DOJ Adopts Brand Memo as Departmentwide Policy
The United States Department of Justice (DOJ) recently updated its Justice Manual and formalized the policies it had previously announced regarding reliance on subregulatory guidance in enforcement actions. (more…)
DOJ Official Outlines Enforcement Priorities Under the Food, Drug, and Cosmetic Act
James Burnham, the Deputy Assistant Attorney General for the Consumer Protection Branch (“CPB”), addressed the annual Food and Drug Law Institute Conference (“FDLI”) on December 13, 2018 about DOJ’s enforcement priorities and tools in the FDA-regulated space. As head of the branch within DOJ that has responsibility for bringing civil and criminal actions for violations of the Federal Food, Drug, and Cosmetic Act (“FDCA”), and that works with DOJ Civil Frauds to bring actions based on those violations under the False Claims Act (“FCA”), Burnham outlined the principles that motivate enforcement action, the CPB’s current enforcement priorities, and some of the “new” enforcement tools CPB has at its disposal with respect to opioids. (more…)
DOJ Intervenes in Medicare Advantage FCA Case Against Provider
On December 11, 2018, the Department of Justice announced that it has intervened in a False Claims Act suit against Sutter Health and its affiliate Palo Alto Medical Foundation. The suit, originally filed in March 2015 by a former Risk Adjustment Manager at Palo Alto Medical, alleges that Sutter knowingly submitted unsupported diagnosis codes for Medicare Advantage patients in order to increase reimbursements from Medicare. (more…)
Court Recommends Dismissal of FCA Claims Against Pharmacy and Private Equity Fund, But Provides Insight Into When Funds May Be Held Responsible For Conduct of Portfolio Companies
As we previously reported, the government has intervened in a qui tam suit against a compounding pharmacy and its private equity fund owner alleging the pharmacy filed claims with Tricare that were rendered false by kickbacks allegedly paid to marketing companies in exchange for patient referrals and directly to patients in the form of co-pay waivers. The government alleged the pharmacy executed a provider agreement with Tricare’s contracted pharmacy benefits manager in which it agreed to be bound by fraud waste and abuse laws and the provider manual, which also required compliance with the Anti-Kickback Statute and other laws. Defendants moved to dismiss and on November 30, the Magistrate Judge filed an opinion recommending the FCA claims be dismissed. U.S. ex rel. Medrano v. Diabetic Care Rx, LLC, Case No. 15-62617-CIV-BLOOM, S.D.Fl.
DOJ Announces Important Changes to Yates Memo
In a speech delivered yesterday, Deputy AG Rod Rosenstein announced important limitations to the policies regarding individual accountability for corporate wrongdoing set forth in the 2015 Yates Memo. Under the policy announced in that Memo, summarized here, DOJ limited the ability of its lawyers to offer any cooperation credit in civil or criminal matters to those corporations that provided “all relevant facts” regarding all of the individuals involved in the alleged corporate misconduct. Companies and counsel that have been engaged in DOJ investigations have experienced the challenges in complying with this standard and it was far from clear that DOJ itself did or even could adhere to the standard. In his speech, Rosenstein acknowledged the challenges and that “the policy was not strictly enforced in some cases because it would have impeded resolutions and wasted resources.” In light of those realities and a recognition that the Department’s “policies need to work in the real world of limited investigative resources,” Rosenstein announced a revised policy that “return[s] discretion to Department attorneys.” (more…)
Court Compels Medicare Advantage Plan to Comply With CID for Testimony in Diagnosis Coding Investigation
On November 13, 2018, a magistrate judge issued a report to the United States District Court for the Southern District of New York recommending that the Department of Justice’s (“DOJ”) petition to compel deposition testimony from Anthem regarding its procedures and processes for verifying diagnoses for Medicare Advantage payments be granted and that a date be set for Anthem’s witness to testify. DOJ is seeking the testimony in connection with its investigation of Anthem as part of its broader enforcement efforts under the FCA focused on the Medicare Advantage program. (more…)
How Long Under Seal is Too Long?
On October 16, a Philadelphia federal district court rejected the government’s eleventh request for an extension of the seal so that it could continue to investigate five-year-old allegations brought under the False Claims Act qui tam provisions. See United States ex rel. Brasher v. Pentec Health, Inc., No. 13-05745, 2018 U.S. Dist. LEXIS 177118 (E.D. Pa. Oct. 16, 2018). The suit, first filed by relator in 2013, alleges that Pentec Health defrauded Medicare when it submitted fraudulent bills to the government health insurance program. In denying the request, U.S. Judge Eduardo C. Robreno of the Eastern District of Pennsylvania determined the government had failed to show good cause for an eleventh extension of the seal period and ordered it to decide within 30 days if it will intervene in the suit. (more…)
Private Equity Funds Face Increasing Risk of False Claims Act Liability
Evidence is mounting that DOJ is willing to pursue private equity funds in False Claims Act cases, particularly ones based on alleged violations of healthcare fraud and abuse laws. Earlier this year, for the first time the Department intervened in one such False Claims Act case against a private equity sponsor, the fund’s portfolio pharmacy, and two pharmacy employees. U.S. ex rel. Medrano v. Diabetic Care Rx, LLC, Case No. 15-62617-CIV-BLOOM, S.D.Fl.
District Court Vacates 2014 Medicare Advantage Overpayment Rule and Curtails Potential Avenues for DOJ to Pursue False Claims Act Damages
On September 7, 2018, the United States District Court for the District of Columbia vacated CMS’s 2014 Final Overpayment Rule,[1] applicable to the Medicare Advantage program, granting summary judgment to UnitedHealthcare that the Final Rule violated the Medicare statute, was inconsistent with the Affordable Care Act (ACA) and the False Claims Act (FCA), and violated the Administrative Procedures Act (APA). In broad strokes, the District Court confronted two statutory issues. The first centered on the undisputed fact that the Final Rule did not account for known errors in the data (from traditional Medicare) used to calculate payments to Medicare Advantage plans. The court found that this failure violates the statutory mandate of “actuarial equivalence” because, although “payments for care under traditional Medicare and Medicare Advantage are both set annually based on costs from unaudited traditional Medicare records,” the Final Rule “systematically devalues payments to Medicare Advantage insurers by measuring ‘overpayments’ based on audited patient records.” As a result, the court concluded that the Final Rule “establishes a system where ‘actuarial equivalence’ cannot be achieved.” On the same basis, the court found that the Final Rule violates the statutory requirement to use the “same methodology” in calculating expenditures in traditional Medicare and determining payments to Medicare Advantage plans. The Final Rule “fails to recognize a crucial data mismatch and, without correction, it fails to satisfy [the Medicare statute].” (more…)
Granston Memo Calls for DOJ to Dismiss More Declined Qui Tams; Courts Diverge on The Extent of DOJ’s Right to Do So
In the recently released Granston Memo, DOJ outlined its policy in favor of dismissing non-intervened qui tam suits when dismissal will advance other important government interests. [Reported on here]. While the FCA bar has been debating how much – if at all – the world of FCA enforcement will change in light of the Granston Memo, DOJ has been litigating over its right to act on the policy and dismiss declined qui tam suits. In that regard, the statute appears straightforward: “The Government may dismiss the action notwithstanding the objections of the person initiating the action if the person has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion.” 31 USC § 3730(c)(2)(a). However, in the last week DOJ lost and won this issue in sharply contrasting decisions regarding the government’s right not to pursue claims. (more…)