U.S. Department of Justice 2018 False Claims Act Statistics -- not a banner year for DOJ or Relators

Dear Readers:

Happy holidays and best wishes to you for 2019.

Just in time for Christmas, the Civil Division of the U.S. Department of Justice ("DOJ") released its 2018 annual statistics for False Claims Act ("FCA") filings and cases for fiscal year 2018 (10/1/17 - 9/30/18). The DOJ's press release highlights DOJ settlements and recoveries, and I will not repeat them here. Rather, as I have done for the last several years, I wish to focus on a few of the highlights revealed by the statistics.

2018 was not a banner year for DOJ and FCA cases. DOJ "obtained" $2.8 billion "in settlements and judgments" from civil cases involving fraud and false claims against the government, and of that amount, over $2.1 billion resulted from qui tams. That’s the lowest amount “obtained” since 2009, when DOJ “only” recovered $2.4 billion.

2018 was also not a banner year for qui tam relators who recovered “only” $301 million in relator share awards, down 37% from last year. This was the lowest amount recovered by relators in any single year since 2009.

767 FCA cases were filed in 2018, down from 825 in 2017 and the second lowest year for FCA filings since 2011. Last year, DOJ filed 122 "non-qui tam" or direct-filed cases and qui tams accounted for 645 matters.  DOJ does not say in which of the 645 cases it has intervened, declined, or is still “investigating.” Note: DOJ apparently revised 2017’s statistics: last year it published statistics showing 125/674 direct filed and qui tam matters and this year’s statistics now show 145/680 direct filed and qui tam matters for 2017. 

Healthcare related cases continue to predominate (almost 69%) all FCA cases filed: 506 healthcare FCA cases filed and $2.5 billion “obtained.” Direct-filed healthcare cases continued to be up at 60, tied with 2008, for the second most number of direct filed cases in a year since 1987. The record is 70 in 2016. Recoveries in direct filed FCA cases were up dramatically to $568 million, up from $32 million in 2017 and the third best year since 1987. A large portion of the healthcare FCA recoveries (almost 59%) is attributable to five cases: $625 million paid by AmerisourceBergen Corp., $210 million paid by United Therapeutics Corp., $270 million by HealthCare Partners Holdings LLC, $216 million from Health Management Associates, and $84.5 million by William Beaumont Hospital.

The "other" category of FCA cases accounted for almost 28% of all FCA cases filed in 2018.  That is down from 225 last year and is the lowest overall since 2010 when 211 cases were filed.  The big news here is that recoveries were only $259 million, a dramatic drop from the $106 billion last year and the lowest since 2010.  Relator shares, not surprisingly, dropped as well: $14.9 million, which is down 78% from the prior year and is the worst year for relators in this category since 2008.

Department of Defense FCA cases continued to be small: 47 or 6% of all FCA cases, and they accounted for $107 million recovered.

A few observations about 2018:

• Relator generated qui tams continue to hold strong in healthcare where 446 qui tams were filed. 2018 was the fifth best year since 2010. Relator recoveries in declined healthcare cases dropped from $445 million in 2017 to $80 million in 2018, with relator share awards in declined cases falling as well: $123 million in 2017 to $22 million in 2018. The $266 million in relator share awards in healthcare cases overall was the lowest since 2010.
• The relator share awards in the “other” category (non HHS, non DOD) fell dramatically from $77 million in 2017 to $20.7 million in 2018.  That is the lowest amount collected in this category since 2008.  
• Of the $2.8 billion “obtained,” DOJ does not tell us how much it actually recovered in cash as opposed to "judgments” in 2018 or any other year.  For example, DOJ cites as an example a “judgment totaling more than $114 million” that it obtained against three individuals that allegedly paid kickbacks to two labs.  However, the title of its press release proclaims that it “recovered” $2.8 billion. 
• DOJ’s press release heralded its commitment to “holding individuals accountable” in FCA cases.  Several examples are cited, including DOJ’s FCA settlement with Lance Armstrong who agreed to pay $5 million.  Given where the government started in that case with its demands, however, that settlement effectively was a win for Armstrong. With the new revisions to the Yates policy, it will be interesting to see how that affects DOJ’s efforts to hold individuals accountable going forward.

Overall, a good year for DOJ direct filed cases against healthcare defendants, and a bit of a decline in all other areas. 

Finally, a plea to DOJ and U.S. Attorneys:  when are you going to release the FCA statistics for each individual U.S. Attorney Office? And, why not provide a breakdown of all FCA settlements and judgments “obtained” for each district?

A. Brian Albritton

December 26, 2018

Maybe That Wasn’t Such a Good Idea After All – DOJ takes a “common sense” approach in applying Yates Policy in civil cases

Dear Readers:

In June 2016, I reported how the U.S. Department of Justice (DOJ) planned on implementing its Yates policy of stressing the accountability of corporate executives and employees in False Claims Act (FCA) cases. In FCA investigations of corporate wrongdoing, DOJ’s Yates policy instructed its attorneys to “focus on both the company and individuals who may be responsible for bad conduct” and, charged its attorneys in any investigation of corporate misconduct to proceed “in tandem” with an inquiry into individual misconduct. Indeed, DOJ stated that settlements of FCA claims with corporations will not end DOJ’s “inquiry into whether and which individuals will be pursued.” DOJ went so far as to claim that it was “threshold requirement” for any corporate defendant seeking “credit” for its “cooperation” in settling a FCA case to “disclose all facts related to individuals involved in the wrongdoing.” (emphasis added).

As with many of its initiatives, DOJ’s Yates policy sounded good in theory: pursue every avenue of corporate and individual civil liability. I predicted, however, that as a result of the new focus on individual accountability, “FCA investigations and cases are likely to become more complicated.” In fact, I wondered if “DOJ and U.S. Attorneys will follow through in promoting this policy of individual accountability given that FCA investigations and cases often move quite slowly and this policy will require more time and substantial resources to enforce.” And, I was right.

Two years later, Deputy Attorney General Rod Rosenstein (“Rosenstein”) announced “common sense reforms” in applying the Yates policy stressing individual accountability in civil cases. “Civil cases,” Rosenstein pointed out, “are different” than criminal cases.  The “primary goal of civil affirmative cases,” such as FCA cases, are to “recover money,” and as a result DOJ needs to use its resources “efficiently.” To that end, Rosenstein observed that the “all or nothing approach to [awarding] cooperation” for civil cases was “counterproductive.” “[O]ur attorneys,” Rosenstein explained, “need flexibility to accept settlements that remedy the harm and deter future violations, so they can move on to other important cases.” In a seldom seen acknowledgement by DOJ of how things should work in the real world, Rosenstein noted that “[o]ur civil litigators simply cannot take the time to pursue civil cases against every individual employee who may be liable for misconduct and we cannot afford to delay corporate resolutions because a bureaucratic rule suggests that companies need to continue investigating until they identify all involved employees and reach an agreement with the government about their roles.”

So what does this mean? In part, the revised Yates policy is intended to restore “some of the discretion that [DOJ] civil attorneys traditionally exercised” though with “supervisory review,” of course. Also, in part, it means that companies no longer need to cooperate to the Nth degree in order to obtain any credit for their cooperation. To be sure, the gold standard for obtaining “maximum credit” remains that a corporate defendant must “identify every individual . . . substantially involved in or responsible for the misconduct.” But, whereas that was the requirement for a corporate defendant to receive any credit under the previous Yates policy, now DOJ counsel may award some credit as long as a “company honestly did meaningfully assist the government’s investigation.” Of course, the other extreme from the gold standard for which no credit will be awarded are companies who seek to “conceal wrongdoing by senior officials” or who fail to “act in good faith.” 

Rosenstein provided an example of how this new policy might be applied in an FCA case. A defendant who made a “voluntary disclosure” to DOJ and provided “valuable assistance” is entitled to “some credit even if the company is unwilling to stipulate about which non-managerial employees are culpable or . . . to identify every individual who might face civil liability in theory, but in reality would not be sued personally.”

Again, in an uncharacteristic admission as to how things really work at U.S. Attorney’s offices, Rosenstein acknowledged that the “civil policy was not strictly enforced in many cases” and that as a result he prefers “realistic internal guidance.”

Finally, DOJ’s new pragmatism endorses considering “an individual’s ability to pay in deciding whether to pursue a civil judgment.” DOJ does not want its “attorneys to spend time pursuing civil litigation that is unlikely to yield any benefit; not while other worthy cases are competing for [its] attention.” Translating this for the defendant, being broke really can be a benefit when the government is trying to determine whether to pursue FCA liability against your individual client.

Rosenstein is to be commended for this change which takes into account -- for once – the “practical implications of [DOJ] policies” and whether a policy actually “inhibit[s]” or promotes DOJ’s goals.  His enthusiasm for such a change of policy, I suspect, comes from serving as a U.S. Attorney in a medium sized district (Maryland) over many years.  DOJ priorities, mandates, and initiatives frequently enjoin U.S. Attorneys to investigate every last detail or person who could possibly be responsible, even on the civil side.  Being 100% faithful to the letter and spirit of such mandates, as I am sure Rosenstein experienced, is frequently an impossible task, if your goal is to keep pace with the pressing number of cases, criminal and civil, that continually come before a U.S. Attorney.  “Common sense” policies that restore discretion to line assistants and that promote realistic goals in FCA cases are long overdue.

A. Brian Albritton

December 18, 2018

Highlights of U.S. Department of Justice 2017 False Claims Act Satistics

Dear Readers:

Happy New Year. 

As we come to the close of 2017, the Civil Division of the U.S. Department of Justice ("DOJ") recently issued its 2017 annual statistics for False Claims Act ("FCA") cases filed and settled in fiscal year 2017 (10/1/16 - 9/30/17). The DOJ's press release highlights many of the Department's achievements (which I will not repeat here). I wanted to take a few moments to focus further on what DOJ's statistics reveal.

The DOJ publishes yearly statistics for FCA cases (i) overall ("the overview"); (ii) Department of Defense related cases; (iii) Department of Health and Human Services (healthcare) related cases; and (iv) all "other" FCA cases. DOJ "obtained"  --that does not mean collected -- $3.7 billion in "in settlements and judgments from civil cases involving fraud and false claims against the government." DOJ does not say how much it actually netted in cash as opposed to "judgments."  

As shown in its "overall" statistics, 799 False Claim Act cases were filed in 2017: roughly 50 cases less than last year but more than 2015. Generally, though, the total number of cases filed has been generally consistent for several years. In 2017, DOJ filed 125 "non-qui tam" or direct-filed cases and qui tams accounted for 674 matters. Of these 674 cases, DOJ does not say in which it has intervened, declined, or is still considering what to do nor does it tell us in which districts they were filed.  

Healthcare/HHS cases predominated in 2017: 544 cases, almost 68% of all FCA cases filed, and most of these were qui tams. 491 or almost 61% of all FCA cases were health care qui tams. In direct-filed healthcare cases, this was DOJ's third highest number of cases filed ever, and for qui tams, it was the second best year --surpassed only by 2016's 503 qui tams filed.

As it has for many years, the "other" category of FCA cases continues to have the second most number of FCA cases: 208 or 26%, and of these, 155 were qui tams, which is the lowest number of "other" qui tams filed since 2010.

Department of Defense ("DOD") related filings continued to be small: 47 or 5.8% of all FCA cases. Of note: relators filed only 28 DOD related qui tams, which is the smallest number since 1988. DOJ direct-filed 19 DOD-FCA cases, which is the most since 2011  --up from 9 in 2016 and 7 in 2015.

Of course, we have no idea if any of these newly filed cases were resolved or dismissed, as DOJ purportedly says it may do for qui tam cases lacking merit.

Turning to the settlement/judgments DOJ collected in 2017, a few observations:

• Nearly $428 million was collected in FCA cases where DOJ declined to intervene. That is the second highest amount collected in declined cases since stats were kept. 2015's $512 million in declined case settlements is the best year.  Relators collected $43.593 million in relator share awards in these 2017 declined cases -- the third best year ever.

• Not surprisingly, a large portion of relators' success in declined cases was driven by healthcare settlements. Relators  collected $380 million in HHS/healthcare declined cases in 2017 and collected $32.5 in relator share awards  -- the second best year ever in both of these categories.  

• As with declined healthcare cases, relators had a successful year in declined cases in the "other" category, obtaining $45 million in settlements and $10.9 million in relator share awards: the third best year ever.

• These stats continue to bear out what many defense attorneys have been experiencing for some time: relators increasingly are willing to aggressively pursue cases when the government has declined to intervene.  

• The $265.5 million DOJ collected in overall direct-filed cases was the lowest amount it collected since 2013 and the third lowest year since 2004. Clearly, the reason for this is that DOJ collected only $32.6 million in direct-filed HHS/healthcare cases  -- down from $97.5 million in 2016. DOJ has not had such a poor collections year in this category since 1993.

• Overall,it should be no surprise that qui tam filings are strong overall and in healthcare cases. DOJ paid $349 million to relators in intervened cases overall last year, of which $250 million was paid in intervened healthcare cases.

DOJ stats continue to show that to generate False Claims Act cases the Department continues to rely heavily on relators and that huge awards in qui tams and declined cases continue to serve as as a powerful incentive to relators and their counsel to file FCA claims.  Since 1987, DOJ has paid relators $6.584 billion in relator share awards.

A. Brian Albritton

January 1, 2018

DOJ Criminal Division's "New Qui Tam Process" - Attempting to Share in the Civil Division's Success

Dear Readers:

Sorry to have been away so long.  There is much to catch up about. 

The recent remarks by Leslie R. Caldwell, Assistant Attorney General for the U.S. Department of Justice's (DOJ) Criminal Division, at the Taxpayers Against Fraud Education Fund Conference, about the "New Qui Tam Process" merit a closer examination than many other blogs or articles have provided. Upon closer examination, AAG Caldwell's invitation to Relators to bring their qui tam cases to the Criminal Division appears to be more an effort by the Criminal Division to share in the success of DOJ's Civil Division than a real effort to increase the criminal enforcement of health care fraud cases that have a parallel qui tam.

• First, let's be clear: AAG Caldwell is head of the Criminal Division. It is not at all clear what, if any, impact her remarks will have on the Civil Division at the Justice Department or the U.S. Attorneys' Offices throughout the country. I have not heard of complaints by the Civil Division or the U.S. Attorneys' Offices that they wish DOJ Criminal Division would do more or become more involved in qui tams. Rather, her announcement reflects a department that is seeking to share in the successes of the Civil Division.

• In appealing to Relator counsel, AAG Caldwell states, we "encourage you to reach out to criminal authorities in appropriate cases, even when you are discussing cases with civil authorities." All I can say is, Relator counsel beware! Involving the Criminal Division may slow a government decision on your qui tam case even more than the usual slow pace. Sharing information between DOJ's Criminal and Civil Divisions is often only a one way street: Civil gives to the Criminal Division and not vice versa. And, the agents and assistant U.S. Attorneys working those criminal investigations often slow the civil investigation by asking Civil to wait on the criminal investigation. In turn, defendants and probable criminal targets lawyer-up even more, assert the Fifth, and the civil investigation and any hoped for speedy qui tam recovery can grind to a halt.  

• So what does AAG Caldwell mean when by "appropriate cases"? She doesn't say. Since the Criminal Division's Fraud Section consists only of "100" lawyers and its Health Care Fraud Section only has "40" lawyers, there are not a whole lot of personnel to devote to the several hundred qui tam cases that are filed each year. Moreover, AAG Caldwell did not announce that the law enforcement agencies -- the people who actually investigate these cases such as the FBI, HHS-OIG, Postal, etc. -- have agreed to devote additional resources and manpower to investigating all these new qui tams. Without those additional investigative resources, it is hard for the Criminal Division or any U.S. Attorney to pursue complex white collar fraud cases requiring investigative expertise. So what is the "appropriate case"? Most likely, this will be an easy to investigate obvious case of wrong doing of a solvent corporation that can actually pay massive criminal fines -- probably like the Big Pharma cases.

• AAG Caldwell cites the example of the Medicare Fraud Strike Forces operating in several cities throughout the United States that are "hot spots" for Medicare fraud. These Strike Forces really have done a lot to focus on and successfully prosecute what the AAG refers to as the "worst offenders" and the "most pervasive fraud." Yet, based on the example of the Health Care Fraud Unit in the Miami Division of the U.S. Attorney's Office, these strike forces were never intended to take on the lengthy and sophisticated investigations seen in many civil qui tam cases. Rather, they were started to address the worst abuses in the health care industry, many of which could be found among durable medical equipment suppliers and home health care providers in Miami. In turn, at least initially, many of these abuses were uncovered by tracking huge statistical disparities that reflected fraudulent health care billings. In short, the Strike Forces are not really the model for increased qui tam/criminal cooperation and prosecution.

• AAG Caldwell announces that "executives at health care providers such as hospitals are also a high priority for us" -- woe to the executive who gets caught up in one of these investigations. When agencies make announcements like this, they often look far and wide to make cases to justify their public statements. In the face of invited public scrutiny and pressure, prosecutors and agents can sometimes make really bad judgements, prosecuting cases that never should have been brought or treating defendants far more harshly than they deserve. Hopefully, DOJ's zeal to prosecute executives won't affect their prosecutorial judgment.

• Finally, I applaud AAG Caldwell's wish to prosecute more health care fraud cases, and she rightfully looks to the whistleblowers and other insiders who often are best positioned to come forward with evidence. Yet, given the few resources that DOJ's Criminal Division really has in attorneys and agents and the already vigorous enforcement of health care cases, both civil and criminal, by the U.S. Attorneys' Offices throughout the country, I do not see how AAG Caldwell's invitation to Relators' counsel will result in more parallel criminal prosecutions or better results for Relator counsel.

A. Brian Albritton

October 13, 2014

DOJ Announces Nearly $5 Billion in False Claims Act Recoveries for FY 2012

The U.S. Department of Justice announced yesterday that it had secured $4.9 billion in settlements and judgments in civil cases involving fraud against the federal government for fiscal year 2012. Highlights of DOJ's announcement include:

• $4.9 billion for 2012 is a "record recovery" for a single year, eclipsing the previous record by more than $1.7 billion.
• Total recoveries under the False Claims Act since January 2009, when President Obama took office, is $13.3 billion.
• 647 qui tam actions were filed in 2012.
• Of the $4.9 billion in recoveries, $3.3 billion resulted from suits filed by qui tam relators.
• Of the $4.9 billion, health care fraud recoveries accounted for more than $3 billion and housing and mortgage fraud recoveries accounted for $1.4 billion.
• Enforcement actions against the pharmaceutical and medical device industry were the source of the largest recoveries, such as the $1.5 billion paid by GlaxoSmithKline and $441 million paid by Merck.
• The mortgage fraud recoveries included a $900 million settlement with five mortgage companies to address mortgage loan servicing and foreclosure abuses.
• Procurement fraud recoveries totaled $427 million, bringing the total of procurement fraud recoveries to $1.7 billion since January 2009.
• Nearly 8,500 qui tam suits have been filed since 1986; 2,200 were filed since January 2009.

As Acting Associate Attorney General Tony West stated in announcing these False Claims Act recoveries, the "recovery of taxpayer dollars" is "a high enforcement priority" that has been brought about in part by the "aggressive use of [the False Claims Act]. . . . . The False Claims Act is, quite simply, the most powerful tool that we have to deter and redress fraud." The statements made by Associate Attorney General West and Principal Deputy Assistant Attorney General Delery in announcing these recoveries can be found here and here.

A. Brian Albritton
December 5, 2012

False Claims Act News from the AHLA Annual Meeting

Joe Carlson of ModernHealthcare.com recently reported on some of the news about the False Claims Act and qui tams that came up at the jointly held annual conference of the American Health Lawyers Association and the Health Care Compliance Association: "Shift Seen in False Claims Whistle-Blower Suits," 10/2/2012.

According to relator counsel and HHS speakers at the conference, relators increasingly are continuing to litigate qui tam suits even when the government declines to intervene.

Dan Anderson, deputy director of Commercial Litigation for DOJ's Civil Division, told the conference that DOJ has been "roundly criticized for taking too long" to make intervention decisions in healthcare cases and that it will now try to make an intervention decision "within nine months."

Anderson went on, reports Carlson, to note that the "hospital industry has reason to be concerned now . . . And there is reason to think there will be an uptick in the number of qui tam cases that are filed . . . We had a record-setting year last year, and this year we are going to blow right past that."


A. Brian Albritton
October 7, 2012

False Claims Act Investigations of Non-Evidence Based ICD Procedures

News has been coming out about what is reported to be the U.S. Department of Justice's latest False Claims Act initiative:  "the national false claims investigation of Medicare billing for implantable cardiac defibrillator (ICD) procedures."  According to the National Heart Lung and Blood Institute, ICDs are small devices implanted  in the chest or abdomen that are used to treat irregular heart beats by using electrical pulses or shocks to bring the heart back to a normal rhythm.  A study published early last year by JAMA, the Journal of the American Medical Association, examined an enormous patient sample where implantable cardiac defibrillators were used.  Out of over 100,000 patients who received such devices, the article found that 22.5% of those patients received ICD devices even though they did not meet "evidence-based criteria for implantation:"  what the authors called "non-evidence based" ICD procedures.  Patients who  received non-evidence based ICDs, the study found, had a significantly higher rate of in-hospital death and complications.

In an article reprinted at www.Forbes.com (and apparently several other cites as well), "Feds Turn corner in ICD Investigation; Hospital Liability in Divided Into Categories," its author, Larry Husten, writes that DOJ "is apparently about to take a big step forward in its national false claims investigation of Medicare billing for implantable cardiac defibrillator (ICD) procedures" and whether such ICD procedures are medically necessary.  "DOJ, reports Husten, "now has a blueprint for determining hospital liability" under the False Claims Act.  According to Husten, Medicare will normally reimburse the use of ICDs, but a number of the "covered indications" for when such devices may be used have "timing requirements."  "Medicare," writes Husten, "won’t pay for a patient’s ICD implant within 40 days of an acute myocardial infarction (MI) or within three months of a coronary artery bypass graft (CABG) or percutaneous transluminal coronary angioplasty (PTCA). . . . . The idea is to first give patients time to recover from the heart attack to determine whether the patient really is at elevated risk for cardiac arrest."  Husten writes that there are exceptions to when such devices can be implanted notwithstanding these timing requirements; however, he quotes an anonymous source who says that "it doesn’t look like the government will go easy when hospitals billed in violation of the timing requirement in other circumstances."

The press attention to this new initiative appears to be prompted in part by the  Hospital Corporation of America ("HCA")  recent disclosure that it provided information to the Civil Division of the U.S. Attorney's Office for the Southern District of Florida about the "the medical necessity of interventional cardiology services provided at about 10 HCA hospitals, mostly in Florida."

In a recent article, "Hospitals face hefty False Claims penalties over defibrillator cases," on the investigation of ICD usage by Joe Carlson of Modern Healthcare.com, he writes that for the "past two years" DOJ has been conducting a "patient-by-patient investigation into thousands of implantable cardioverter defibrillators . . . for Medicare beneficiaries between 2003 and 2010 at hospitals across the country. . . . .  More than 100 U.S. hospitals are believed to have received requests for records on their implanted defibrillators, with the first round going out in March 2010."

I think there has been some question as to whether DOJ can really pursue such large scale "medical necessity cases" as involved here with ICDs.  Carlson, for example quotes one attorney who rightly points out that "the government would have to be prepared to show that a hospital acted with intent to defraud, or with deliberate indifference or reckless disregard for the CMS rules, in order for False Claims penalties to come into play."  In certain False Claims Act cases based on alleged statistical abnormalities, however, I have not found that the government was prepared to show either fraud or deliberative indifference.  Rather, the government draws the inference that fraud or deliberate indifference occurred based on the statistical abnormality alone, and hospitals faced with the prospect of a False Claims Act suit, often settle rather than fight the issue of medical necessity.   For example, in the pneumonia up-coding cases, hospitals were accused of overusing higher reimbursable diagnostic codes for a certain type of pneumonia.  Rather than fight these cases, hospitals settled in droves, even in many instances where there was substantial evidence to support their use of such codes.  Another example can be found in the recent DOJ kyphoplasty settlements.  In those cases, DOJ accused the hospitals of admitting  too many kyphoplasty patients for a one day stay and argued that the patients should have been observed instead.  Here again, hospitals settled, often protesting their innocence.    My point is medical necessity cases are much easier to bring when there is a gross or large statistical aberration in the procedure at issue by the hospital or medical provider:  the government does not need evidence of fraud or recklessness beyond the aberration itself in order to drive settlements.

A. Brian Albritton
August 19, 2012

GlaxoSmithKline to Pay Largest Health Care Fraud Settlement in US History

In the largest health care fraud settlement in U.S. history, the U.S. Department of Justice announced today that "global health care giant" GlaxoSmithKline LLC ("GSK") agreed to plead guilty and to pay $3 billion to resolve "its criminal and civil liability arising from the company’s unlawful promotion of certain prescription drugs, its failure to report certain safety data, and its civil liability for alleged false price reporting practices."

Deputy Attorney General James Cole described the plea and settlement with GSK as follows:  "GSK will plead guilty to criminal charges and pay $1 billion in criminal fines and forfeitures for illegally marketing and promoting the drugs Paxil and Wellbutrin for uses not approved by the FDA – including the treatment of children for depression, and the treatment of other patients for ailments ranging from obesity, to anxiety, to addiction and ADHD – and for failing to report important clinical data about the drug Avandia to the Food and Drug Administration.  GSK will pay an additional $2 billion to resolve civil allegations that it caused false claims to be submitted to federal health care programs for these and other drugs as a result of the company’s illegal promotional practices and payments to physicians.  This settlement also resolves a civil investigation of the company’s alleged underpayment of rebates that were required under the Medicaid Drug Rebate Program."

As with previous criminal and False Claim Act settlements with Big Pharma discussed in the blog, GSK's conduct as detailed in the plea and the allegations of the False Claim Act complaint is disturbing and reprehensible.  For example, the factual allegations of the Information detail GSK's marketing of the prescription drug Paxil for use in treating depression in children and adolescents even though the drug had not been found to have any efficacy for such a population. 

Paxil had been approved by the FDA for the treatment of depression in adults, and it was one of the top 10 selling drugs in the U.S., with sales surpassing $1.8 billion a year in 2001-2002.  Paxil, however, was never approved by the FDA "for any purpose" in the treatment of children and adolescents.  In fact, GSK conducted three placebo-controlled studies in the safety and efficacy of using Paxil to treat depression in children and adolescents, and those studies failed to demonstrate any "efficacy" for the treatment of this population between the "patients in the study who received the drug being studied and patients in the study who received a placebo."  After these studies, a GSK contractor hired to write an article about one of the studies misrepresented the study's findings as being favorable for the treatment of children and adolescents with Paxil, going so far as to say that "the findings of this study provide evidence of the efficacy and safety of [Paxil] in the treatment of adolescent depression."

With the article in hand, GSK then forwarded it to its 1900 sales representatives who sold Paxil with a cover letter stating, "Paxil demonstrates REMARKABLE efficacy and safety in the treatment of adolescent depression." This was just the beginning of GSK's marketing of Paxil.  In addition, the Information reflects that GSK created a "150 person neuroscience specialty sales force to promote Paxil to psychiatrists."  The Company also promoted Paxil's use in adolescents at Paxil "Forum Events," dinner programs, lunch programs, and spa programs. GSK had their sales personnel target those physicians --including physicians who only treated patients under age 18-- who prescribed the most antidepressants and provide free samples of Paxil in the hope that they would shift their patients to using Paxil.

GSK, however, did not inform its sales personnel that the FDA had not approved Paxil for the treatment of children or adolescents, and it continued to conceal that its studies did not support its claims for Paxil's efficacy in this population.  In fact, the FDA later recommended that Paxil "not be used to treat depression in patients under 18" and later recognized that antidepressants, such as Paxil, "increased the risk of suicidal thinking and behavior in . . . patients under age 18." 

Paxil was not the only drug that GSK unlawfully promoted:  it unlawfully promoted Wellbutrin and Avandia as well.  As a result of the criminal plea, GSK will pay fines and forfeiture totaling $1 billion.  The "civil settlements" resolve claims relating to these three drugs and others and will require GSK to pay $2 billion. 

One of the civil settlements reported that relators had filed 4 qui tams against GSK and that the U.S. had intervened in them in 2011.  The settlements explicitly did not address the whether any relator was entitled to any share of the proceeds or whether in fact they had filed valid qui tams.

DOJ has posted the  key documents in the criminal and civil matters, and they can be found here.

A. Brian Albritton
July 2, 2012

Ninth National Institute on the Civil False Claims Act and Qui Tam Enforcement

Last week, I attended the ABA's National Institute on Civil False Claims Act and Qui Tam Enforcement in Washington, D.C..  It was well attended and a worthwhile event overall.  A few observations:

• The conference was attended by a great mix of people:  lots of plaintiff's counsel (a/k/a relators' counsel), defense counsel, a number of attorneys from state attorneys' general or state Medicaid Fraud Control Units, and a number of federal investigators and counsel from federal agencies.  Unlike conferences such as the ABA's White Collar Crime which are huge with nearly a 1,000 attendees, this conference is still quite small (I would estimate around 200+) and there was a very collegial atmosphere.

•  As with the attendees, so too with the panels as they were always had a mix of defense counsel, relators' counsel, and various government representatives usually from the a U.S. Attorney's Office or Department of Justice.  Most panels provided a very broad perspective.

• Joyce Branda, now Acting Deputy Attorney General for the Civil Division and chair of the first panel, noted that 600 False Claims Act/Qui Tam cases were being filed each year, 2/3 of them health care related, though she said that "other areas were developing."  Branda further observed that the government intervenes in 22% of qui tam cases and that percentage has "held steady over the years."

•  Dan Anderson, co-chair of the Institute and Deputy Director of the Commercial Litigation  Branch of DOJ's Civil Division, told the conference "we are doing much more with much less.  We are doing the best we can  and are stretched very thin."

• More than one speaker discussed the increased use  of Civil Investigative Demands ("CIDs"):  a very effective investigative tool that allows the government prior to intervening in a qui tam case to conduct depositions and obtain interrogatories and the production of documents.  Prior to the recent amendments of the False Claims Act, the Attorney General had to personally approve the issuance of a CID, but their use has now been liberalized and they are now being issued by DOJ-Civil as well as U.S. Attorneys.

•  29 states have passed False Claims Act statutes.  The panel on State Qui Tam Enforcement was one of the best.

•  John Boese, conference co-chair and author of a leading treatise on the False Claims Act, observed rather critically that the False Claims Act has become not just a statute to sanction those making false claims, but with the False Claims Act "jurisprudence being dominated by false certification claims," it is increasingly used as an "enforcement mechanism" for compelling compliance with governmental regulations.  He gave the example of a bid protest.  In the past, he explained, a losing bidder might challenge the legitimacy of a competitor's bid; now, they file an FCA/qui tam claim.

• Panelist Peter Hutt II of Akin Gump noted that  non-intervened qui tam cases impose very real and substantial costs on the businesses as a result of the discovery that stems from such suits.  Invited to say what he would change about the False Claims Act, he argued that there was too many meritless qui tam suits and that such suits resulted from the "over-incentive" of damages presently allowed under the FCA.  To discourage meritless suits, Hutt argued that real fee shifting should be introduced and that it should apply not just to the relator but to a relator's counsel as well.  He also argued for a cap on relators' recoveries. Hutt's comments about meritless suits brought an interesting reaction from other panelists. The relators' counsel on the panel did not believe meritless qui cases were a problem, but they also discussed that they carefully review potential qui tam cases and only file a handful of the cases they review.  Speaking for herself, an Assistant U.S. Attorney from the Northern District of California who handles FCA/qui tam cases argued that if qui tam cases had been investigated and found to be without merit, then they should be dismissed by the government as permitted by the statute --though she did not cite any instances of that occurring.  Boese argued that since dismissals of qui tam required hearings and that such hearings had often been hotly contested by relators, DOJ rarely exercised its authority to dismiss.

A. Brian Albritton
June 10, 2012

DOJ Publishes Summary of Statistics on False Claims Act and Qui Tams

The Civil Division of the U.S. Department of Justice has published a summary of statistics relating to the False Claims Act and qui tams for the period of 1987-2011.  They are quite interesting, and include the following:

1.  A chart showing the False Claims Act matters broken down between non qui tam and qui tam; the totals for each year for settlements and judgments for qui tam/non qui tam; for qui tams, along with a break down of the total amounts where the government intervened in the qui tam and the total settlements where the government declined to intervene; and the non qui tam total settlements; and a yearly summary of the relator share awards, broken down by whether the government intervened and where it declined.

2.  There are three other charts which break out the False Claims Act/Qui Tams numbers, settlement and judgments, and relator share awards by client agent:  (a) a chart for Health and Human Services showing the numbers relating to health care fraud; (b) a chart for Department of Defense; and (c) "other" relating to False Claims Act/Qui Tams unrelated to Health & Human Services and Department of Defense.

As has been reported elsewhere, 2011 was a good year for False Claims Act cases:  there were over 762 new matters (referrals, investigations, and qui tam actions); total settlements of $3,029 billion, of which almost $2.8 billion related to qui tams.  Relators share awards totaled $532 million.

Department of Justice and Health & Human Services Officials Speak Out About Record False Claims Act Recoveries and Cutting Waste in Federal Spending

False Claims Act recoveries, the government's promise of more enforcement, and the crucial role played by whistleblowers in enforcing the False Claims Act have been making the news these last ten days. 

First, the departing head of the Centers for Medicare and Medicaid Services, Dr. Donald Berwick, told the New York Times in a December 3rd interview that "20-30%" of all health care spending is "waste."  Dr. Berwick listed "five reasons" for the “extremely high level of waste” in health care spending:  "overtreatment of patients, the failure to coordinate care, the administrative complexity of the health care system, burdensome rules and fraud."  Overtreatment of patients can be cast as unnecessary treatment, akin to fraud, and can give rise to claims under the False Claims Act.  Indeed, Dr. Berwick observed that "Much is done that does not help patients at all, and many physicians know it.”

Second, Deputy Attorney General James Cole recently spoke at a December 13th press conference on the subject of cutting waste in federal spending.   The Department of Justice, Cole noted, "recovered over $5.6 billion in criminal and civil fraud proceeds," which is "more than has ever been recovered in a single year in the history of the Department of Justice."  The $5.6 billion in fraud recoveries included everything from "healthcare fraud to grant fraud, from mortgage fraud to procurement fraud."  Fraud recoveries, Cole explained, occurred across the nation:  "Between fiscal years 2008 and 2011, the Department has doubled fraud recoveries in twenty-one states, as well as the District of Columbia and the Virgin Islands."   Health care fraud enforcement not only resulted in significant recoveries  --$900 million from 8 drug companies alone-- but generated revenue as well:  Cole noted that "[f]or every dollar Congress has provided for health care enforcement over the past three years, we have recovered nearly seven."

Finally, today Assistant Attorney General Tony West of the Department of Justice, Civil Division, announced  $3 billion in settlements and judgments in civil cases involving fraud against the government in the fiscal year ending Sept. 30, 2011.   Of the$3 billion total, West explained, $2.8 billion "came from suits filed under the qui tam, or whistleblower, provisions of the False Claims Act."  West went on to state that in the last 25 years "whistle blowers have filed more than 7,800 actions under the qui tam provisions" and  "qui tam suits hit a peak of 638 this past year, after hovering in the 300s and low 400s for much of the decade."  Of the $3 billion recovered, nearly $2.2 billion came from in civil claims against the pharmaceutical industry.

In short, the message is clear: the federal government will continue to target waste in federal spending, with special enforcement devoted to health care spending.  Whistleblowers and the qui tam suits they file will continue to play a crucial role in investigating fraud and obtaining recoveries against those who commit fraud against the federal government.  We can expect False Claims Act suits to continue to grow.