FOR IMMEDIATE RELEASE
MARCH 30, 2009
WWW.USDOJ.GOV/USAO/MA
CONTACT: CHRISTINA DiIORIO-STERLING
PHONE: (617)748-3356
E-MAIL: USAMA.MEDIA@USDOJ.GOV
PHARMACEUTICAL COMPANY MANAGER PLEADS GUILTY TO OFF-LABEL MARKETING
BOSTON, MA - A Branchburg, NJ, woman agreed to plead guilty to violating the Food, Drug and Cosmetic Act, for marketing the drug Bextra for uses and dosages that were not approved by the Food and Drug Administration.
United States Attorney Michael J. Sullivan; Warren T. Bamford, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division; Susan J. Waddell, Special Agent in Charge of the Department of Health and Human Services, Office of Inspector General; Leigh-Alistair Barzey, Resident Agent in Charge of the Defense Criminal Investigative Service; Kim Rice, Special Agent in Charge of the Food and Drug Administration, Office of Criminal Investigations; Jeffrey Hughes, Special Agent in Charge of the U.S. Department of Veterans Affairs, Office of Inspector General, Office of Investigations - Northeast Field Office; Joseph Finn, Special Agent in Charge of the United States Postal Service, Office of Inspector General, Boston Field Office; and Drew Grimm, Special Agent in Charge of the U.S. Office of Personnel Management, Office of Inspector General - Eastern Operations, announced today that MARY HOLLOWAY, age 47, of Branchburg, New Jersey, has plead guilty to a one count Information charging her with distribution of a misbranded drug.
According to the Information from approximately November 2001, through April 2005, HOLLOWAY was employed as a Regional Manager at a pharmaceutical company and was responsible for sales in her region of the drug Bextra. Bextra was a Cox-II inhibitor and had been approved in by the Food and Drug Administration (FDA) in November 2001 for the signs and symptoms of osteoarthritis, adult rheumatoid arthritis, at 10 mgs and primary dysmennorhea at 20 mgs, twice a day as needed. The Information charges that, in 2001, the FDA specifically denied the request of the pharmaceutical company to approve it for acute pain, including the pain of surgery. The FDA told the pharmaceutical company that it could not approve it for these other indications because the safety in these other uses had not been established. Specifically, the FDA was concerned about the results of a study in which there was an excess of cardiovascular events in patients who had undergone coronary artery bypass graft surgery and used Bextra. Bextra was withdrawn from the market in April 2005.
HOLLOWAY was aware of the FDA’s safety concerns, but that she nonetheless had her sales staff of approximately 100 employees sell Bextra for precisely the uses that the FDA refused to approve. For example, HOLLOWAY trained and encouraged her sales teams to promote Bextra by obtaining protocols from doctors that instructed that Bextra be used for the pain of surgery, an unapproved use, and at 20 mgs, an unapproved dose. HOLLOWAY also instructed her staff to market Bextra for use before, during and after surgery to reduce the risk of deep vein thrombosis, which is a form of life threatening blood clots, even though she knew there were no studies showing that Bextra was safe and effective for this use. Finally, HOLLOWAY encouraged her staff to make false safety claims about Bextra in order to sell the drug.
HOLLOWAY faces up to six months’ imprisonment, to be followed by not more than 3 years of supervised release and a maximum fine of $100,000 or twice the amount of gross loss or gross gain.
The case was investigated by the Federal Bureau of Investigation, the Office of Inspector General for the Department of Health and Human Services, Special Prosecutions Staff for the Food and Drug Administration, the Office of Inspector General for the Department of Veterans Affairs, the Defense Criminal Investigative Service, the Office of Inspector General for the United States Postal Service and the Office of Inspector General for the U.S. Office of Personnel Management. It is being prosecuted by Assistant U.S. Attorneys Sara Miron Bloom and Susan M. Poswistilo of Sullivan’s Health Care Fraud Unit.
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Showing posts with label PHARMACEUTICAL Fraud. Show all posts
Showing posts with label PHARMACEUTICAL Fraud. Show all posts
Sunday, April 5, 2009
Thursday, December 18, 2008
Legal Advocacy
Supreme Court Refuses to Allow Federal Labeling Law to Shield Against Fraud/Misrepresentation Claims
The U.S. Supreme Court ruled that manufacturers of potentially dangerous products are not shielded from state consumer law merely because their products have complied with federal labeling laws. The specific product at issue in Altria Group Inc. v. Good was “light” cigarettes, but the Court is also considering this term a case that asks whether federal law preempts state product liability claims against pharmaceutical manufacturers for labeling that fails to adequately warn of a drug’s risks.
AARP filed “friend of the court” briefs in both the cigarette and the pharmaceutical case, urging the Court not to preempt state laws because doing so would limit state efforts to protect the health and welfare of their citizens -- allowing consumers who have been injured as a result of a manufacturer’s deceptive practices or faulty manufacturing without a remedy for the harm.
The dispute
Stephanie Good was a smoker who lived in Maine and favored Marlboro Lights and Cambridge Lights cigarettes, believing the marketing claims by cigarette manufacturers that “light” cigarettes were a healthier alternative to regular cigarettes. After learning that the marketing claims were false, she sued Altria and other cigarette manufacturers. She alleged that they had falsely marketed their “light” cigarettes as containing lower tar and nicotine in order to convey to consumers the impression that the cigarettes are less harmful than regular cigarettes. The class action lawsuit argued that in contrast, light cigarettes can actually be more harmful than regular cigarettes due to the cigarettes’ design. The lawsuit alleged that the companies had known this information and had deliberately deceived consumers systematically and over many years.
Plaintiffs specifically invoked the protections of the Maine Unfair Trade Practices Act (MUTPA), which prohibits unfair or deceptive acts or practices in commerce. The defendant cigarette companies argued that their cigarettes complied with federal cigarette safety warning laws and that the federal labeling law preempted the state consumer protection law.
Numerous similar lawsuits have been filed around the country and, faced with conflicting rulings from various courts, the U.S. Supreme Court agreed to take up the matter and resolve this preemption issue.
The ruling
The Supreme Court began with the assumption that the historic powers of states to regulate the health and welfare of their citizenry was not to be disturbed unless Congress specifically intended to do so. It then looked to the enactment of the federal Labeling Act of 1965 (which required cigarette manufacturers to include specific warnings about the potential hazards of smoking cigarettes) to determine whether Congress intended to preempt state labeling laws. Reviewing the many amendments and refinements enacted into law, the Court did find the intent to prohibit states from enacting stronger cigarette labeling laws – but only those laws that specifically addressed the labeling of cigarettes.
The Court was unable to find any support for the argument that state fraud laws were to be preempted. In fact, the court noted in a prior cigarette labeling case, unlike the concerns about wide divergence in labeling that led to Congress limiting state ability to mandate cigarette labels, fraud claims “rely only on a single, uniform standard: falsity.” Or, as AARP’s brief put it, “Make no mistake, this case is about fraud.” Since the MUTPA only addressed fraud and deceit as a general business practice, its general principles were not to be disturbed and defendants were not shielded by the federal cigarette labeling law.
In other words, the Court ruled that federal cigarette labeling law does not protect a manufacturer from liability for breaching the general duty not to lie to the public.
The ruling carries additional significance because the Court is considering this term another case that tests the balance between federal and state law. In Wyeth v. Levine, the pharmaceutical manufacturer is seeking to be shielded from liability because it complied with federal Food and Drug Administration approvals that did not require it to warn of specific dangers. In that case, Diana Levine went to the hospital suffering from migraines but had to later have her arm amputated after doctors intravenously administered a drug that destroyed her arteries. Levine alleged that the drug manufacturer had evidence that if the drug reached arteries, it could cause gangrene but despite this it did not warn of this danger. A jury agreed that the company had failed to warn of risks and awarded her $6.7 million in damages.
At trial and in its appeal, Wyeth argued that it was exempted from state tort law because the federal Food and Drug Administration (FDA) had approved the drug without requiring the warning sought and this preempted state tort law.
AARP’s briefs
In both Altria and Wyeth, the AARP “friend of the court” briefs filed by AARP Foundation Litigation attorneys pointed out that while regulatory agencies impose Congressionally-authorized requirements on manufacturers, those agencies face particular challenges. Both the Federal Trade Commission (which oversees cigarette labeling) and the Food and Drug Administration (pharmaceuticals) are chronically underfunded, often criticized for reliant relationships with industry, and have limited authority over the products -- with very little FTC oversight over cigarettes and extremely limited post-market oversight by the FDA.
Fortunately, there has been another safety net built into the legal system – the traditional tort lawsuit. By imposing the possibility of significant monetary penalties directly on wrongdoers, tort lawsuits incentivize those who develop, make, and distribute potentially dangerous products to do so with the utmost consideration for human health. The tort system plays a critical complementary role with agency regulatory processes to help ensure that items placed into the marketplace are as safe as possible and that any necessary warnings are adequately written and targeted.
The brief in Altria detailed the history of misrepresentation and deception in the marketing of “light” cigarettes, noting the voluminous evidence that has been presented indicating cigarette companies’ knowledge both that smokers were sensitive to health claims and that the health claims were exaggerated. One example of the sensitivity of “light” cigarette consumers: following aggressive health-based campaigns, the market share for “light” cigarettes skyrocketed from 2% in 1967 to 81% of cigarette sales in 1998.
Finally, AARP’s brief pointed out the absurdity of allowing the federal law to preempt state fraud law. Under a theory advanced by one of the defendants, the brief noted, cigarette manufacturers would be shielded from liability even if they made the following claims ”Smoking fights Parkinson’s Disease,” or “Smoking wards off depression.” As the brief put it, “Under Philip Morris’ reading, the Labeling Act – a statute designed to ensure that the public is informed of the risks of smoking – becomes an instrument of deception.”
AARP filed its brief in Altria with other health care and consumer protection advocates. The narrow 5-4 decision is a welcome ruling and could pave the way for further bolstering of state law remedies when the Court turns to Wyeth later this Term.
Contact persons:
Julie Nepveu
jnepveu@aarp.org
Stacy Canan
SCanan@aarp.org
Supreme Court Refuses to Allow Federal Labeling Law to Shield Against Fraud/Misrepresentation Claims
The U.S. Supreme Court ruled that manufacturers of potentially dangerous products are not shielded from state consumer law merely because their products have complied with federal labeling laws. The specific product at issue in Altria Group Inc. v. Good was “light” cigarettes, but the Court is also considering this term a case that asks whether federal law preempts state product liability claims against pharmaceutical manufacturers for labeling that fails to adequately warn of a drug’s risks.
AARP filed “friend of the court” briefs in both the cigarette and the pharmaceutical case, urging the Court not to preempt state laws because doing so would limit state efforts to protect the health and welfare of their citizens -- allowing consumers who have been injured as a result of a manufacturer’s deceptive practices or faulty manufacturing without a remedy for the harm.
The dispute
Stephanie Good was a smoker who lived in Maine and favored Marlboro Lights and Cambridge Lights cigarettes, believing the marketing claims by cigarette manufacturers that “light” cigarettes were a healthier alternative to regular cigarettes. After learning that the marketing claims were false, she sued Altria and other cigarette manufacturers. She alleged that they had falsely marketed their “light” cigarettes as containing lower tar and nicotine in order to convey to consumers the impression that the cigarettes are less harmful than regular cigarettes. The class action lawsuit argued that in contrast, light cigarettes can actually be more harmful than regular cigarettes due to the cigarettes’ design. The lawsuit alleged that the companies had known this information and had deliberately deceived consumers systematically and over many years.
Plaintiffs specifically invoked the protections of the Maine Unfair Trade Practices Act (MUTPA), which prohibits unfair or deceptive acts or practices in commerce. The defendant cigarette companies argued that their cigarettes complied with federal cigarette safety warning laws and that the federal labeling law preempted the state consumer protection law.
Numerous similar lawsuits have been filed around the country and, faced with conflicting rulings from various courts, the U.S. Supreme Court agreed to take up the matter and resolve this preemption issue.
The ruling
The Supreme Court began with the assumption that the historic powers of states to regulate the health and welfare of their citizenry was not to be disturbed unless Congress specifically intended to do so. It then looked to the enactment of the federal Labeling Act of 1965 (which required cigarette manufacturers to include specific warnings about the potential hazards of smoking cigarettes) to determine whether Congress intended to preempt state labeling laws. Reviewing the many amendments and refinements enacted into law, the Court did find the intent to prohibit states from enacting stronger cigarette labeling laws – but only those laws that specifically addressed the labeling of cigarettes.
The Court was unable to find any support for the argument that state fraud laws were to be preempted. In fact, the court noted in a prior cigarette labeling case, unlike the concerns about wide divergence in labeling that led to Congress limiting state ability to mandate cigarette labels, fraud claims “rely only on a single, uniform standard: falsity.” Or, as AARP’s brief put it, “Make no mistake, this case is about fraud.” Since the MUTPA only addressed fraud and deceit as a general business practice, its general principles were not to be disturbed and defendants were not shielded by the federal cigarette labeling law.
In other words, the Court ruled that federal cigarette labeling law does not protect a manufacturer from liability for breaching the general duty not to lie to the public.
The ruling carries additional significance because the Court is considering this term another case that tests the balance between federal and state law. In Wyeth v. Levine, the pharmaceutical manufacturer is seeking to be shielded from liability because it complied with federal Food and Drug Administration approvals that did not require it to warn of specific dangers. In that case, Diana Levine went to the hospital suffering from migraines but had to later have her arm amputated after doctors intravenously administered a drug that destroyed her arteries. Levine alleged that the drug manufacturer had evidence that if the drug reached arteries, it could cause gangrene but despite this it did not warn of this danger. A jury agreed that the company had failed to warn of risks and awarded her $6.7 million in damages.
At trial and in its appeal, Wyeth argued that it was exempted from state tort law because the federal Food and Drug Administration (FDA) had approved the drug without requiring the warning sought and this preempted state tort law.
AARP’s briefs
In both Altria and Wyeth, the AARP “friend of the court” briefs filed by AARP Foundation Litigation attorneys pointed out that while regulatory agencies impose Congressionally-authorized requirements on manufacturers, those agencies face particular challenges. Both the Federal Trade Commission (which oversees cigarette labeling) and the Food and Drug Administration (pharmaceuticals) are chronically underfunded, often criticized for reliant relationships with industry, and have limited authority over the products -- with very little FTC oversight over cigarettes and extremely limited post-market oversight by the FDA.
Fortunately, there has been another safety net built into the legal system – the traditional tort lawsuit. By imposing the possibility of significant monetary penalties directly on wrongdoers, tort lawsuits incentivize those who develop, make, and distribute potentially dangerous products to do so with the utmost consideration for human health. The tort system plays a critical complementary role with agency regulatory processes to help ensure that items placed into the marketplace are as safe as possible and that any necessary warnings are adequately written and targeted.
The brief in Altria detailed the history of misrepresentation and deception in the marketing of “light” cigarettes, noting the voluminous evidence that has been presented indicating cigarette companies’ knowledge both that smokers were sensitive to health claims and that the health claims were exaggerated. One example of the sensitivity of “light” cigarette consumers: following aggressive health-based campaigns, the market share for “light” cigarettes skyrocketed from 2% in 1967 to 81% of cigarette sales in 1998.
Finally, AARP’s brief pointed out the absurdity of allowing the federal law to preempt state fraud law. Under a theory advanced by one of the defendants, the brief noted, cigarette manufacturers would be shielded from liability even if they made the following claims ”Smoking fights Parkinson’s Disease,” or “Smoking wards off depression.” As the brief put it, “Under Philip Morris’ reading, the Labeling Act – a statute designed to ensure that the public is informed of the risks of smoking – becomes an instrument of deception.”
AARP filed its brief in Altria with other health care and consumer protection advocates. The narrow 5-4 decision is a welcome ruling and could pave the way for further bolstering of state law remedies when the Court turns to Wyeth later this Term.
Contact persons:
Julie Nepveu
jnepveu@aarp.org
Stacy Canan
SCanan@aarp.org
Wednesday, November 12, 2008
Justice Department Announces 2008 Fraud & "Qui Tam" False Claims Act Recoveries...
Posted On: November 11, 2008 by Finch McCranie, LLP
Justice Department Announces 2008 Fraud & "Qui Tam" False Claims Act Recoveries, with Medicare, Medicaid, and Other Health Care Fraud Alone Topping $1 Billion in Recoveries of Taxpayer Funds
Will Wall Street Bailout Produce the Next Round of Whistleblowers Reporting Fraud?
The U.S. Department of Justice this week announced its FY 2008 recoveries in fraud and False Claims Act cases, with more than $1 billion in health care fraud recoveries alone, and a total of more than $1.3 billion. (As explained below, we believe the $1.3 billion figure is low and understates the actual fraud recoveries this year.)
Cases brought by "relators" or whistleblowers under the nation's primary whistleblower statute, the False Claims Act, accounted for 78% of the money recovered. Since the False Claims Act took its current form in 1986, this law has recovered more than $21 billion of taxpayer funds from those who defraud the government.
As health care costs have grown as a percentage of the federal budget, so have recoveries for health care fraud. Recoveries of federal dollars were made because of fraud not only in Medicare and Medicaid, but also other federal programs such as Tricare and the Federal Employees Health Benefits Program.
The largest recoveries were from pharmaceutical companies--Cephalon Inc., Merck & Co. and CVS Caremark Corp. paid more than $640 million. Pharmaceutical fraud cases also repaid $430 million to state Medicaid programs.
DOJ also cited recoveries in cases of fraud affecting defense procurement contracts, disaster assistance loans and agricultural subsidies.
The actual recoveries were greater if you compare DOJ's announcements of its settlements, as well as include dollars recovered under the various State False Claims Acts. (We have written extensively about why states are enacting their own State False Claims Acts to mirror the federal False Claims Act, given the federal law's successes.)
With whistleblowers reporting fraud infecting in the Wall Street bailout funds (because no federal program is immune), it will be interesting to see how these billions of federal dollars show up in future statistics of fraud recoveries.
We have reprinted below DOJ's "fact sheet" about its FY 2008 significant recoveries. We congratulate Justice on another very successful year in fighting fraud and false claims.
FACT SHEET: SIGNIFICANT RECOVERIES IN FISCAL YEAR 2008
Among the Department’s most significant settlements and judgments in fiscal year 2008 were:
• $361.5 million from Merck & Company to resolve allegations that the pharmaceutical manufacturer knowingly failed to pay proper rebates to Medicaid and other government health care programs, and paid kickbacks to health care providers to induce them to prescribe the company’s products. The settlement resulted from two lawsuits brought under the qui tam provisions of the False Claims Act.
In the first, which accounted for $221.9 million of the $361.5 settlement, a former Merck employee alleged that the company violated the Medicaid Rebate Statute by providing deep discounts to hospitals that used its drugs Zocor and Vioxx in place of competitors’ brands, without reporting those discounts and other cost information to reflect its "best price," as required by the statute to ensure that Medicaid obtains the benefit of the same price concessions other purchasers enjoy. This suit also alleged that Merck paid kickbacks to physicians, disguised as fees for training, consultation, and market research, to induce them to prescribe its drugs, also contrary to law. The United States paid the relator $46.6 million as his share of the settlement under the False Claims Act’s qui tam provisions. In addition to the federal recovery, Merck paid $162 million to state Medicaid programs.
In the second lawsuit, which accounted for the remaining $139.6 million of the settlement, a physician alleged that Merck provided deep discounts to hospitals to induce them to administer its antacid, Pepcid, as a means to boost sales through continued use after the patient’s discharge. The suit went on to allege, similar to the first suit, that Merck knowingly failed to report these discounts as required by the Medicaid Rebate Statute, which resulted in illegal and inflated claims to federal and state Medicaid programs. In addition to paying the United States $139.5 million in federal claims, Merck paid $114 million to settle state Medicaid claims. The relator received $24 million as his federal share of the settlement and an additional sum for the state recoveries. Merck also entered into a Corporate Integrity Agreement with the Inspector General of the Department of Health and Human Services (HHS) to ensure compliance with federal health insurance programs in the future.
For the original press release, see:
http://www.usdoj.gov/opa/pr/2008/February/08_civ_094.html
http://www.usdoj.gov/usao/pae/News/Pr/2008/feb/steinkrelease.pdf
• $258 million from Cephalon Inc. to resolve claims that the company marketed three drugs for uses not approved by the Food and Drug Administration (FDA). By promoting the drugs for so-called "off label" uses, Cephalon caused providers to charge federal health insurance programs such as Medicare, Medicaid, TRICARE and the Federal Employees Health Benefits Program for unapproved uses of the drugs not covered by the programs. The settlement resolved four lawsuits, three of which were brought by former Cephalon sales representatives under the qui tam provisions of the False Claims Act. Consistent with those provisions, the relators who filed the suits will share $46.7 million as their part of the settlement. In addition to the $258 million recovered for federal programs, the United States recovered $116 million for the Medicaid programs in 14 states and the District of Columbia. Cephalon also pleaded guilty to related criminal charges, paid $50 million in fines and forfeitures and entered into a five-year Corporate Integrity Agreement with the Inspector General of HHS to ensure strict compliance in the future.
For the original press release, see:
http://www.usdoj.gov/opa/pr/2008/September/08-civ-860.html
• $225 million from Amerigroup Corporation to settle both federal and state allegations that Amerigroup, together with its Illinois subsidiary, systematically avoided enrolling pregnant women and other high-cost patients in the company’s managed care program in Illinois. The program was funded by Medicaid, which required open enrollment to all eligible beneficiaries. By excluding pregnant women and other high-cost patients, Amerigroup increased its profits in conflict with the law. The United States and Illinois jointly brought suit under the federal False Claims Act and the Illinois Whistleblower Reward and Protection Act. In October 2006, following a lengthy trial, the court entered judgment for $334 million. Amerigroup appealed and the parties entered negotiations leading to settlement. The relator received $56.25 million as his share of the federal and state recoveries. In conjunction with the settlement, Amerigroup entered into a Corporate Integrity Agreement with the Inspector General of HHS to ensure future compliance.
For the original press release, see:
http://www.usdoj.gov/opa/pr/2008/August/08-civ-723.html
• $75 million to settle claims that Kyphon Inc., now Medtronic Spine LLC, violated the False Claims Act by knowingly causing the submission of false claims to Medicare for its kyphoplasty procedure–a minimally-invasive surgery used to treat compression fractures of the spine. The settlement resolved a lawsuit filed by two former Kyphon employees under the qui tam provisions of the False Claims Act. The suit alleged that Kyphon engaged in a seven-year marketing scheme that resulted in certain hospitals billing Medicare for kyphoplasties performed on an inpatient basis rather than for less costly and clinically appropriate outpatient kyphoplasty treatment. This conduct resulted in the Medicare program paying more for inpatient kyphoplasty procedures. The relators received a total of $14.9 million as their share of the settlement. In conjunction with the settlement, Kypon entered into a Corporate Integrity Agreement with the Inspector General of HHS to ensure future compliance.
For the original press release, see:
http://www.usdoj.gov/opa/pr/2008/May/08-civ-455.html
• $74 million from Staten Island University Hospital (SIUH) to resolve two False Claims Act qui tam suits and two other matters. In the first action, a physician and former SIUH Director of Chemical Dependency Services, filed suit alleging that SIUH fraudulently billed Medicare and Medicaid for substance abuse and alcohol detoxification services provided to inpatients in unlicensed beds, in violation of state law, between 1994 and 2000. SIUH paid the United States $11.8 million in settlement of this qui tam action, with the relator receiving $2.3 million as his share of the government’s recovery. In related allegations of inflated Medicaid billings asserted under New York State’s false claims statute, SIUH paid New York $14.88 million, with the relator receiving $2.97 million as his share of the state’s recovery.
In the second action, the widow of an SIUH cancer patient filed suit alleging that between 1996 and 2004, SIUH submitted false claims to Medicare and TRICARE using incorrect codes for cancer treatments not covered by the programs. SIUH paid the United States $25 million, including a relator share award of $3.75 million. In the third matter, the United States alleged that SIUH deliberately inflated the number of residents it employed to fraudulently increase Medicare reimbursement between 1996 and 2003. SIUH paid the United States $35.7 million in settlement of this matter. Lastly, SIUH paid the United States $1.47 million to settle allegations that it billed Medicare and Medicaid for treating psychiatric patients in unlicensed beds from 2003-2005. In conjunction with the settlement, SIUH also entered into a Corporate Integrity Agreement with the Inspector General of HHS to ensure future compliance.
For the original press release, see:
http://www.usdoj.gov/usao/nye/pr/2008/2008sep15.html
• $60 million from Lester E. Cox Medical Centers, a health care system headquartered in Springfield, Mo., to settle claims that it violated the False Claims Act, the Anti-Kickback Statute and the Stark Statute between 1996 and 2005. The United States alleged that Cox entered into illegal financial relationships with referring physicians at a local physician group and engaged in improper billing practices with respect to Medicare. Under the Stark Statute, providers such as Cox are prohibited from billing Medicare for referrals from doctors with whom the providers have a financial relationship, unless that relationship falls within certain exceptions. The United States contended that Cox and the referring physicians ran afoul of the Stark Statute, as well as the Anti-Kickback Statute, which prohibits offering inducements to providers in return for patient referrals. The settlement also resolves claims that Cox included non-reimbursable costs on its Medicare cost reports and improperly billed for dialysis services. In conjunction with the settlement, Cox entered into a Corporate Integrity Agreement with the Inspector General of HHS to ensure future compliance.
For the original press release, see:
http://www.usdoj.gov/opa/pr/2008/July/08-civ-638.html
http://www.usdoj.gov/usao/mow/news2008/cox.settlement.htm
• $53 million from Pratt & Whitney, a division of United Technologies Corporation, and PCC Airfoils LLC, a subsidiary of Precision Castparts Corporation, to resolve allegations that the companies knowingly submitted false claims for defective turbine blades purchased by the Air Force to retrofit the F100-PW-220 engines found in F-16 and F-15 aircraft. The settlement includes corrective action to replace defective blades and inspection of potentially serviceable blades to ensure their integrity. The case was pursued as part of a National Procurement Fraud Initiative launched in October 2006, to promote the early detection, identification, prevention and prosecution of procurement fraud.
For the original press release, see:
http://www.usdoj.gov/opa/pr/2008/August/08-civ-675.html
• $26 million from St. Joseph’s Hospital of Atlanta to resolve allegations that the hospital falsely claimed Medicare reimbursement for inpatient admissions that were, in fact, less costly outpatient visits. A registered nurse, formerly employed by the hospital, initiated suit under the False Claims Act’s qui tam provisions. The complaint alleged that the hospital improperly billed for short inpatient admissions, usually of one day or less, when the service should have been billed as an outpatient "observation" or emergency room visit. Medicare reimburses hospitals a higher rate for inpatient admissions than it does for observation care or emergency room visits. The nurse who triggered the investigation received $4.94 million as her share of the recovery. St. Joseph’s entered into a Corporate Integrity Agreement with the Inspector General of HHS in conjunction with the settlement, to ensure future compliance.
For the original press release, see:
http://www.usdoj.gov/usao/gan/press/2007/12-21-07.pdf
• $23.2 million from Bechtel Infrastructure Corp. and PB Americas Inc. to settle allegations of false claims for federal highway funds in connection with the firms’ failure to provide adequate management and quality assurance services during the construction of the Central Artery Tunnel, known as the Big Dig, in Boston. The recovery, part of a $458 million settlement of state and federal claims, resolved parts of a qui tam lawsuit, a related federal investigation and additional claims that Bechtel and PB Americas violated federal and state criminal and civil laws in connection with their services on the Big Dig. In addition to the federal recovery, the companies paid $40 million in state claims and $335 million into a state warranty fund for future repairs to the Big Dig. The private citizen who filed the suit received $54,000 and $96,000 as his share of the federal and state recoveries, respectively.
For the original press release, see:
http://www.usdoj.gov/opa/pr/2008/January/08_crt_048.html
http://boston.fbi.gov/dojpressrel/pressrel08/govtclaimsettlement012308.htm
• $21.1 million from CVS Caremark Corp. to settle claims that from 2000-2006, the company illegally switched patients from the tablet version of the drug Ranitidine (generic Zantac) to a more expensive capsule version for the sole purpose of increasing Medicaid reimbursement. For example, CVS pharmacies in Illinois would charge Medicaid $79.80 for 60 Ranitidine capsules, rather than $17.10 for the tablets prescribed, increasing reimbursement by $62.70 on a single prescription. CVS Caremark is headquartered in Rhode Island and operates more than 6,000 pharmacies nationwide. The settlement resolves qui tam claims under federal and state false claims statutes. In addition to the federal recovery, CVS Caremark paid $15.6 million to 23 states and the District of Columbia. The qui tam plaintiff received $4.3 million as his share of the federal and state settlements. CVS Caremark also entered into a Corporate Integrity Agreement with the Inspector General of HHS to ensure future compliance.
For the original press release, see:
http://www.usdoj.gov/opa/pr/2008/March/08_crt_214.html
Posted by Finch McCranie, LLP
Justice Department Announces 2008 Fraud & "Qui Tam" False Claims Act Recoveries, with Medicare, Medicaid, and Other Health Care Fraud Alone Topping $1 Billion in Recoveries of Taxpayer Funds
Will Wall Street Bailout Produce the Next Round of Whistleblowers Reporting Fraud?
The U.S. Department of Justice this week announced its FY 2008 recoveries in fraud and False Claims Act cases, with more than $1 billion in health care fraud recoveries alone, and a total of more than $1.3 billion. (As explained below, we believe the $1.3 billion figure is low and understates the actual fraud recoveries this year.)
Cases brought by "relators" or whistleblowers under the nation's primary whistleblower statute, the False Claims Act, accounted for 78% of the money recovered. Since the False Claims Act took its current form in 1986, this law has recovered more than $21 billion of taxpayer funds from those who defraud the government.
As health care costs have grown as a percentage of the federal budget, so have recoveries for health care fraud. Recoveries of federal dollars were made because of fraud not only in Medicare and Medicaid, but also other federal programs such as Tricare and the Federal Employees Health Benefits Program.
The largest recoveries were from pharmaceutical companies--Cephalon Inc., Merck & Co. and CVS Caremark Corp. paid more than $640 million. Pharmaceutical fraud cases also repaid $430 million to state Medicaid programs.
DOJ also cited recoveries in cases of fraud affecting defense procurement contracts, disaster assistance loans and agricultural subsidies.
The actual recoveries were greater if you compare DOJ's announcements of its settlements, as well as include dollars recovered under the various State False Claims Acts. (We have written extensively about why states are enacting their own State False Claims Acts to mirror the federal False Claims Act, given the federal law's successes.)
With whistleblowers reporting fraud infecting in the Wall Street bailout funds (because no federal program is immune), it will be interesting to see how these billions of federal dollars show up in future statistics of fraud recoveries.
We have reprinted below DOJ's "fact sheet" about its FY 2008 significant recoveries. We congratulate Justice on another very successful year in fighting fraud and false claims.
FACT SHEET: SIGNIFICANT RECOVERIES IN FISCAL YEAR 2008
Among the Department’s most significant settlements and judgments in fiscal year 2008 were:
• $361.5 million from Merck & Company to resolve allegations that the pharmaceutical manufacturer knowingly failed to pay proper rebates to Medicaid and other government health care programs, and paid kickbacks to health care providers to induce them to prescribe the company’s products. The settlement resulted from two lawsuits brought under the qui tam provisions of the False Claims Act.
In the first, which accounted for $221.9 million of the $361.5 settlement, a former Merck employee alleged that the company violated the Medicaid Rebate Statute by providing deep discounts to hospitals that used its drugs Zocor and Vioxx in place of competitors’ brands, without reporting those discounts and other cost information to reflect its "best price," as required by the statute to ensure that Medicaid obtains the benefit of the same price concessions other purchasers enjoy. This suit also alleged that Merck paid kickbacks to physicians, disguised as fees for training, consultation, and market research, to induce them to prescribe its drugs, also contrary to law. The United States paid the relator $46.6 million as his share of the settlement under the False Claims Act’s qui tam provisions. In addition to the federal recovery, Merck paid $162 million to state Medicaid programs.
In the second lawsuit, which accounted for the remaining $139.6 million of the settlement, a physician alleged that Merck provided deep discounts to hospitals to induce them to administer its antacid, Pepcid, as a means to boost sales through continued use after the patient’s discharge. The suit went on to allege, similar to the first suit, that Merck knowingly failed to report these discounts as required by the Medicaid Rebate Statute, which resulted in illegal and inflated claims to federal and state Medicaid programs. In addition to paying the United States $139.5 million in federal claims, Merck paid $114 million to settle state Medicaid claims. The relator received $24 million as his federal share of the settlement and an additional sum for the state recoveries. Merck also entered into a Corporate Integrity Agreement with the Inspector General of the Department of Health and Human Services (HHS) to ensure compliance with federal health insurance programs in the future.
For the original press release, see:
http://www.usdoj.gov/opa/pr/2008/February/08_civ_094.html
http://www.usdoj.gov/usao/pae/News/Pr/2008/feb/steinkrelease.pdf
• $258 million from Cephalon Inc. to resolve claims that the company marketed three drugs for uses not approved by the Food and Drug Administration (FDA). By promoting the drugs for so-called "off label" uses, Cephalon caused providers to charge federal health insurance programs such as Medicare, Medicaid, TRICARE and the Federal Employees Health Benefits Program for unapproved uses of the drugs not covered by the programs. The settlement resolved four lawsuits, three of which were brought by former Cephalon sales representatives under the qui tam provisions of the False Claims Act. Consistent with those provisions, the relators who filed the suits will share $46.7 million as their part of the settlement. In addition to the $258 million recovered for federal programs, the United States recovered $116 million for the Medicaid programs in 14 states and the District of Columbia. Cephalon also pleaded guilty to related criminal charges, paid $50 million in fines and forfeitures and entered into a five-year Corporate Integrity Agreement with the Inspector General of HHS to ensure strict compliance in the future.
For the original press release, see:
http://www.usdoj.gov/opa/pr/2008/September/08-civ-860.html
• $225 million from Amerigroup Corporation to settle both federal and state allegations that Amerigroup, together with its Illinois subsidiary, systematically avoided enrolling pregnant women and other high-cost patients in the company’s managed care program in Illinois. The program was funded by Medicaid, which required open enrollment to all eligible beneficiaries. By excluding pregnant women and other high-cost patients, Amerigroup increased its profits in conflict with the law. The United States and Illinois jointly brought suit under the federal False Claims Act and the Illinois Whistleblower Reward and Protection Act. In October 2006, following a lengthy trial, the court entered judgment for $334 million. Amerigroup appealed and the parties entered negotiations leading to settlement. The relator received $56.25 million as his share of the federal and state recoveries. In conjunction with the settlement, Amerigroup entered into a Corporate Integrity Agreement with the Inspector General of HHS to ensure future compliance.
For the original press release, see:
http://www.usdoj.gov/opa/pr/2008/August/08-civ-723.html
• $75 million to settle claims that Kyphon Inc., now Medtronic Spine LLC, violated the False Claims Act by knowingly causing the submission of false claims to Medicare for its kyphoplasty procedure–a minimally-invasive surgery used to treat compression fractures of the spine. The settlement resolved a lawsuit filed by two former Kyphon employees under the qui tam provisions of the False Claims Act. The suit alleged that Kyphon engaged in a seven-year marketing scheme that resulted in certain hospitals billing Medicare for kyphoplasties performed on an inpatient basis rather than for less costly and clinically appropriate outpatient kyphoplasty treatment. This conduct resulted in the Medicare program paying more for inpatient kyphoplasty procedures. The relators received a total of $14.9 million as their share of the settlement. In conjunction with the settlement, Kypon entered into a Corporate Integrity Agreement with the Inspector General of HHS to ensure future compliance.
For the original press release, see:
http://www.usdoj.gov/opa/pr/2008/May/08-civ-455.html
• $74 million from Staten Island University Hospital (SIUH) to resolve two False Claims Act qui tam suits and two other matters. In the first action, a physician and former SIUH Director of Chemical Dependency Services, filed suit alleging that SIUH fraudulently billed Medicare and Medicaid for substance abuse and alcohol detoxification services provided to inpatients in unlicensed beds, in violation of state law, between 1994 and 2000. SIUH paid the United States $11.8 million in settlement of this qui tam action, with the relator receiving $2.3 million as his share of the government’s recovery. In related allegations of inflated Medicaid billings asserted under New York State’s false claims statute, SIUH paid New York $14.88 million, with the relator receiving $2.97 million as his share of the state’s recovery.
In the second action, the widow of an SIUH cancer patient filed suit alleging that between 1996 and 2004, SIUH submitted false claims to Medicare and TRICARE using incorrect codes for cancer treatments not covered by the programs. SIUH paid the United States $25 million, including a relator share award of $3.75 million. In the third matter, the United States alleged that SIUH deliberately inflated the number of residents it employed to fraudulently increase Medicare reimbursement between 1996 and 2003. SIUH paid the United States $35.7 million in settlement of this matter. Lastly, SIUH paid the United States $1.47 million to settle allegations that it billed Medicare and Medicaid for treating psychiatric patients in unlicensed beds from 2003-2005. In conjunction with the settlement, SIUH also entered into a Corporate Integrity Agreement with the Inspector General of HHS to ensure future compliance.
For the original press release, see:
http://www.usdoj.gov/usao/nye/pr/2008/2008sep15.html
• $60 million from Lester E. Cox Medical Centers, a health care system headquartered in Springfield, Mo., to settle claims that it violated the False Claims Act, the Anti-Kickback Statute and the Stark Statute between 1996 and 2005. The United States alleged that Cox entered into illegal financial relationships with referring physicians at a local physician group and engaged in improper billing practices with respect to Medicare. Under the Stark Statute, providers such as Cox are prohibited from billing Medicare for referrals from doctors with whom the providers have a financial relationship, unless that relationship falls within certain exceptions. The United States contended that Cox and the referring physicians ran afoul of the Stark Statute, as well as the Anti-Kickback Statute, which prohibits offering inducements to providers in return for patient referrals. The settlement also resolves claims that Cox included non-reimbursable costs on its Medicare cost reports and improperly billed for dialysis services. In conjunction with the settlement, Cox entered into a Corporate Integrity Agreement with the Inspector General of HHS to ensure future compliance.
For the original press release, see:
http://www.usdoj.gov/opa/pr/2008/July/08-civ-638.html
http://www.usdoj.gov/usao/mow/news2008/cox.settlement.htm
• $53 million from Pratt & Whitney, a division of United Technologies Corporation, and PCC Airfoils LLC, a subsidiary of Precision Castparts Corporation, to resolve allegations that the companies knowingly submitted false claims for defective turbine blades purchased by the Air Force to retrofit the F100-PW-220 engines found in F-16 and F-15 aircraft. The settlement includes corrective action to replace defective blades and inspection of potentially serviceable blades to ensure their integrity. The case was pursued as part of a National Procurement Fraud Initiative launched in October 2006, to promote the early detection, identification, prevention and prosecution of procurement fraud.
For the original press release, see:
http://www.usdoj.gov/opa/pr/2008/August/08-civ-675.html
• $26 million from St. Joseph’s Hospital of Atlanta to resolve allegations that the hospital falsely claimed Medicare reimbursement for inpatient admissions that were, in fact, less costly outpatient visits. A registered nurse, formerly employed by the hospital, initiated suit under the False Claims Act’s qui tam provisions. The complaint alleged that the hospital improperly billed for short inpatient admissions, usually of one day or less, when the service should have been billed as an outpatient "observation" or emergency room visit. Medicare reimburses hospitals a higher rate for inpatient admissions than it does for observation care or emergency room visits. The nurse who triggered the investigation received $4.94 million as her share of the recovery. St. Joseph’s entered into a Corporate Integrity Agreement with the Inspector General of HHS in conjunction with the settlement, to ensure future compliance.
For the original press release, see:
http://www.usdoj.gov/usao/gan/press/2007/12-21-07.pdf
• $23.2 million from Bechtel Infrastructure Corp. and PB Americas Inc. to settle allegations of false claims for federal highway funds in connection with the firms’ failure to provide adequate management and quality assurance services during the construction of the Central Artery Tunnel, known as the Big Dig, in Boston. The recovery, part of a $458 million settlement of state and federal claims, resolved parts of a qui tam lawsuit, a related federal investigation and additional claims that Bechtel and PB Americas violated federal and state criminal and civil laws in connection with their services on the Big Dig. In addition to the federal recovery, the companies paid $40 million in state claims and $335 million into a state warranty fund for future repairs to the Big Dig. The private citizen who filed the suit received $54,000 and $96,000 as his share of the federal and state recoveries, respectively.
For the original press release, see:
http://www.usdoj.gov/opa/pr/2008/January/08_crt_048.html
http://boston.fbi.gov/dojpressrel/pressrel08/govtclaimsettlement012308.htm
• $21.1 million from CVS Caremark Corp. to settle claims that from 2000-2006, the company illegally switched patients from the tablet version of the drug Ranitidine (generic Zantac) to a more expensive capsule version for the sole purpose of increasing Medicaid reimbursement. For example, CVS pharmacies in Illinois would charge Medicaid $79.80 for 60 Ranitidine capsules, rather than $17.10 for the tablets prescribed, increasing reimbursement by $62.70 on a single prescription. CVS Caremark is headquartered in Rhode Island and operates more than 6,000 pharmacies nationwide. The settlement resolves qui tam claims under federal and state false claims statutes. In addition to the federal recovery, CVS Caremark paid $15.6 million to 23 states and the District of Columbia. The qui tam plaintiff received $4.3 million as his share of the federal and state settlements. CVS Caremark also entered into a Corporate Integrity Agreement with the Inspector General of HHS to ensure future compliance.
For the original press release, see:
http://www.usdoj.gov/opa/pr/2008/March/08_crt_214.html
Posted by Finch McCranie, LLP
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