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Over the past decade, relators have attempted to expand the long-established “fraudulent inducement” theory of liability into a novel “fraud-on-the-FDA” theory. The fraudulent inducement theory posits that when a defendant’s fraudulent conduct induces a government entity to enter into a contract with the defendant, the claims for payment submitted under that contract are false. However, the fraud-on-the-FDA theory stretches this causal chain by contending that fraudulent conduct directed at FDA can render false the claims for payment submitted to an entirely different government entity, such as CMS. Courts have been divided as to the viability of this theory (as we have discussed here and here).

Fraud on the FDA; Worthless Services

DOJ Seeks to Avoid Supreme Court Review of Rule 9(b) Circuit Split; Argues Standard Has Largely “Converged”

Jun 07 2022

Jaime L.M. Jones, Brenna Jenny and Matt Bergs

There has been growing variation among courts of appeal over the appropriate pleading standard to apply under Rule 9(b) to the element of presentment, i.e., the requirement that plaintiffs plead with particularity the submission of a false claim to the government for payment. This topic has been the subject of repeated Supreme Court cert petitions (as discussed further here), and the topic has been raised yet again in a cert petition filed late last year in Johnson v. Bethany Hospice and Palliative Care, LLC (No. 21-462) (lower court opinion discussed here). The relator in Bethany Hospice, whose case was dismissed by the Eleventh Circuit for “rely[ing] on mathematical probability to conclude that a defendant surely must have submitted a false claim at some point”, seeks Supreme Court review of this “longstanding circuit split.”

Rule 9(b); U.S. Supreme Court

Inflationary Adjustments to Civil Monetary Penalties Take Effect Less than Six Months After the Last Increase

May 09 2022

Scott Stein and Catherine Stewart

This week the Department of Justice (“DOJ”) published inflationary adjustments to civil monetary penalties. This increase takes effect less than six months after the last increase and indicates that DOJ is eager to return to a more regular cadence after a period of less frequent inflationary adjustments (see here). DOJ is likely eager to implement penalties that reflect the rising inflation rate, which is currently at a forty-year record high. As we previously reported, the 2015 Balanced Budget Act (BBA) provides for federal agencies to make inflationary adjustments to civil monetary penalties on January 15 of each year to account for inflation using calculations based on the Bureau of Labor Statistics’ Consumer Price Index. After an inflationary update in January 2018, only two updates have occurred until now: an update in June 2020 and a recent update in December 2021. The revised penalties will be assessed for violations that occurred prior to the adjustment, but are assessed after May 9, 2022. As of May 9, 2022, the minimum False Claims Act penalty of $11,803 has increased to $12,537 per claim. The maximum penalty has increased from $23,607 to $25,076 per claim.

Civil Monetary Penalties

Recently Unsealed Complaint Reinforces Potential Liability of Private Equity Investors in the Healthcare Industry

Apr 26 2022

Jaime L.M. Jones, Brenna Jenny and Megan Coggeshall

Recently, a court in the Central District of California unsealed a qui tam complaint against several specialty pharmacies and their private equity fund owners. See United States ex rel. Webster v. BioMatrix Holdings, LLC, 2:18-cv-09333-PSG-PLA (C.D. Cal. Oct. 31, 2018). Relator, a former Vice President for Managed Care at BioMatrix Specialty Pharmacy, alleged that the specialty pharmacy defendants (collectively “BioMatrix”), with the knowledge of their private equity owners, employed a kickback scheme to increase the number and value of prescriptions for hemophilia medications filled through their pharmacies.

Anti-Kickback Statute; Pharmacies; Private Equity

Latest DOJ COVID Crackdown Features Another Defendant Accused of Abusing Telehealth Waivers

Apr 22 2022

Jaime L.M. Jones, Brenna Jenny and Francesca Ozinal

With its latest announcement this week of a criminal crackdown of 21 defendants for their alleged participation in various health care related fraud schemes, DOJ has underscored its commitment to aggressively pursue individuals and companies alleged to have exploited the COVID-19 pandemic. Among these actions are a collection involving alleged billing fraud arising from COVID testing; one set of defendants is alleged to have taken the data from patients seeking COVID tests and submitting bills to the federal healthcare programs for office visits that never occurred, while another set of actions involve obtaining patient samples and then billing for more expensive lab tests. Still others involve defendants alleged to have sold fake COVID vaccination cards.

Enforcement; Telehealth

Settlement Highlights Ongoing Interest in Kickbacks Affecting Non-Federal Healthcare Programs

Apr 21 2022

Jaime L.M. Jones and Brenna Jenny

Earlier this week, two laboratory testing companies paid $42.25 million to resolve allegations that they violated the California and federal FCAs, as well as the California Insurance Frauds Prevention Act (“CIFPA”), by paying kickbacks to induce physicians to order a specialized lab test for auto-immune and inflammatory diseases. The kickbacks allegedly took the form of inflated processing fees and caps on patient cost-sharing obligations. See United States ex rel. STF, LLC v. Crescendo Bioscience, Inc., No. 16-cv-2043 (N.D. Cal.). DOJ and the State of California declined to intervene, and the laboratory testing companies entered into this settlement with the relator to resolve ongoing litigation. The settlement highlights increasing enforcement risk arising from kickback allegations affecting non-federal healthcare programs, which are not directly subject to the Anti-Kickback Statute or the FCA.

Anti-Kickback Statute; Clinical Laboratories

DOJ Settles FCA Case Alleging Medically Unnecessary Telehealth Visits, Claws Back PPP Money

Apr 13 2022

Jaime L.M. Jones, Brenna Jenny and Krystalyn Weaver

This week DOJ announced one of the first civil settlements under the FCA involving abuse of the pandemic flexibilities that the Department of Health and Human Services used to authorize broader use of telehealth during the COVID public health emergency. Physician Partners of America (“PPOA”) agreed to pay $24.5 million to resolve allegations that it violated the FCA by billing for medically unnecessary telehealth visits, and by submitting claims for medically unnecessary genetic, psychological, and urine drug tests and claims tainted by violations of the Stark Law. While DOJ has previously engaged in criminal enforcement actions relating to abuse of the telehealth waiver flexibilities, as discussed further here, this case represents an expansion of telehealth enforcement scrutiny to the civil side.

COVID-19; Enforcement; Telehealth

Welcome to Original Source: The Sidley Austin False Claims Act Blog

DOJ Defends Viability of Fraud-on-the-FDA Theory in Statement of Interest

DOJ Seeks to Avoid Supreme Court Review of Rule 9(b) Circuit Split; Argues Standard Has Largely “Converged”

Inflationary Adjustments to Civil Monetary Penalties Take Effect Less than Six Months After the Last Increase

Recently Unsealed Complaint Reinforces Potential Liability of Private Equity Investors in the Healthcare Industry

Latest DOJ COVID Crackdown Features Another Defendant Accused of Abusing Telehealth Waivers

Settlement Highlights Ongoing Interest in Kickbacks Affecting Non-Federal Healthcare Programs

DOJ Settles FCA Case Alleging Medically Unnecessary Telehealth Visits, Claws Back PPP Money

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