On July 10, 2020, a federal magistrate judge in the District of Minnesota issued a 39-page decision sanctioning DOJ (and the defendants) for various discovery violations in an FCA case based on alleged violations of the Anti-Kickback Statute.
As previously reported here, the Defendants Paul Ehlen (“Ehlen”), the majority owner of Precision Lens, and Cameron-Ehlen Group (conducting business as Precision Lens) (collectively, the “defendants”) are involved in the distribution of intraocular lenses and other products for ophthalmic surgeries. DOJ alleges that the defendants provided physicians with expensive trips, meals, and other in-kind remunerations at no cost or below fair market value. DOJ further alleges that, in exchange, these physicians purchased the Defendants’ products and used them during surgeries, which were subsequently billed to Medicare, in violation of the Anti-Kickback Statute and the False Claims Act. DOJ and the defendants filed motions seeking sanctions against the other in connection with inadequate preparation of 30(b)(6) designees and potential spoliation of information, documents, and electronically stored information. DOJ also filed a motion to compel the production of additional potentially relevant documents.
DOJ has announced that ResMed Corp., a manufacturer of durable medical equipment (DME) that treats sleep apnea and other chronic respiratory diseases, has agreed to pay $37.5 million to settle claims under the False Claims Act based on allegations that ResMed paid kickbacks to DME suppliers, healthcare providers, and other entities in violation of the federal Anti-Kickback Statute. In particular, DOJ alleged that ResMed “(a) provided DME companies with free telephone call center services and other free patient outreach services that enabled these companies to order resupplies for their patients with sleep apnea, (b) provided sleep labs with free and below-cost positive airway pressure masks and diagnostic machines, as well as free installation of these machines, (c) arranged for, and fully guaranteed the payments due on, interest-free loans that DME suppliers acquired from third-party financial institutions for the purchase of ResMed equipment, and (d) provided non-sleep specialist physicians free home sleep testing devices.”
Earlier this month, a federal judge in Minnesota held that DOJ was required to articulate the factual basis for its allegation that Defendants’ claims for payment resulted from kickbacks, rejecting the argument that such information was irrelevant based on a legal presumption of causation. The Government alleges that defendants Precision Lens and Paul Ehlen provided kickbacks to physicians, including “lavish hunting, fishing and golf trips, private plane flights, frequent-flyer miles and other items of value,” to induce them to use products that Defendants supplied. The Government further alleges that these kickbacks violated the Anti-Kickback Statute (AKS), causing the submission of false claims to the Government.
On November 15, 2019, Sutter Health (“Sutter”) and Sacramento Cardiovascular Surgeons Medical Group Inc. (“Sacramento”) agreed to pay a total of $46 million to resolve FCA claims based on whistleblower allegations made by a former Sutter compliance officer that Sutter provided kickbacks to Sacramento physicians in exchange for referring patients to Sutter. The settlement also resolved Stark Law allegations relating to above fair market value payments made by certain of Sutter’s hospitals to Sacramento physicians. The underlying FCA complaint was filed in 2014 by a former Sutter compliance officer. The settlement only resolves some of the fraud allegations included in the former compliance officer’s complaint.
On November 20, 2019, the US Attorney’s Office for the District of Massachusetts announced that The Assistance Fund (“TAF”), an independent charity patient assistance program (“PAP”), agreed to settle allegations that it violated the False Claims Act and agreed to pay $4 million to the government. That amount was calculated on an ability to pay basis. TAF is the third charity to settle in this ongoing, industry-wide investigation led by the District of Massachusetts. To date, the government has collected approximately $10 million from charity PAPs and over $800 million from eight drug manufacturers.
On September 30, 2019, a judge in the United States District Court for the Northern District of Illinois granted a motion to dismiss in an intervened FCA qui tam suit, finding that the relators, the United States, and the state of Illinois failed to satisfy Federal Rule of Civil Procedure 9(b)’s heightened pleading requirements for fraud claims. The suit targeted an entity referred to as C&M Specialty Pharmacy (“C&M”), which provides specialized medication for complex medical conditions.
On July 16, 2019, the United States District Court for the Central District of California granted in part and denied in part motions to dismiss a declined FCA suit against defendants Providence Health & Services (“Providence”), its affiliates, and J.A. Thomas and Associates, Inc. (“JATA”), a clinical documentation consultant. The suit alleges that Providence perpetrated an upcoding scheme whereby it trained its doctors to describe medical conditions with language that would support increasing the severity levels of the DRGs that Providence reported to Medicare, leading to inflated Medicare reimbursements.
Last week, the Eleventh Circuit issued an opinion holding that a Relator bringing an FCA claim premised on an AKS violation – at least when relating to lease arrangements – must show that the financial arrangements were not at fair market value. See Bingham v. HCA, Inc., Case No. 1:13-cv-23671 (11th Cir. 2019). Significantly, this ruling provides that proving fair market value (or lack thereof) is not a burden imposed solely on defendants as part of a safe harbor defense, but is instead an essential element to establishing the existence of remuneration in the first instance. In the same opinion, the court also held that a Relator cannot rely upon information gleaned in discovery to satisfy Rule 9(b)’s pleading requirements.
Earlier this month, in a FCA case in which the Government intervened, the United States District Court for the District of Minnesota held that the Government was obligated to produce evidence that supported its allegation that amounts that physicians paid for social trips and other benefits provided by Defendants were below fair market value. In United States v. Cameron-Ehlen Grp., Inc., No. 13-CV-3003 (WMW/DTS), 2019 WL 1453063, at *1 (D. Minn. Apr. 2, 2019), the Government’s Complaint-In-Intervention alleged that Defendants, Precision Lens and Paul Ehlen, schemed to pay kickbacks—in the form of “lavish hunting, fishing and golf trips, private plane flights, frequent-flyer miles and other items of value”—to physicians to induce them to use products supplied by Defendants. The Complaint-In-Intervention includes several specific examples where physicians “were remunerated by not paying the full fair market value for trips and other benefits provided by Defendants.” (more…)
A recent decision from the Southern District of New York denying defendants’ motion for summary judgment identified a number of characteristics of a pharmaceutical company’s promotional speakers program that may raise concerns under the Anti-Kickback Statute. The opinion highlights the features of the promotional speaker program at issue that persuaded the court that it ran afoul of the AKS.