Humana Faces Anti-Kickback and False Claims Act Suit

A federal judge recently denied motions by Humana Inc., in an ongoing whistleblower lawsuit with Hoffman-LaRoche Ltd. The lawsuit was brought by a former Roche Diagnostics employee, Crystal Derrick, who alleged that Roche inappropriately dismissed debt that Humana owed to Roche to keep Roche’s diabetes testing products on Humana’s formularies and to exclude competing products.

The complaint, filed in June 2014, alleges that the dismissed debt gave Roche inappropriate access to insurance plan participants of Humana’s. The complaint further alleges that Humana was planning to cut Roche’s products from its Medicare Advantage plans and Medicare prescription drug plans’ formularies in March of 2013 until it was realized that Roche had overpaid Humana in rebates. Roche allegedly determined the overpayment (of roughly $45 million) to be “an opportunity to be placed back on Humana’s formularies.”

According to the recent ruling, Roche offered to settle the $45 million debt for a mere $27.6 million because it did not want to lose the Humana relationship. Humana allegedly balked at the discount and said they would return no more than $20 million of the debt. Negotiations continued through December 2013 when Humana and Roche agreed on a contract requiring Humana to repay no more than $11 million and to place Roche’s diabetes products back on Humana’s formularies and exclude competing brands.

The whistleblower employee – the same employee who realized the overpayment existed – expressed concern to her superiors about the potential violation of two federal laws in the deal: the Anti-Kickback Statute and the False Claims Act. The whistleblower was fired shortly after the deal was executed, and she believes she was terminated because of “her effort to blow the whistle on [Humana’s and Roche’s] unlawful kickback scheme.”

Humana and Roche attempted to get the case thrown out by arguing for dismissal on the ground that the complaint “fails the particularity and plausibility standards of Rule 9(b) and Rule (8). They argue that dismissal is appropriate for the additional reason that the conduct relator attributes to them in the complaint falls within the AKS’s safe harbor provisions and is consistent with Congress’s intent in establishing a ‘managed care’ exception to the statute.

Judge Elaine E. Bucklo, however, did not find their arguments persuasive, reminding the companies that the False Claims Act is designed to encourage whistleblowers to report possible fraud within all industries and that whistleblowers filing False Claims Act violations do not need to provide highly specific details of the apparent fraud, but only their own internal observations that indicate possible criminal activity.

Judge Bucklo stated, “If Roche’s proposed standard was correct, a relator would need to be a False Claims Act expert in order to report suspected fraud internally, which clearly is not the Act’s intended purposed.”

Sanford Heisler Sharps is the firm representing Ms. Derrick, the whistleblower, and attorney Ross Brooks praised Judge Bucklo’s decision, noting, “The Court affirms the important principle that financial arrangements between managed care organizations and pharmaceutical companies are not immune from the False Claims Act and Anti-Kickback Statute.” He continued, saying, “This decision is critical as watchdog groups scrutinize secretive financial arrangements among pharmaceutical companies, pharmacy benefit managers, and insurance companies.”

NEW
Comments (0)
Add Comment