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Pill-Bottle-MoneyThis week, Bristol-Myers Squibb Co. (“BMS”) and Otsuka America Pharmaceutical Inc. (“Otsuka”) asked a federal court judge in Ohio to dismiss a complaint filed against them by two relators that alleges that the pharmaceutical companies offered illegal kickbacks to physicians in order to induce them to promote off-label uses of the antipsychotic drug Abilify. Induced prescriptions for off-label uses are not eligible for reimbursement by government health care programs. The kickbacks allegedly violated the Anti-Kickback Statute. Both allegations predicate liability under the False Claims Act. Two former sales representatives employed by BMS are specifically alleging that, beginning in 2005, the companies engaged in a nationwide scheme to fraudulently promote Abilify to doctors of pediatric and geriatric patients. Aripiprazole, marketed jointly by BMS and Otsuka as Abilify, generated sales of over $6 billion in 2013. Such sales make it one of the highest-grossing prescription drugs worldwide. Continue reading

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DODThe U.S. Department of Justice announced yesterday that defense contractor DRS Technical Services Inc. (“DRS”) has agreed to pay $13.7 million to settle allegations that it violated the False Claims Act by overbilling the government for work performed by employees who in fact lacked the requisite job qualifications outlined in its contracts with the U.S. Army and the U.S. Coast Guard. The Herndon, Virginia-based company designs, integrates, operates, and maintains satellite and wireless network solutions, telecommunication services, and security systems for both government and private sector customers. An indirect subsidiary of DRS, Gaithersburg, Maryland-based DRS C3 & Aviation Company provides services to government agencies, including: aircraft maintenance, logistics support, depot support, and engineering support. For ten years, DRS and its predecessors were awarded time and materials contracts for services and supplies to be provided to the Army’s Communication and Electronics Command (CECOM) in Iraq and Afghanistan, and to the Coast Guard for aircraft maintenance. Continue reading

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Last week, a federal judge in Illinois retained the majority of a relator’s allegations in a complaint filed under the False Claims Act against UChicago Argonne LLC after the company sought to dismiss the case. Originally filed in 2012 and unsealed in December 2013, the complaint details how the research lab, managed and operated by UChicago Argonne, engaged in an elaborate scheme to defraud the government by overcharging it for work done under federally-funded contracts for agencies. These agencies included the U.S. Department of Defense, the U.S. Department of Energy (“DOE”), and the U.S. Department of Transportation. UChicago Argonne is the prime contractor for Argonne National Laboratory. The laboratory employs more than 12,000 scientists and engineers who perform nuclear engineering, basic energy science, biological and environmental research, hard x-ray science, high energy physics, and computational and technological research at a facility outside Chicago. Continue reading

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Yellow-and-Red-Pills-300x224The U.S. Department of Justice announced last week that Shire Pharmaceuticals LLC (“Shire”) has agreed to pay $56.5 million to settle allegations brought by several whistleblowers that it violated the False Claims Act. At issue was the Pennsylvania-based company’s improper marketing, promotion, and distribution of Adderall XR, Vyvanse, and Daytrana approved by the U.S. Food and Drug Administration (“FDA”) for the treatment of attention deficit hyperactive disorder (“ADHD”) and Pentasa and Lialda, approved by the FDA for the treatment of mild to moderate active ulcerative colitis. Although the uses for the drugs may be considered diverse, the company had allegedly made a number of claims to prescribers involving the appropriateness and benefits of the drugs without any corresponding supporting data. Former Shire executive Gerardo Torres filed the first of two qui tam complaints in a federal court in Pennsylvania in 2008 while three former Shire sales representatives filed the second in a federal court in Illinois in 2009.

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New Orleans (Post-Katrina)Any large influx of federal aid associated with disaster relief presents the potential for fraud. Fortunately, whistleblowers who report these abuses under the False Claims Act stand to share in between 15% and 30% of the government’s recovery. After a natural disaster, the federal government, through the Federal Emergency Management Agency (FEMA), contracts with private companies to provide the affected communities with food, water, shelter, clothing, cleanup, etc. In addition, FEMA administers national insurance policies for those that live in flood prone areas. The need to act quickly combined with a lack of government oversight often results in the submission of fraudulent payment claims to the federal government, especially in large disasters. Examples of potential natural disaster fraud include:

  • Receiving federal funding for services not rendered or goods not provided
  • Receiving or providing kick-backs or other benefits in awarding government funding
  • Receiving federal funds for expenses paid for by another source
  • Inflating the cost of goods and services paid for by federal funding
  • Misclassifying expenses or falsifying records to justify federal aid
  • Collusion or price fixing schemes in connection with bidding on federal contracts; or
  • Using federal funds for personal or other non-qualifying uses

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StethoscopeOn Friday, the U.S. Department of Justice announced that Illinois-based global pharmaceutical and health care products company Abbott Laboratories (“Abbott”) has agreed to pay $5.4 million to settle a whistleblower’s allegations that it violated the False Claims Act by paying illegal kickbacks to doctors in order to induce them to implant the company’s carotid, biliary and peripheral vascular products.

United States ex rel. Peters et al. v. Abbott Laboratories, Inc. was filed by former Abbott employees Steven Peters and Douglas Gray and specifically alleged that the company violated the Anti-Kickback Act by paying prominent, well-known physicians for teaching assignments, speaking engagements, and conferences with the underlying expectation that these physicians would then arrange for the hospitals with which they were affiliated to purchase Abbott’s carotid, biliary and peripheral vascular products. Carotid and peripheral vascular products are used to treat circulatory disorders by increasing blood flow to the head and various parts of the body while biliary products are used to treat obstructions that occur in the bile ducts.

The qui tam provisions of the False Claims Act allow private parties to bring suit on behalf of the government and is a powerful tool for uncovering fraud. A successful suit entitles the whistleblower, also known as a relator, to between 15% and 30% of any final judgment or settlement. As part of the settlement reached in this case, Peters and Gray will receive a total payment of more than $1 million. Dating back to 1863, the False Claims Act has enabled relators with direct and independent knowledge of fraud by hospitals, health care facilities, health care providers, medical device manufacturers, and pharmaceutical companies to help recover taxpayer dollars. The statute also provides relators with considerable protection from employer retaliation. The government’s total recovery under the False Claims Act since January 2009 has amounted to $17 billion. Of this total, $12.2 billion was recovered from cases involving fraud on government health care programs.

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Medicine Test TubeYesterday, the FBI announced that Clean on Green PLLC (“Clean on Green”), a North Carolina drug and alcohol treatment center, its owner, and two of its employees have been indicted by a grand jury on bribery and conspiracy charges in connection with the treatment center’s contracts with the U.S. Probation Office. According to the indictment, each defendant was charged with one count of conspiracy to violate the federal False Claims Act.

Clean on Green had contracts with the U.S. Probation Office, the community corrections arm of the judiciary that administers probation and supervised release under federal law. The contracts required the treatment center to collect urine samples from individuals on pretrial release, supervised release, parole, or probation and to test the samples for controlled substances. The results were then to be reported to the U.S. Probation Office. The contract also required the treatment center to provide substance abuse assessments and counseling services to those under federal supervision. Between 2010 and 2012, Clean on Green allegedly failed to follow urine collection protocol to ensure that the test results were accurate and reliable. The reliability of such tests were essential in determining whether or not conditions of probation, release, or parole were being met. Individuals were allegedly allowed to submit false urine samples to avoid the detection of a controlled substance. Over the same time period, the treatment center and its employees allegedly allowed individuals to falsify sign in and sign out records to show attendance at required counseling sessions that were not actually attended. In some cases, employees of the treatment center received bribes to in exchange for allowing individuals to bypass the drug tests and required counseling sessions. Falsified forms and invoices for services provided were then allegedly submitted to the U.S. Probation Office.

Although the investigation in this case led to criminal charges, the federal government relies heavily upon civil actions by private citizens under the qui tam provisions of the False Claims Act to help uncover fraud that might have otherwise gone undetected. The statute prohibits the submission of false claims for government money or property. The False Claims Act awards a private citizen that is acting as a whistleblower (also known as a relator) between 15% and 30% of any final judgment or settlement and provides considerable protection from employer retaliation.

 

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College classroomOn Tuesday, the U.S. Department of Justice announced a $400,000 settlement with Texas businessman Larry Lehmann to resolve allegations that he violated the federal False Claims Act in connection with the Federal Communications Commission’s E-rate Program while acting as the CEO and managing partner of Acclaim Professional Services (“Acclaim”).

The Schools and Libraries Program of the Universal Service Fund is commonly known as the E-rate Program and was created by Congress as part of the Telecommunications Act of 1996. The program helps schools and libraries in the United States obtain affordable Internet access and internal networking by subsidizing eligible equipment and services. The Houston Independent School District (“HISD”) applied for and received E-rate subsidies for two years, from 2004 until 2006. Over this two-year period, Acclaim partnered with other companies to provide E-rate funded equipment and services to HISD.

United States ex rel. Richardson and Gillis v. Lehmann was initiated by two whistleblowers that had previously bid for contracts with HISD and the Dallas Independent School District (“DISD”). The government intervened in the suit and alleged that Lehmann violated the E-rate program’s competitive bidding requirements and HISD’s procurement rules by providing gifts such as tickets to sporting events to school district employees, and loans totaling $66,750 to an employee of the school district that was involved in the procurement and administration of HISD’s E-rate projects. The suit additionally alleged that Lehmann developed a scheme where HISD outsourced some of its employees to Acclaim, allowing them to continue to work for the school district while passing the cost on to the E-rate Program. Acclaim then allegedly disguised the cost of these employees by billing them as eligible goods and services in its E-rate program invoices.

The whistleblowers (also known as realtors) in this case originally filed their complaint on behalf of the United States under the qui tam provisions of the False Claims Act. The statute dates back to 1863 and allows a private party to bring suit on behalf of the government for fraudulent claims made by others for the receipt of government money or property. If the qui tam suit is successful, the defendant is liable for a civil penalty of between $5,500 and $11,000 for each individual false claim as well as three times the amount of damages sustained by the government. Relators are entitled to between 15% and 30% of any final judgment or settlement and considerable protection from employer retaliation. The relators’ share of the settlement in this case has not yet been determined. The settlement with Lehmann is, however, part of a broad investigation by the United States into E-rate program funding requests submitted by Texas school districts. The government has previously recovered $16.25 million from Hewlett-Packard, $850,000 from HISD, and $750,000 from DISD.

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GSAOn Monday, the General Services Administration’s (“GSA”) Office of Inspector General announced a $270,000 settlement with Supplies Now, Inc. (“Supplies Now”) to resolve allegations that the company violated the False Claims Act. The GSA alleged that Supplies Now falsely certified compliance with the Trade Agreements Act when it won a contract with the GSA to supply four federal buildings in Illinois with lamps.

Contractor Malcolm Wilson lost to Supplies Now in the competitive bidding process and suspected that the company may have won by submitting an estimate using prices of lamps manufactured in the People’s Republic of China (“China”). GSA Federal Supply Schedule Contracts are subject to the Trade Agreements Act, which can restrict the procurement of goods and services for government contracts. All products listed in the contract must be manufactured or substantially transformed in one of the designated countries. These countries include World Trade Organization Government Procurement Agreement countries, Free Trade Agreement countries, Least Developed countries, and Caribbean Basin countries. China is not a designated country. Pursuant to the Freedom of Information Act, Wilson filed a disclosure request with the U.S. Army Corps of Engineers, the agency responsible for overseeing the project, to learn the model of the lamps being provided by Supplies Now. Upon receiving the information, Wilson sent an email to the manufacturer of the lamps to find out where the products were made and was informed that they were made in China.

Wilson subsequently filed suit on behalf of the United States under the qui tam (or whistleblower) provisions of the False Claims Act. A whistleblower complaint is filed under seal and served upon the government. The government may then exercise its right to intervene following an investigation of the allegations. In this case, the settlement with Supplies Now was reached following the Justice Department’s decision to intervene and assume primary responsibility for pursuing the litigation. A whistleblower (also known as a relator) can, however, proceed with their claims even if the government declines to intervene. A successful suit entitles the relator to up to 30% of any final judgment or settlement. Wilson’s share of the settlement in this case has not yet been determined.

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Doctor looking at EKGOn July 29th, the US Attorney’s Office in Boston and the Department of Health and Human Services announced a settlement with Beth Israel Deaconess Medical Center that resolves False Claims Act allegations of improper Medicare billing.  Although the billing in question took place between June 2004 and March 2008, the Boston Globe has reported that the government subpoenaed records from Beth Israel Deaconess in 2010 in connection with the case.

According to the US Attorney’s Office release, the government’s False Claims Act case accused the hospital of inappropriately submitting claims for reimbursement to Medicare for one-day stay inpatient admissions for patients with congestive heart failure, chest pain, and certain digestive and nutritional disorders.  The government contended that such claims should not have been for inpatient services, but for observation services, as they were admitted only for the purpose of observation and discharged the next day.  According to the government, additional claims to Medicare for inpatient services for “zero day” (less than one day) admissions were also inappropriate.

Beth Israel Deaconess did not admit to any wrongdoing or liability as part of the settlement; according to the Globe, Beth Israel Deaconess general counsel Jamie Katz said in a written statement that the billing “involved an extremely technical issue.”

The federal False Claims Act imposes liability for the submission of false claims for payment to the government.  In addition, the statute also imposes liability for retaining overpayments received by the government.  Since passage of the Affordable Care Act, entitles that participate in federal health insurance programs have 60 days upon discovery of an overpayment to return the difference to the government.  For conduct to be actionable under the False Claims Act, it must have cheated the government knowingly, or acted in reckless disregard or deliberate ignorance of a claim or statement’s falsity.  Under the qui tam provision of the False Claims Act, whistleblowers are entitled to sue on the government’s behalf and to keep between 15% and 30% of any recovery.