Healthcare Enforcement Trends to Watch in 2020
According to the statistics published by the Department of Justice (“DOJ”) in December of 2018, fraud recoveries, including under the False Claims Act, declined in 2018 for the third straight year. While the majority of the dollars recovered by the government in these actions continues to come from the providers of healthcare services, technologies that enable those services, the manufacturers of the drugs, devices, and the private insurers who pay for health care, recoveries from the healthcare sector have also declined. While we await the official 2019 statistics from DOJ, we know that this year has continued this Administration’s trend of decreasing enforcement recoveries. That said, recoveries from the industry continue to be counted in the billions of dollars and outstrip levels seen a decade ago. While this Administration’s enforcement priorities have shifted from those of the last, and while DOJ is taking steps to exercise discretion and preserve its enforcement resources in some matters, both DOJ and the U.S. Department of Health and Human Services (“HHS”) continue to devote substantial resources aggressively to pursuing high priority enforcement issues, particularly those that potentially impact patient safety and substantially increase costs to the federal healthcare programs.
HHS Memo Announces Violations of Sub-Regulatory Payment Rules and Guidance Cannot Form the Basis of Enforcement Actions
As we reported here, the Supreme Court in Azar v. Allina Health Services, 139 S. Ct. 1804 (2019) held that the Medicare Act expressly requires HHS to engage in notice-and-comment rulemaking prior to adopting any “substantive legal standard.” One court recently relied on Allina to conclude that FCA claims premised on a CMS rule articulated in payment manuals must fail because the rule constitutes a “substantive legal standard” that did not go through notice-and-comment rulemaking. Polansky v. Executive Health Resources, Inc., No. 12-4239, 2019 WL 5790061 (E.D. Pa. Nov. 5, 2019). (more…)
District Court Determines That CMS Requirements That Have Not Been Established Through Rulemaking Cannot Be Enforced in a False Claims Act Case
In a landmark decision that could have significance for any False Claims Act case in the Medicare context, the Eastern District of Pennsylvania recently held that Medicare reimbursement criteria must be established through notice-and-comment rulemaking if they are to be the basis of a viable FCA suit. Polansky v. Executive Health Resources, Inc., No. 12-4239, 2019 WL 5790061 (E.D. Pa. Nov. 5, 2019). Because the relator was relying on a reimbursement policy that was found solely in a CMS manual, the Eastern District held that the relator’s claims failed “as a matter of law.”
Principal Deputy Associate Attorney General Discusses DOJ’s Corporate Enforcement Priorities, Focus on Corporate Compliance
At the recent Compliance Week Annual Conference, Principal Deputy Associate Attorney General Claire McCusker Murray delivered extensive remarks on DOJ’s corporate enforcement priorities. Of particular note, Murray discussed a number of policy reforms focused on promoting and incentivizing corporate compliance and cooperation.
DOJ Announces New Guidance to Prosecutors on FCA Investigations
On May 7, 2019, the Department of Justice (DOJ) announced the release of formal guidance to its False Claims Act (FCA) prosecutors that provides a path for leniency for defendants in FCA investigations. More specifically, the guidance which is formalized in Section 4-4.112 of the DOJ’s Justice Manual, explains the manner in which the DOJ will award credit to defendants who voluntarily self-disclose misconduct that could serve as the basis for FCA liability, take other steps to cooperate with FCA investigations, or implement adequate and effective remedial measures in the FCA context. And significantly, the guidance provides that a defendant can receive a reduction in the damages multiplier and civil penalties under the FCA, which is the typical form of “credit” described in the guidance.
Court Dismisses DOJ’s Complaint against Pharmacy and Private Equity Fund, But Permits Re-Pleading
As we previously reported here and here, DOJ is pursuing a compounding pharmacy and its private equity fund owner alleging the pharmacy filed claims with Tricare that were rendered false by alleged kickbacks.
In November, the Magistrate Judge filed an opinion recommending the FCA claims be dismissed for DOJ’s failure adequately to plead its claims on either an implied or express certification theory of liability. However, the Magistrate went on to hold that the allegations that the private equity fund and its principals knew of some of the alleged misconduct and caused the submission of false claims by the portfolio company were otherwise sufficient to state a claim against those defendants under the False Claims Act. (more…)
Department of Justice Closes Two Pharmacies In Connection With Opioid FCA Investigation
DOJ recently took the unusual step of obtaining a temporary restraining order (“TRO”) to shut down two healthcare providers in conjunction with the filing of a False Claims Act lawsuit based on the dispensing of medically unnecessary prescriptions.
On October 26, 2017, the Secretary of the Department of Health and Human Services (“HHS”) declared the opioid epidemic a national public health emergency. As further detailed in the Complaint, according to the Center for Disease Control and Prevention (“CDC”), retail opioid prescriptions were dispensed in 2017 at a national rate of 58.7 prescriptions per 100 persons, and Tennessee’s dispense rate is nearly double the national rate, according to the United States. See Complaint, at ¶15. In Clay County, in particular, the United States contends that opioids were dispensed “at a rate sufficient for every man, woman, and child in the county to get their own prescription – twice.” See Complaint, at ¶16. (more…)
Deputy Associate Attorney General Stephen Cox Delivers Remarks on Key FCA Issues
On January 28, 2019, in remarks to the Advanced Forum on False Claims and Qui Tam Enforcement, Deputy Associate Attorney General Stephen Cox discussed current Department of Justice policy on key False Claims Act enforcement topics, including the Granston Memo, cooperation credit, FCA liability for individuals, and the Brand Memo (which, as noted here, has now been formalized in the Department of Justice’s Manual). A copy of his remarks can be found here.
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 Nominee Barr Walks Back FCA Stand, But Not Entirely
Scott Stein (Chicago), Doreen Rachal (Boston), and Naomi Igra (San Francisco) authored an article for Bloomberg Law about Attorney General nominee William Barr’s testimony on the qui tam provisions of the False Claims Act. As discussed in the article, Barr questioned the constitutionality of the qui tam provisions earlier in his career but took a softer stance at his confirmation hearing. The article, a copy of which can be accessed here, explains how Barr acknowledged a Supreme Court decision upholding the qui tam provisions but left open the possibility that a Barr-led DOJ would continue moving to dismiss whistleblower actions that do not advance the federal government’s interests.