consultant.

The district court dismissed relator’s qui tam claims for lack of jurisdiction, holding that the alleged fraud was publicly disclosed “through the investigations, oversights and audits conducted by the government, consultants, attorneys and contractors.” On review, the Sixth Circuit reversed, declining to follow Seventh Circuit precedent that interprets “public disclosure” to include disclosures of an alleged false claim to a “competent public official who has managerial responsibility for that claim.” The Sixth Circuit joined the Fourth Circuit, which recently observed in United States ex rel. Wilson v. Graham Cnty. Soil & Water Conservation Dist. that no other circuit court has followed the Seventh Circuit’s precedent. Instead, the Sixth Circuit held that disclosure outside the government is required to trigger the public disclosure bar. The court then clarified that non-government actors—specifically, the Medicare contractor and the hospital’s third party billing consultant—do not qualify as “outsiders” or “strangers” to the alleged fraud. As such, confidential disclosures to these parties in the context of an administrative audit and investigation are not “public disclosures” under the FCA. This decision thus continues the trend of narrowly interpreting the public disclosure bar, substantially curtailing a previously powerful limit to FCA liability.

A copy of the opinion can be found here.

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16 June 2014

Fifth Circuit Applies First-To-File Bar in Fraudulent Billing Suit

Posted by Scott Stein and Catherine Starks

On June 4, 2014, the Fifth Circuit affirmed the dismissal of a qui tam suit under the first to file bar, even though the later-filed complaint referred to specific government programs and the first-filed complaint did not. United States ex rel. Johnson v. Planned Parenthood of Houston and Southeast Texas, Inc., Case No. 13-20206 (5th Cir. June 4, 2014). A copy of the decision can be found here.

Relator Johnson, a former Planned Parenthood employee, alleged that Planned Parenthood falsely billed the Texas Women’s Health Program (“TWHP”), a Medicaid waiver program, for non-reimbursable procedures and services and unperformed laboratory tests, among other activities. The district court dismissed Johnson’s suit under the FCA and Texas Medicaid Fraud Prevention Act based on a case filed before the Johnson complaint by a different relator (Karen Reynolds) who, without explicitly identifying TWHP as a payor, alleged that Planned Parenthood fraudulently billed Medicaid programs for unnecessary medical services or services not rendered, among other activities.

On appeal, Johnson challenged the first to file dismissal on grounds that the Reynolds complaint did not mention TWHP or other specific Medicaid programs. However, the Fifth Circuit concluded that because both complaints alleged that Planned Parenthood’s billing practices caused the fraudulent receipt of funding from the federal government and the Texas Medicaid programs, an investigation into the allegations would have likely uncovered the same fraudulent activity, particularly because TWHP is a Texas Medicaid program. The court reasoned: “Considering that this court has previously held that fraudulent filings occurring in different states would be discovered through a thorough investigation into the filing system of an insurance company, it is likely that an investigation into fraudulent Medicaid filings would uncover fraudulent filings for related programs, as the alleged fraudulent activity occurred within the same offices.” Additionally, although Johnson argued that her allegations of fraud were different in kind because Reynolds alleged fraudulent billing for services not performed whereas Johnson alleged that the services were improperly coded, the Fifth Circuit held that the specific facts added by Johnson were not sufficient to avoid the first-to-file bar because both complaints alleged that fraud was committed by altering patient records and billing Medicaid programs for services other than those rendered.

The case suggests that, in fraudulent billing cases, the first to file bar may apply broadly where there is a previously-filed case alleging the fraudulent receipt of funds from related government programs, and even where alleged billing practices differ from practices that were the subject of an earlier-filed case.

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12 June 2014

Court Holds that Pharmacy Cannot Be Liable Under the FCA for Filling “Off-Label” Prescriptions

Posted by Jaime Jones and Catherine Starks

A federal district court in Georgia recently granted summary judgment in favor of Omnicare, Inc. in a qui tam suit asserting FCA liability against the specialty pharmacy for purportedly dispensing atypical antipsychotics for off-label uses and seeking Medicare Part D reimbursement for those prescriptions. United States ex rel. Fox Rx, Inc. v. Omnicare, Inc., No. 1:11-cv-962-WSD (N.D. Ga. May 23, 2014).

The relator, a Medicare Part D plan sponsor, alleged that Omnicare had actual or constructive knowledge that it was submitting “false” claims for off-label, non-reimbursable, uses because Omnicare’s consultant pharmacists regularly reviewed patient records and recorded diagnosis information in Omnicare’s computer system. In a previous post, we reported that this court earlier ruled that Part D does not cover off-label uses of drugs that are not for “medically accepted indications.” See http://fcablog.sidley.com/blog.aspx?entry=95&fromSearch=true. In ruling on the summary judgment motion, the court rejected the notion that there was evidence that Omnicare acted “knowingly” with respect to the off-label and non-reimbursable nature of the claims, finding that there was no proof that Omnicare’s dispensing pharmacists had actual knowledge of or even access to this patient diagnosis information. The court also held that even if the pharmacists had accessed the diagnosis information, there was still no evidence that they knew the diagnoses were not for medically-accepted indications, and thus not subject to reimbursement by Medicare. Moreover, the court held that there was no duty for Omnicare or its pharmacists to make this determination (such as by reviewing the label for FDA approval of the specific use or referring to Medicare Part D- recognized compendia to determine whether the use was supported and therefore properly reimbursable).

This case has important implications for specialty pharmacies and similarly situated parties that are implicated in cases alleging the submission of claims for off-label use of drugs, and supports the argument that dispensing pharmacists do not have a duty to evaluate whether a drug has been prescribed for an on-label or otherwise medically accepted indication prior to submitting a claim for reimbursement to the federal healthcare programs.

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24 February 2014

Losing Defendant in FCA Suit Accuses Relator’s Counsel and Relator of Conspiracy to Misappropriate Trade Secrets in Furtherance of Qui Tam Lawsuit

Posted by Jaime Jones and Catherine Starks

On February 10, 2014, following a recent jury finding that pipemaker J-M Manufacturing (“J-M”) was liable for damages in a False Claims Act suit initiated by former employee John Hendrix, J-M filed a complaint in the Superior Court of New Jersey, Middlesex County, alleging that the whistleblower and his counsel, Phillips & Cohen LLP (“P&C”), conspired to misappropriate confidential, proprietary, and trade secret information in furtherance of the qui tam lawsuit. The complaint specifically alleges that P&C repeatedly directed Hendrix to use his employee status to obtain information to support his FCA claims, in violation of his confidentiality agreement with J-M. According to the complaint, J-M did not discover the theft of the information until after the qui tam complaint was unsealed and the discovery process unfolded in 2013, more than five years after the qui tam complaint was filed. J-M alleges that P&C used the misappropriated information to develop Hendrix’s own lawsuit and to recruit additional whistleblowers. In doing so, J-M asserts that P&C exceeded its role as counsel “by actively directing and engaging in Hendrix’s illegal scheme to steal J-M’s confidential and proprietary information.” J-M alleges that this represents a “pattern of misconduct” by P&C, citing the 2012 decision in which P&C was disqualified and ordered to pay sanctions related to its acquisition of documents from IASIS Healthcare Corp., a defendant in another qui tam suit.

The issue of whistleblowers taking confidential business information and trade secrets in support of potential qui tam actions, and, increasingly, whistleblower counsel’s solicitation of such information, is one confronted by many FCA defendants. In recent years a number, like J-M, have sought damages and protections from such misappropriation. Several courts have been receptive to such claims, rejecting arguments from whistleblowers that the public policy served by the FCA justifies confidentiality and other breaches in gathering evidence of fraud. We will monitor the outcome of the J-M case, and provide an update as it is available.

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