As If the DOJ Weren’t Enough – Shareholders Are Increasingly Quick to Sue to Recover Lost Value Triggered by Enforcement Actions

By Thomas Sullivan Last updated May 5, 2018

Recent plaintiff wins in lawsuits against life sciences companies seeking to recover lost shareholder value resulting from healthcare fraud investigations and enforcement actions seem to have emboldened more plaintiffs to aggressively pursue this remedy. An effective compliance program is intended to manage the risk of healthcare fraud by putting in place controls designed to help prevent company personnel from paying kickbacks or promoting off label to generate business. Now more than ever, a company that fails to put in place an effective compliance program to manage such risk runs the additional risk of a shareholder lawsuit should the healthcare fraud investigation or enforcement action compromise shareholder value.

If the risk of a healthcare fraud enforcement action were not enough to cause the members of the Board of Directors of a life sciences company to lose sleep, they must now be ever more concerned about their own shareholders filing lawsuits against their companies that piggyback on such enforcement actions.