No Signs of a Slow Down in 2018

The 2017 fiscal year-end results are in and the U.S. Department of Justice (DOJ) has announced the recovery of $3.7 billion in settlements and judgments from civil cases involving fraud and false claims against the government.

In a summary of 2017 enforcement activity, the DOJ year-end report indicated that of the $3.7 billion in settlements and judgments, $2.4 billion involved the health care industry, including drug companies, hospitals, pharmacies, laboratories, and physicians.  2017 marks the eighth consecutive year that the department’s civil health care fraud settlements and judgments have exceeded $2 billion.  The recoveries included in the $2.4 billion reflect only federal losses.  In many of these cases, the department was instrumental in recovering additional millions of dollars for state Medicaid programs.

The DOJ report drew particular attention to the fact that the largest recoveries involving the health care industry in 2017 – over $900 million – came from the drug and medical device sectors.  Some of the recoveries specifically cited included:

  • Shire Pharmaceuticals LLC – Shire paid $350 million to resolve allegations that it and the company it acquired in 2011, Advanced BioHealing (ABH), induced clinics and physicians to use or overuse its bioengineered human skin substitute by offering lavish dinners, drinks, entertainment and travel, supplying physicians and others with medical equipment and supplies, issuing unwarranted payments for purported speaking engagements and bogus case studies, and also supplying cash, credits and rebates. In addition to these kickback allegations, the settlement also resolved allegations brought by relators that Shire and ABH unlawfully marketed the skin substitute for uses not approved by the FDA, made false statements to inflate the price of the product, and caused improper coding, verification, or certification of claims for the product and related services.
  • Mylan Inc. – Myalan paid approximately $465 million to resolve allegations that it underpaid rebates owed under the Medicaid Drug Rebate Program by erroneously classifying its patented, brand name drug EpiPen – which has no therapeutic equivalents or generic competition – as a generic drug to avoid its obligation to pay higher rebates.
  • Life Care Centers of America Inc.– The company and its owner agreed to pay $145 million to settle allegations that it caused skilled nursing facilities to submit false claims for rehabilitation therapy services that were not reasonable, necessary, or skilled.  This was the largest civil settlement with a skilled nursing facility chain in the history of the False Claims Act.  The government alleged that Life Care instituted corporate-wide policies and practices designed to place beneficiaries in the highest level of Medicare reimbursement – known as “Ultra High” – irrespective of the clinical needs of the patients, resulting in the provision of unreasonable and unnecessary therapy to many beneficiaries.  Life Care also allegedly sought to keep patients longer than necessary in order to continue billing for rehabilitation therapy.
  • eClinicalWorks (ECW) – The national electronic health records software vendor, along with some of its employees, paid $155 million to resolve allegations that they falsely obtained certification for the company’s electronic health records software by concealing from its certifying entity that its software did not comply with the requirements for certification.  For example, rather than programming all the required standardized drug codes into its software, the company allegedly “hardcoded” into its software only the drug codes required for testing.  As a result of the deficiencies in its software, ECW allegedly caused physicians who used its software to submit false claims for federal incentive payments.  The United States also alleged that ECW paid unlawful kickbacks to certain customers in exchange for promoting its product.

Also of note, of the $3.7 billion in settlements and judgments, $3.4 billion related to lawsuits filed under the qui tam provisions of the False Claims Act.  Over the course of fiscal year 2017, the government paid out $392 million to the individuals who exposed fraud and false claims by filing a qui tam complaint. During the past year, 669 new qui tam suits were filed nationwide.

In his confirmation hearings last winter, Attorney General Jeff Sessions stated, “[T]his government must improve its ability to protect the United States Treasury from waste, fraud, and abuse. This is a federal responsibility. We cannot afford to lose a single dollar to corruption and you can be sure that if I am confirmed, I will make it a high priority of the department to root out and prosecute fraud in federal programs and to recover any monies lost due to fraud or false claims.”

The Sessions’ Justice Department gives every indication that it is following through on the Attorney General’s promise. FCA investigations and prosecutions have not lost steam during the first year of the Trump administration and give no signs of doing so.

The health care and pharmacy legal team at FisherBroyles welcomes your questions on all issues of federal and state health care law compliance. Please contact any of the following attorneys:

Brian Dickerson, FisherBroyles Partner
Brian E. Dickerson

Anthony Calamunci, FisherBroyles Partner
Anthony Calamunci

Nicole Waid, FisherBroyles Partner
Nicole Hughes Waid

Amy Butler, FisherBroyles Partner
Amy Butler

Katy Wane, FisherBroyles Partner
Katy Wane