Whistleblower Law Blog

Topic: False Claims Act (FCA)

Federal District Court Refuses To Dismiss Case Based on the Public Disclosure Bar When the Government Has Opposed Dismissal On that Basis

In United States ex rel. Karin Berntsen v. Prime Healthcare Services, Inc. et al., the U.S. District Court for the Central District of California denied Prime Healthcare’s motion to dismiss, ruling that a False Claims Act qui tam action cannot be dismissed under the “public disclosure bar” if the Government has opposed dismissal on that basis.

The False Claims Act prevents a private party from bring a qui tam action where the alleged fraud is already publicly known (this is often referred to as the public disclosure bar).  In this case, Karin Berntsen, the relator, alleged that she was the original source of the information underlying her qui tam complaint and that she made these disclosures to the government before filing her lawsuit.  But Prime Healthcare and the other defendants moved to dismiss, in part, because they claimed that Berntsen was not the original source.  In support of their motion, they identified a number of publicly-available reports and articles regarding their allegedly fraudulent practices.

The relator argued that because the Government opposed the dismissal of the complaint on the basis of the public disclosure bar, the district court was barred from dismissing the complaint on that basis.  The court agreed with the relator.  The court also acknowledged a lack of legal authority on the issue and reviewed Congress’s intent in creating the public disclosure bar: to strike a balance between encouraging private persons to root out fraud and stifling parasitic lawsuits.  Since the Government, through its opposition to the dismissal, had indicated that it supported the relator’s qui tam action, the court found that it would be “illogical” for it to conclude that the relator’s action was parasitic, and thus allowed the relator’s qui tam action to proceed.

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Whistleblower Receives $1.2 Million in $6 Million Settlement of Qui Tam Action Against Caremark For Failing to Reimburse Medicaid for Drug Costs Covered by Both Medicaid and a Private Health Plan

The Department of Justice announced that Caremark, a pharmacy benefit management (PMB) company, will pay $6 million to settle allegations that it violated the False Claims Act; and the former Caremark employee who blew the whistle on the violations will receive $1.2 million from the settlement. Caremark allegedly knowingly failed to reimburse Medicaid for the cost of drugs for beneficiaries who were covered by both Medicaid and a private health plan. These patients are referred to as “dual eligible” and their private insurer or PMB must assume the cost of the prescription drugs rather than submit claims to Medicaid.

If Medicaid pays for the drugs when a private insurer or PMB should have assumed the cost, the private insurer or PMB must reimburse Medicaid. Caremark caused Medicaid to pay the drug costs when Caremark should have paid.

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Pennsylvania Pharmaceutical Company Agrees to Pay $56.5 Million to Settle Allegations It Engaged in Deceptive Marketing Practices

Pennsylvania-based pharmaceutical company, Shire Pharmaceuticals LLC, recently agreed to pay $56.5 million to resolve civil allegations that it violated the False Claims Act (FCA). Shire allegedly made false and misleading statements when marketing several drugs, including Adderall XR, the well-known drug used to treat attention deficit hyperactivity disorder (ADHD) in children and adults.

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DOJ Aggressively Pursues and Settles False Claims Actions Against Doctors and Clinical Labs for Kickbacks and Medically Unnecessary Testing

Over the past two years, the Department of Justice has announced several large settlements involving alleged violations by doctors and clinical laboratories of the False Claims Act and The Anti-Kickback Statute. Many clinical laboratories rely on referrals from physicians, hospitals, and other healthcare entities to obtain samples to examine –which is the crux of their business. However, as shown below, the relationships between clinical labs and physicians and other entities sometimes lead to unnecessary services, billing for more expensive services, and illegal kickback arrangements:

• In February 2013, Florida dermatologist Dr. Steven J. Wasserman, agreed to pay $26.1 million to resolve allegations that he violated the False Claims Act. The government alleged that Wasserman entered into an illegal kickback arrangement with a clinical laboratory and its owner, Dr. Jose Suarez Hoyos. Wasserman allegedly sent biopsy specimens for Medicare beneficiaries to the lab for testing and diagnosis; the lab then made it appear that Wasserman had performed diagnostic work. As part of the alleged kickback agreement, Wasserman substantially increased the number of skin biopsies he performed on Medicare patients, thus increasing referrals to the pathology lab.

• In August 2013, Bostwick Laboratories agreed to pay about $500,000 to resolve allegations it illegally paid physicians to induce them to enroll in a study sponsored by Bostwick. In October 2014, in a separate suit filed by a whistleblower against Bostwick, Bostwick agreed to pay $6.05 million to settle allegations that it made illegal payments to persuade physicians to use Bostwick’s services.

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Doctors’ Self-Referrals Triggered the False Claims Act, Judge Says

A federal judge held that physicians violated the False Claims Act when they made referrals to a hospital that used a radiation imaging company in which the doctors had financial interests.

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Cardiology Group Will Pay $1.3 Million to Settle Claims of Improper Referrals

The U.S. Department of Justice (DOJ) said it obtained a $1.3 million settlement of allegations that a cardiology practice violated the False Claims Act and the Stark Act by knowingly compensating its physicians based on the number of tests that the physicians referred.

The Stark Act prohibits a physician from referring Medicare patients for designated health services to an entity with which the physician has a financial relationship (unless an exception applies). The Stark Act does not permit a practice to compensate a physician based directly on the volume or value of the physician’s referrals for services not personally performed by the ordering physician.

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Third Circuit Sides With Whistleblowers in Split on FCA Pleading

A federal appeals court said that the False Claims Act (FCA) does not require whistleblowers to list “representative samples” of fraudulent transactions in order to proceed with a FCA claim, deepening a  judicial split that won’t be resolved until the U.S. Supreme Court weighs in.

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Sixth Circuit: Whistleblowers May Sue, Despite Arbitration Clause

A federal appeals court said two whistleblowers may sue their former employer for unlawful retaliation under the False Claims Act (FCA), despite having contracts that required arbitration of disputes — and despite a federal law that favors such arbitration requirements.

In U.S. ex rel. Paige v. BAE Systems Technology Solutions & Services, Inc., the U.S. Court of Appeals for the Sixth Circuit held that the FCA retaliation claims of Matt Paige and Jim Gammon were not related to their employment contracts — and therefore weren’t governed by the arbitration clause, which covered issues “arising from” those contracts.

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Whistleblower Nurse Reaps $15 Million Reward in Amedisys Fraud Settlement

The U.S. Department of Justice announced settlements with several healthcare companies accused of fraud — including a massive $150 million deal with Amedisys Inc. in which the government resolved seven lawsuits with the giant homecare provider, leading to more than $26 million in payouts to whistleblowers and a jackpot for U.S. taxpayers.

The largest whistleblower reward, more than $15 million, went to April Brown, an Alabama nurse and single mother who was fired by Amedisys after she questioned its Medicare billing practices.

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March Whistleblower Rewards Include $500,000 in Cargo Price-Fixing Case

The U.S. Department of Justice announced settlements in three large qui tam cases during March — including a price-fixing case where the whistleblower earned a half-million-dollar reward.

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