Insights About False Claim Act Cases and Qui Tams from Joseph “Jody” Hunt and Michael Granston from the U.S. Department of Justice at the Federal Bar Association’s 2020 Qui Tam Conference

Two key representatives of the U.S. Department of Justice - Joseph “Jody” Hunt, Assistant Attorney General for Civil Division, and Michael Granston, Deputy Assistant Attorney General for the Commercial Litigation Branch of the Civil Division – recently addressed the Federal Bar Association’s (FBA) National “Qui Tam” Conference, held on Feb. 27 and 28. Hunt and Granston provided insight as to DOJ’s priorities for False Claims Act (FCA) enforcement, application of the so-called “Granston Memo,” how defendant “cooperation” is evaluated and addressed a number of other topics of importance to FCA practitioners.

Hunt’s Remarks

Hunt began by reaffirming the importance of the FCA as the government’s primary civil tool for addressing fraud against the government and that FCA enforcement remains a “top priority” for DOJ. Hunt noted that DOJ had $62 billion in FCA recoveries and judgments since 1986, of which $45 billion resulted from qui tam suits. The past year, 2019, was another good year for qui tam filings. Hunt said 636 of the 782 FCA cases filed last year were qui tams. Most FCA enforcement continues to be in health care.

One notable fact that Hunt spoke about was the number of settlements and judgments that gave rise to nearly $3 billion dollar recovered in 2019: 213 settlements and judgments. According to Hunt, 2019 was the seventh year in which FCA settlements and judgments exceeded 200 for the year.

Addressing DOJ’s enforcement policies, Hunt listed three areas of focus in health care:

• Medicare Part C/Managed Care Organizations: Hunt said that “plans and providers” have been “taking advantage” of the Part C program by manipulating risk adjustments.

• Prevent fraud pertaining to electronic health records (“EHS”): Hunt mentioned the example of kickbacks paid to EHS providers that “subvert physician decision making.”

• Nursing home cases, especially those cases concerning unnecessary and/or substandard care: Hunt said such enforcement represented “no better use of resources to protect the most vulnerable.” He further cited to the DOJ’s “Elder Justice Initiative” which aimed at pursuing the nation's worse nursing homes. (On March 3, DOJ formally announced its “National Nursing Home Initiative.”)

Hunt along with several Conference speakers discussed the Granston Memo, now incorporated into the Department of Justice Manual at Section 4-4.111, and its enumerated factors that can prompt the government to dismiss a qui tam pursuant to 31 USC 3730(c)(2)(A). Granston Memo dismissals, Hunt explained, are a “small fraction” of the overall number of FCA cases. In the last two years, 45 cases were dismissed compared to 1,200 qui tams filed during this same period. The policy to dismiss qui tams as expressed in the memo will continue to be exercised “judiciously” he emphasized. Hunt made clear that while the government’s “potential burdens” of discovery in a qui tam are one factor in evaluating dismissal, “such burdens will not cause an otherwise meritorious case to be dismissed.”

Hunt further explained that DOJ will evaluate the merits of a qui tam and its impact on other important interests in light of the “statutes, regulations, and contracts” at issue. Here, Hunt appears to be saying that DOJ will evaluate the alleged violation of legal duties at issue in a qui tam in light of the black letter law and contracts, as opposed to non-controlling regulatory guidance – a position first expressed by DOJ in its 2018 “Brand Memo” and now codified in the Department of Justice Manual Section 1-20.100. Hunt noted that DOJ reserved the right to reassess an initial Granston decision against dismissal if “new facts” subsequently emerge during the course of the matter.

The Conference’s panel on “Dismissals” shed further light of the 45 Granston dismissals filed since July 2018. These 45 motions to dismiss qui tams were filed in 30 judicial districts: 12 cases related to pro se litigants; 14 cases related to repeat relators, and 10 cases were effectively voluntary dismissals since the motions to dismiss were not opposed. The 45 Granston motions to dismiss, one speaker noted, were not limited to qui tam cases filed in the last two years but applied to cases as far back as 2012. The result, the speaker explained, is that Granston motions to dismiss were filed in 45 instances out of roughly 6,000 qui tams filed during this period.

Hunt also discussed the merits of defendant “cooperation” in FCA investigations. He explained that a “range of actions may qualify for cooperation” and gave examples such as voluntarily making witnesses and documents available without a subpoena, improving corporate compliance and replacing offending corporate officers.

Granston’s Remarks

In contrast to Hunt’s prepared speech, Michael Granston made his remarks in the context of questions posed to him by DOJ attorney David Finkelstein, co-chair of the Qui Tam Conference. Granston spoke about the following:

• He stressed that application of the so called Granston factors only arises when the continuation of a qui tam is not in the public interest as opposed to the interest of the defendant.

• Addressing “factor 6,” of the Granston memo, which he referred to as the “cost/benefit evaluation” of a qui tam, Granston emphasized that for all “non de minimis” cases, “burden does not overcome [a meritorious case] under any circumstances.” Cost/benefit “is not a singular consideration.”

• Asked about whether the FCA has a “self-disclosure” plan similar to that of other agencies (such as HHS’ Self-Disclosure Protocol), Granston noted, without apology, that the FCA “has its own voluntary self disclosure” plan right in FCA statute itself which provides for “double damages” to those prospective defendants who disclose false claims to “responsible government officials” within 30 days of their discovery.
• Granston stressed that aside from settlement discounts attributable to “litigation risk,” defendants now have an “additional opportunity” to obtain a discount based on their “cooperation” with an FCA investigation.

• When asked if and when DOJ will “veto” the dismissals of qui tams that might otherwise be subject to dismissal under FCA’s public disclosure bar, 31 USC 3730(e)(4), Granston suggested that the government might do so when such qui tams “are in the public interest” or “in the government’s best interest.” Such a determination, he added, would “look beyond the merits of the case itself.”

• Explaining who, DOJ and/or US Attorneys, handle qui tams, Granston explained that DOJ handles cases where the damages are in excess of $10 million and cases below that would be delegated to the District. If I heard him correctly, Granston said that DOJ handles around 25% of qui tam filings, the US Attorneys handle 60%, and another 15% are done jointly. Granston also added that there are exceptions whereby DOJ will keep a case instead of delegating it.

• Speaking of the US Attorney Districts, Granston noted that qui tam cases are “much more evenly distributed” across districts. Only one District (which he did not identify) had more than 5% of the qui tams filed. He identified that top districts for qui tam filings as Middle District of Florida, Central District of California, Southern District of New York, District of Columbia, and Eastern District of Pennsylvania.

• Granston addressed the “policy on providing claims data” to relators in declined qui tams. Once declined, Granston explained, they treat relators and defendants as third parties and DOJ does not provide claims data to them. Rather, they are directed to the agency at issue to try to obtain claims data there, which that agency may decline to do. Granston stressed that in declined cases, the government is a “third party” as described in United States ex rel. Eisenstein v. City Of New York.

• As for “trends” beyond those identified by AAG Hunt, Granston identified (i) fraudulent schemes in telemedicine, such as those that are part of other schemes; (ii) non-compliance with trade restrictions and trade duties; (iii) using data analytics in Medicare to analyze claims data which helps DOJ to analyze the qui tam cases it receives.

• Granston noted that what is “falsity” remains a central question in FCA cases.

• The question arose regarding a party seeking a meeting with Michael Granston or other senior DOJ official overseeing FCA cases: what can one expect if they ask for a meeting? Granston stated that if you are trying to seek a meeting above the “case team” about a case, such meetings really should be directed to addressing the “broader legal and policy questions” posed by a case. By contrast, he added, case-specific fact issues are usually best addressed by the case team and not by “upper levels.” That said, the legal and/or policy issues should first be addressed by the case team as that focuses and narrows the issues. If a litigant obtained an audience with Michael Granston, he counseled that for such a meeting to be most effective the person seeking the meeting should “engage early” with the government, “be fully transparent” with “full disclosure on both sides,” and both sides should be candid about the strength of the case. Do not, Granston added, push arguments that don’t work.

Along with the remarks by AAG Hunt and DAAG Granston, the sold out Qui Tam Conference had several very good and informative panels about different facets of FCA and qui tam practice. The leader of the FBA’s Qui Tam Section, Scott Oswald, together with the conference co-chairs, Katherine Seikaly from Reed Smith and David Finkelstein from DOJ, did a great job with the Conference overall. I look forward to next year’s conference which will be co-chaired by Jennifer Short of KaiserDillon and Natalie Waites of DOJ.

A. Brian Albritton

March 18, 2020

DOJ Announces New Policy Regarding Individal Accountability and Corporate Cooperation for False Claim Act Cases

Dear Readers:

Acting Associate Attorney General Bill Baer spoke at the ABA's 11th National Institute on Civil False Claims Act and Qui Tam Enforcement last week in Washington, D.C. AAG Baer addressed how the U.S. Department of Justice (DOJ) will focus on individual accountability in civil False Claims Act (FCA) cases and in light of that focus, what steps corporations must undertake to earn "cooperation credit" in settling FCA cases. These new DOJ policies announced by AAG Baer are very important for practitioners in qui tam/FCA cases and will certainly impact how corporate defendants investigate, report, and settle FCA cases.

DOJ published AAG Baer's remarks, which are found here. I highlight below those portions of his remarks that I found to be most interesting.

First, AAG Baer addressed how the DOJ policy of holding individuals accountable for corporate misdeeds, announced in the Yates memo, would be "implemented" in FCA cases. He stated:

• DOJ is committed "to the notion that individual accountability applies with equal force and logic to the department's civil enforcement."

• In applying the Yates memo, DOJ starts "by asking department attorneys to make sure they are examining the potential liability of individual actors at the outset of an investigation into corporate wrongdoing" and it is "department policy to pursue civilly those individuals who are responsible [for FCA violations] and hold them accountable in addition to pursuing our civil case against the organization."

FCA practitioners will see a concrete difference in FCA government investigations and intervened cases because

• "At the very outset of any FCA investigation into a corporate scheme, [DOJ] attorneys are instructed to focus on both the company and individuals who may be responsible for bad conduct . . . . Our inquiry into individual misconduct now proceeds in tandem with the underlying corporate investigation."

In a "departure from past practice," FCA settlements and releases will no longer automatically include a release of corporate executives and employees: that is, DOJ will investigate companies and their executives together, but DOJ will not necessarily "negotiate[] outcomes" for these defendants at the same time. Rather, DOJ will "often" settle FCA claims with companies first. But, the fact that it does so will not end DOJ's "inquiry into whether and which individuals will be pursued."  In fact, whereas in the past DOJ's FCA settlements released both the corporation and its executives, it may not do so in the future:  "you should not assume we will be amenable to releasing individuals from [FCA] liability when we settle with the organization."

If individual liability is not resolved together in a corporate settlement, DOJ expects its lawyers "to have a plan for how to proceed in the investigation with respect to those responsible" individuals. While "recognizing" that "claims against individuals may not always be appropriate," DOJ will now require its attorneys to affirmatively "memorialize" any recommendation not to pursue an individual. Overall, AAG Baer noted that "we are disciplining ourselves to assess individual responsibility at the beginning of and throughout our FCA investigations."

Second, AAG Baer addressed how DOJ's new emphasis on civil accountability for corporate executives implicates companies seeking cooperation credit in FCA cases. As an initial matter, the AAG announced a "threshold requirement" whereby DOJ will not credit any company with cooperation in a settlement unless the corporation "disclose[s] all facts related to individuals involved in the wrongdoing."  He elaborated: 

• "[U]nderstanding who did what is a necessary component" for DOJ to determine the nature and extent of any FCA violation. Essentially, a company seeking credit in an FCA settlement for its cooperation cannot withhold "critical" information that identifies those who should be held responsible.

• A corporation demonstrates its commitment to "transparency" and cooperation by "disclosing the facts, including telling us what you know about who did what."

Cooperation, AAG Baer explained, "is not demonstrated by doing what the law requires" such as "compliance with subpoenas or other lawful demands." Rather, "genuine cooperation" involves a "focused presentation of relevant information demonstrating the actual conduct that is the subject of the investigation" and "stretches beyond the precise information that may have been requested by the government." The AAG provided the following examples of "full cooperation:" (i) a company's acknowledgement of responsibility, including in some instances "detailed and complete admissions;" (ii) remediation efforts; (iii) whether a company "reports information that might otherwise not have been discovered in the ordinary course of an investigation or that saves the government time and resources;" (iv) making available "current or former officers and employees for meetings, interviews, depositions;" and (v) disclosing facts gathered in an internal investigation.  

Internal investigations, the AAG went on, must be "tailored to the scope of wrongdoing" and cooperating companies must "make their best efforts to determine all the facts with the goal of identifying the individuals involved." That said, AAG Baer stated that companies do not need to wait until they have finished their internal investigations to self report. Rather, "timing . . . is of the essence," and companies "should come in as early as possible" even if they don't "quite have all the facts yet."

As for the attorney-client privilege, AAG Baer "emphasized" that "nothing in the individual accountability policy" requires the privilege to be waived.

As the reward for satisfying this "threshold requirement" and cooperating with the government's investigation, AAG Baer stated that "the department will use its significant enforcement discretion in FCA matters to recognize that cooperation." There is "no magic formula" or "equation," he explained, as to how much credit a cooperator might receive. Having eschewed any formula for earning cooperation, AAG Baer nevertheless analogized the "downward departures" for cooperation given by the government in federal guideline sentences to how DOJ should accord cooperation in FCA matters. Overall, he said, DOJ is "committed to taking into account the disclosures and other cooperation provided by defendants and to resolve matters for less than the matters would otherwise have settled for based on the applicable law and facts."

DOJ's new policy on individual accountability represents a significant change in FCA cases. Corporations -not individuals- have been the primary focus of most FCA cases in the past. There have been lots of exceptions, of course, especially for physicians accused of submitting false claims to Medicare or Medicaid. Yet, the past emphasis on corporations reflects the reality that it is largely corporations that contract with the government, submit false claims, and who most directly profit from them. The emphasis on corporate liability further reflects the fact that corporate entities are where the money is. Corporations, such as Big Pharma, defense contractors, and hospitals, have the resources to pay large FCA settlements.

Focusing on individual accountability likely will have a profound impact on government FCA investigations, interventions, and settlements. I anticipate that corporate internal investigations will be more involved and complicated. Individuals will lawyer up more quickly, be more concerned about their own exposure, and as a result may be less forthcoming with their employers. FCA investigations and cases are likely to become more complicated if only because cases are likely to have more parties: a corporation and its executives. As for settlements, they too will become more complicated. In Medicare cases, for example, there will be an increased focus on possibly excluding named individual defendants. Also, if individuals are named as subjects of an investigation, I would think that increases the possibility that they will turn against their employers more readily in order to earn cooperation. And, of course, what if a corporate employer refuses to indemnify the executive and/or employee?  

Finally, it will be interesting to see 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.

A. Brian Albritton
June 15, 2016

DOJ Announces $3.8 Billion in False Claim Act Recoveries for FY 2013

The US Department of Justice recently announced another historic year in FY 2013 for False Claims Act (FCA) recoveries and judgments: a total of $3.8 billion, falling short of 2012's nearly $5 billion in FCA recoveries. Among the highlights featured in the DOJ's press release are:

• Heath care fraud continued to constitute the largest portion of FCA recoveries: $2.6 billion, not including $443 million in recoveries by state Medicaid programs.
• Of the $2.6 billion in health care related fraud recoveries, $1.8 billion resulted from claims relating to drug and medical devices. 
• Abbott Labs alone paid $1.5 billion to resolve allegations that it illegally promoted the drug Depakote. $575 million of that amount related to FCA claims.
• Amgen paid $762 million to settle allegations that it illegally promoted the drug Aranesp. $598.5 million of that related to FCA claims.
• Procurement fraud, relating primarily to defense contracts, accounted for $890 million recovered.
• The largest component of the procurement fraud recoveries arose from the $664 million judgment that USDOJ obtained against United Technologies Corp. "based on allegations of false claims and corruption involving government contracts."
• Qui tam suits "soared" to 752, an increase of 100 from FY 2012, and 74% increase over 2009, when 433 qui tam suits were filed.
• Of the total $3.8 billion in FCA recoveries, $2.9 billion or 76% arose from qui tam filings, and of that amount, Relators or what the DOJ refers to as "courageous individuals who exposed fraud" recovered $345 million.
• Last year also saw one of the largest FCA recoveries against a single individual/physician: $26.3 million against a dermatologist, Steven J. Wasserman, M.D., relating to illegal kickbacks.

A. Brian Albritton
January 6, 2014

Update - DOJ Will Join Qui Tam Filed Against Lance Armstrong

The U.S. Department of Justice (DOJ) announced today that it will intervene in the qui tam False Claims Act suit filed by relator Floyd Landis against Lance Armstrong and others: United States ex rel. Landis v. Tailwind Sports Corporation, et al.  According to the DOJ press release, the Government "notified the court that it was joining the lawsuit’s allegations as to Armstrong, Bruyneel, and Tailwind" and that it will file a formal complaint within 60 days.  DOJ, however, stated that it will not be intervening as to all the defendants named in the case.  The U.S. Attorney for the District of Columbia, Ronald C. Machen Jr., stated:  “Lance Armstrong and his cycling team took more than $30 million from the U.S. Postal Service based on their contractual promise to play fair and abide by the rules – including the rules against doping . . . . . The Postal Service has now seen its sponsorship unfairly associated with what has been described as ‘the most sophisticated, professionalized, and successful doping program that sport has ever seen.’ This lawsuit is designed to help the Postal Service recoup the tens of millions of dollars it paid out to the Tailwind cycling team based on years of broken promises. In today’s economic climate, the U.S. Postal Service is simply not in a position to allow Lance Armstrong or any of the other defendants to walk away with the tens of millions of dollars they illegitimately procured.”

The DOJ press release announcing its decision to intervene may be found here.

A. Brian Albritton
February 22, 2013

NBC Reports That DOJ Will Intervene Today in Qui Tam Against Lance Armstrong

NBC News along with other sources reports on its website that U.S. Department of Justice (DOJ) will notify the Court today that it is intervening in the qui tam/False Claims Act suit brought by relator and ex-teamate Floyd Landis against Lance Armstrong and other defendants.

The Landis qui tam against Armstrong and others was unsealed by the U.S. District Court for the District of Columbia just last month.  As previously featured here in the blog, the Wall Street Journal reported in mid-January 2013 that DOJ officials had recommended that the Government intervene.

NBC reports that Armstrong's attorney Robert Luskin has released a statement saying, in effect that the Postal Service had no losses deserving of compensation: "Lance and his representatives worked constructively over these last weeks with federal lawyers to resolve this case fairly, but those talks failed because we disagree about whether the Postal Service was damaged . . .The Postal's Services own studies show that the Service benefited tremendously from its sponsorship -- benefits totaling more than $100 million."

A. Brian Albritton
February 22, 2013

False Claims Act and Qui Tam DOJ Statistics for 2012

The Civil Division of the U.S. Department of Justice has released the False Claims Act/Qui Tam statistics for FY 2012, which ended September 30, 2012. They can be found here. As in previous years, the overwhelming number of all cases filed pursuant to the False Claims Act were filed by qui tam relators and a great majority of the recoveries came from the health care area.

For 2012 False Claims Act (FCA) and Qui Tam (QT) matters, the DOJ statistics reveal the following:

• 782 FCA/QT new referrals, investigations, and qui tam matters. This number has increased slowly over the last two years as it was 773 in 2011 and 715 in 2010. QT actions continue to drive the overwhelming majority of new matters: almost 83% or 647 of the "new" matters were QT's.

• Total FCA/QT combined recoveries (settlements and judgments) were $4,959,333,498. Of that total:
• Almost $1.605 billion (32%) recovered in FCA cases filed by the government;
• Approximately $3.325 billion (67%) recovered in QT cases where government intervened;
• $29.387 million (.059%) recovered in QT cases where government did not intervene; and
• Total relator share awards: nearly $431 million (8.7% of total recoveries and judgments).

The DOJ divides the FCA/QT new matters and recoveries into three major categories: statistics related to Health and Human Services, Department of Defense, and Other. Not surprisingly, new matters and recoveries relating to health and human services (e.g., Medicare, Medicaid, VA, Tricare) continued to maintain a commanding lead in 2012:

•  436 new health-care related matters, of which 412 were QT cases
• Over $3 billion (61%) in total health care related recoveries, almost $2.5 billion in QT cases; and
• Over $284 million in relator share awards.

• 69 new defense related matters, of which 57 were QTs
• Almost $167 million (3%) in total defense related recoveries, only $2 million were non-QTs; and
• Over $19 million in relator share awards.

A. Brian Albritton
December 27, 2012

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 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

First Reported Case in Which the Government Declines to Exercise its Veto of Public Disclosure Dismissal

Readers, I commend to you the recent article on US ex rel Sanchez v. Abuabara, No. 10-61673 (June 4, 2012, S.D. Fla.), "Government Declines to Exercise New Authority Over Public Disclosure Motion", by Scott Stein of Sidley Austin's "Original Source" False Claims Act Blog.

I heard about this case at the recent Qui Tam and False Claims Act Enforcement Conference, and it was referred to by one speaker as the first reported case to reference the government's new authority under the False Claims Act to oppose and prevent the dismissal of a relator's claim on the grounds that it had already been publicly disclosed. 31 U.S.C. 3730(e)(4)(A).   I would not describe the opinion itself as a page turner, but Mr. Stein does a good job explaining the significance of this recent case.

A. Brian Albritton
6/20/12

Abbott Labs $1.5 Billion Plea and False Claims Act Settlement: the Facts at Issue

By now, Readers, I am sure you have heard of the announcement this week by the U.S. Department of Justice that Abbott Labs has agreed to pay $1.5 billion  in a False Claims Act settlement and a criminal plea regarding its off-label promotion of its drug, Depakote. A number of blogs have covered it including Sidley's Original Source blog as well as MintzLevin's Health Law & Policy Matters blog, both of which I commend to you.  The four relators will receive $84 million of the $800 million paid for the False Claims Act portion of the settlement.

I suspect that some Readers may think this settlement --one of many settlements against pharma companies alleging the promotion of off-label drug usages-- may be just another instance in which the government has overreached and used it power to extract a ruinous settlement from the defendant.  A review of the facts admitted to by Abbott, however, shows that the company's conduct was reprehensible and that this settlement and the criminal charge against it could have been far worse.  The company clearly benefited from great counsel, including former Deputy Attorney General, Mark Filip.

According to the Agreed Statement of Facts for its plea, Abbott's gross sales of Depakote from 1998 - 2008 were roughly  $13.8 billion.  During an 8 year period, Abbot promoted the sale and use of Depakote primarily for the elderly suffering from dementia and for the treatment of schizophrenia, even though it knew that the drug was not effective for the treatment of such conditions.  For example, Abbott conducted a study of the effects of Depakote in 1998-99, but suspended the study due to an "increased incidence of adverse events in the Depakote treatment group," discontinuing it completely in 1999.  The study failed to show that Depakote was effective in treating mania in elderly dementia patients.  Abbott performed another clinical trial on dementia patients in 2000, but according to Abbott, the trial was "terminated for low enrollment  . . . . . [and was] seriously underpowered and definitive conclusions from the data were not possible."  Abbott conducted no other studies, but another 153 patient randomized study was done on the use of Depakote for treatment of elderly patients with dementia in 2000 - 2002, and it concluded that "treatment with [Depakote] did not show benefit over placebo in the treatment of agitation associated with possible or probable [Alzheimer's disease] . . . in nursing home residents included in this trial."

Notwithstanding the lack of evidence of Depakote's efficacy in the treatment of dementia, for several years Abbott engaged in widespread promotion of Depakote as effective for controlling agitation and aggression in elderly dementia patients. Abbott informed its own sales force that "Depakote had been shown effective  . . . to treat behavioral disturbances in dementia patients . . . " and developed "educational programs" to promote the drug's usage for the elderly.  It gave funds for speaker programs to promote the use of Depakote to control agitation and aggression in elderly patients with dementia. It sent out a letter to 4,000 prescribers of atypical antipsychotic drugs and to 1,000 prescribers of another drug to nursing home patients to "help increase overall the use of Depakote  . . . for patients with dementia related behaviors."  The Statement of Facts describes a whole host of things that Abbott did to market Depakote --a drug which had not been proven effective, and in fact appeared to be ineffective, for treating agitation and aggression in elderly dementia patients.  The Statement of Facts reflect similar conduct by Abbott in the marketing of Depakote as a treatment of for schizophrenia

The False Claims Act Settlement reflects Abbott's admission that Medicare and Medicaid paid "hundreds of millions of dollars for claims resulting from the use of Depakote for the control of the agitation and aggression of dementia patients" and paid "millions of dollars for claims resulting from the use of Depakote to treat schizophrenia."

The key documents relating to Abbott's plea and settlement can be found here at the Department of Justice's site.

A. Brian Albritton
May 9, 2012

This Week in the False Claims Act: McKesson's $190 Million Settlement and the Government Intervenes Against Toyo for Failing to Pay Antidumping Duties

It has been a slow week for Qui Tams and False Claims Act matters.

The government has just announced its most recent settlement against another drug company last week: McKesson Corporation for $190 million.  The government alleged that McKesson reported "inflated mark-up percentages" to a publisher of drug prices, First Databank, for a "wide variety of brand name drugs," which in turn caused many state Medicaid programs to overpay for the drugs.  Overall, the DOJ proudly announces that more than "$2 billion" has been recovered from other drug manufacturers that were alleged to have engaged in the same type of conduct.

The most interesting qui tam I found this week was the Department of Justice's announcement  that it is intervening in US ex rel  Dickson v. Toyo Ink Manufacturing Co., Ltd et al.  Filed under seal in 2009 in the Western District of North Carolina, the case alleges that "Toyo Ink companies," a leading provider of printing inks, "knowingly misrepresented the country of origin on [import] documents presented to U.S. Customs and Border Protection to avoid paying antidumping and countervailing duties on" what appears to be an imported ink: "the colorant carbazole violet pigment number 23 (CVP-23)."   According to DOJ, the Department of Commerce assesses antidumping and countervailing duties, which are collected by U.S. Customs, to protect U.S. businesses by offsetting unfair foreign pricing and government subsidies" for certain imports, such as CVP-23, "from China and India."  Toyo is alleged in the suit to have "misrepresented Japan and Mexico as the countries of origin for its CVP-23 imports to avoid these duties."   According to the Complaint, which has not yet been released on Pacer, "Toyo’s CVP-23 imports from China and India underwent a finishing process in Japan and Mexico," but that  "process was insufficient to change the country of origin." 

I find this most recent announcement interesting only because it further shows the breadth of the False Claims Act and the different kind of industries and settings to which it can apply: anywhere there is a payment obligation to the United States, including as shown here, Customs' duties for imports.

A. Brian Albritton

May 2, 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.

Merck Settles Claims with DOJ and 43 States Relating to Vioxx Marketing

Merck and the U.S. Department of Justice (“DOJ”) announced yesterday that Merck will pay $950 million to resolve criminal charges and civil claims related to its promotion and marketing of the painkiller Vioxx.   Merck joins a number of pharmaceutical makers, including GlaxoSmithKline, Pfizer and Eli Lilly, who have entered into settlements with the DOJ relating to their promotion and marketing of “off label” uses of their drugs. 

Merck will plead guilty to a one-count misdemeanor information charging a single violation of the Food Drug and Cosmetic Act (“FDCA”) for illegally promoting Vioxx and will pay a $321,636,000 criminal fine.  Merck’s criminal plea relates to misbranding of Vioxx by promoting the drug for treating rheumatoid arthritis, before that use was approved by the Food and Drug Administration (FDA).   Under the provisions of the FDCA, a company is required to specify the intended uses of a product in its new drug application to FDA.   Once approved, the drug may not be marketed or promoted for so-called “off-label” uses – any use not specified in an application and approved by FDA – unless the company applies to the FDA for approval of the additional use.   

Merck is also entering into a “civil settlements” agreement with the DOJ and 43 states under which it will pay $628,364,000.  DOJ did not post the civil settlement documents, but presumably these are False Claims Act type settlements as these settlements resolve allegations that Merck (i) “made inaccurate, unsupported, or misleading statements about Vioxx’s cardiovascular safety in order to increase sales of the drug, resulting in payments by the federal government;”  (ii) made false statements to state Medicaid agencies about the cardiovascular safety of Vioxx that those agencies relied on in making payment decisions about the drug;” and (iii) also “recovers damages for allegedly false claims caused by Merck’s unlawful promotion of Vioxx for rheumatoid arthritis.” 

Once the settlements are posted on line, I will link them.