A recent slew of Federal Claims Act (FCA) complaints may be the norm as whistleblowers are bringing more and more cases against healthcare companies. Originally enacted in response to defense contractors during the Civil War, the FCA serves a “specific function, protecting the federal fiscally by imposing severe penalties on those whose false or fraudulent claims cause the government to pay money.”
The FCA imposes liability on any person who submits a claim to the federal government that he or she knows (or should know) is false. An example may be a doctor who submits a bill to Medicare for medical services he knows he has not provided. The FCA provides that private parties may bring an action on behalf of the United States. These private parties are known as qui tam relators, and share in a percentage of the proceeds from an FCA action or settlement. Despite being 150 years old, the FCA is still kicking today in the medical arena.
Oct. 15, 2013: The Eighth Circuit Court of Appeals revived a False Claims Act (FCA) whistleblower suit alleging Bayer Healthcare misled the Department of Defense (DoD) about the risks of its now off-the-market cholesterol-lowering drug, Baycol. The Court found that the allegations were properly brought under a fraud-in-the-inducement theory. Laurie Simpson, who worked at Bayer from 1998 through 2004 as a marketing manager, alleged the company knew about but downplayed the risks of developing a serious muscle disorder associated with Baycol, particularly when taken in high doses. Last year, a Minnesota federal judge dismissed Simpson’s qui tam suit, ruling she had not made any allegations linking the government’s decision to pay for Baycol to the drug maker’s alleged fraud. The Eighth Circuit disagreed, but with some puzzling logic.
The Court stated that the Act’s “core provisions,” make liable anyone who “knowingly presents, or causes to be presented, [to a federal official] a false or fraudulent claim for payment or approval.” The Court stated the FCA is not concerned with “general regulatory noncompliance,” but specifically with “false or fraudulent claims that cause the government to pay money.”
Given the fact that the Court outlined the narrow scope of the law, the final result is surprising. Without reference to any specific claim for reimbursement, the majority sanctioned a trial based on the theory that, while no specific claim for reimbursement was objectively false, or indeed needed to be identified with particularity, all claims related to Baycol were “false” because DoD would not have agreed to contract if it had been truthfully and completely advised of the risks, even though the government suffered no identifiable economic loss.
The implications of this case, at least in the Eighth Circuit, are that when a relator alleges liability under a fraud-in-the-inducement theory, claims for payment subsequently submitted under a contract initially induced by fraud do not have to be false or fraudulent in and of themselves in order to state a cause of action under the FCA. This is a significant ruling because Bayer is now at risk for treble damages based on the contracted value of each and every reimbursement claim made to the government for Baycol.
Oct. 22, 2013: Omnicare, the nation’s largest provider of pharmacy services to nursing home patients, disclosed that the company would pay $120 Million to settle kickback and false-claims allegations brought by Donald Gale, an Ohio pharmacist who worked for the company’s Wadsworth, Ohio pharmacy from 1993 to 2010. Gale’s complaint alleged that Omnicare engaged in a kickback scheme known as “swapping,” where Omnicare gave nursing home owners discounted prescription drugs for Medicare Part A inpatients. Gale claimed that Omnicare gave the discounts intending that the nursing homes would refer, or “swap,” their non-Part A patients, most of whom participate in the Medicare Part D prescription-drug benefit program. Omnicare then allegedly charged full price for their prescription drugs and other pharmacy services.
Nov. 5, 2013: Shopko stores secured a dismissal of a FCA suit brought by an ex-employee whistleblower who accused the company of knowingly overcharging Medicaid for the cost of pharmaceuticals. A Wisconsin federal judge found that the plaintiff did not show the company’s alleged charges were knowingly false. Shopko Stores, headquartered in Green Bay, Wisconsin, owns and operates a retail pharmacy chain in small to mid-sized cities throughout the Midwest, Mountain, North Central and Pacific Northwest regions. While the case was dismissed, Shopko was still exposed to expensive litigation that could be avoided by preventative measures.
_______
The government has been increasingly using the FCA to combat fraud. In December 2012, the government announced that it had recovered a record-setting $5 billion in settlements and judgments in FCA cases during the fiscal year ending September 30, 2012. As the three cases above indicate, he FCA also provides strong incentives to private plaintiffs to bring cases in the name of the United States. The FCA was amended in 1986 to include non-retaliation protections for whistleblowers, and the Act protects whistleblowers who initiate, assist with, or testify for a false claim action.
Some analysts argue that safe harbors should be provided for companies with robust compliance programs and that whistleblower incentives should be reasonable, but scaled back. Until reforms come to fruition, it is important for healthcare companies to understand the rules that relate to the services and goods being billed. Information contained in any claim must be as accurate and complete as possible. Furthermore, making changes to prevent any potential FCA problem from continuing and/or making arrangements to repay any overpayments may avoid or limit liability.
Policy & Medicine will continue to follow FCA cases and keep you updated on the latest trends in FCA litigation.