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Columbia University will pay $9.5 million to Settle FCA Suit Alleging Overcharges for Research

New-York-City2-300x200Columbia University will pay $9.5 million dollars to settle a False Claims Act suit that alleged the university routinely overcharged federal agencies for medical research.

The False Claims Act (“FCA”) allows whistleblowers to bring allegations under seal against companies and institutions that fraudulently bill the federal government. After filing, the government has the option to “intervene” and control the suit itself. If the whistleblower’s suit is successful, as it was here, the whistleblower is entitled to a portion of the government’s recovery. Whistleblowers typically receive 15-30% of the government’s take.

The government’s complaint alleges that Columbia impermissibly applied its “on-campus” research cost rate instead of the substantially lower “off-campus” rate when seeking federal reimbursement for 423 National Institutes of Health (“NIH”) grants where the research was primarily performed at  facilities owned by the state of New York or other academic institutions.

Educational institutions are generally entitled to seek and receive federal reimbursement only for actual costs incurred by the institution in support of federally sponsored grants.

A university recovers its indirect costs for a particular research project by applying the relevant facilities and administrative rate (the “F&A Rate”) for the project to a segment of the direct costs it incurred in connection with the project. HHS and educational institutions negotiate one F&A Rate for research primarily performed on campus, and another F&A Rate for research mostly performed off-campus. The On-Campus F&A Rate is typically more than double the Off-Campus F&A Rate. On-campus research is usually costlier than off-campus research.

From July 1, 2003 through June 30, 2015, Columbia’s On-Campus Rate was approximately 61%, while their Off-Campus Rate for reimbursement was merely 26%.

The activity at issue in the complaint occurred primarily due to Columbia’s reimbursement relationship with the New York State Psychiatric Institute (“NYSPI”). For most of the relevant period, the University did not pay the State of New York for use of a building that housed Columbia/ NYSPI research. By doing so, and by not informing the federal government that the University was conducting research off-campus, but billing their On-Campus Rate, the university “unjustly enriched” itself.

Columbia did not state on its applications for NIH Grants that the research would be primarily performed off-campus, as required.

Instead, Columbia frequently included the main address for the College of Physicians & Surgeons in the section of the application that was supposed to list the primary performance location.  Even when the NYSPI Buildings were listed in that section of the grant application, or mentioned elsewhere in the application, Columbia failed to disclose that these buildings were not owned and operated by the university.

By accepting NIH funding, educational institutions agree to comply with all applicable laws, regulations, and policies governing the use of the federal funds, including those that are intended to ensure costs charged to the federal government are permissible under cost allocation principles set by agencies.

Reporting fraud may carry palpable professional risks. These causes for discomfort can be minimized by an experienced False Claims Act attorney.

Greene LLP is a complex civil litigation firm located in downtown Boston, Massachusetts, that specializes in representing qui tam whistleblowers in False Claims Act litigation and employing a low-volume, high-attention approach to litigation.

Each of the firm’s partners have over twenty years of experience in False Claims Act litigation, pioneering innovative theories of recovery, including the theory that off-label promotion of drugs can cause damages actionable under the False Claims Act and that “implied certification” of claims is an actionable theory of recovery.

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