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When commercially available medications’ standard dosage forms or amounts don’t quite fit a patient’s particular needs, the patient may benefit from customized compounded drugs. Medicare Part D, the prescription drug program, allows the private company sponsors that administer the benefit to cover compounded drugs under certain circumstances.[1] In recent years, Part D reimbursement to pharmacies for compounded drugs has increased significantly. A 2016 report by the Office of the Inspector General for the Department of Health and Human Services (“OIG”) found that from 2006 to 2015, payment for compounded drugs under Part D had grown more than sevenfold—compared to…
Each year, billions of dollars in damages are paid to the government as a result of False Claims Act (FCA) settlements and judgments. A significant percentage of those damages are paid out to whistleblowers – known as “relators” in FCA parlance – who are statutorily entitled to recover between 10 and 30 percent of the proceeds depending on the extent they contributed to the prosecution of the case. And where there is money to be had, there are opportunistic relators looking for an easy payday. One such relator was Jeffrey Berkowitz, the president of Complete Packaging and Shipping Supplies, Inc.,…
And it is even more difficult still if the defendant had – and acted in accordance with – a reasonable interpretation of the vague or ambiguous statute, regulation or contract provision. A concurring opinion in a Supreme Court decision issued this week indicates that civil liability in such situations may also be Constitutionally suspect. Courts, as this blog has reported previously, have held that a defendant cannot “knowingly” submit a false claim when it certifies compliance with an ambiguous contract provision based on its objectively reasonable interpretation of that ambiguous or vague provision, and when the government had not…
Before Escobar, some courts held that implied certification cases could survive a motion to dismiss only if the statute, regulation, or contractual provision that was allegedly violated was a “condition of payment,” as opposed to a “condition of participation.” The idea was that payments to contractors in connection with government programs (e.g., Medicare) were conditioned on compliance with conditions of payment, but not conditions of participation. Under this line of reasoning, there could be no liability under an implied certification theory for violations of conditions of participation, but violations of conditions of payment could result in False Claims Act liability…
On Thursday, March 8, Kmart Corporation inked a settlement of a False Claims Act investigation[1] in which the qui tam relator initially alleged systematic pharmacy billing fraud across twenty-seven states for $525,000.[2] Brought by a pharmacist formerly employed at a Kmart in Lakeport, California, the original complaint alleged among other things that, instead of using a state-made drug utilization review alert system, Kmart relied on its own electronic systems that were not sufficiently sophisticated to provide detailed alerts such that pharmacy personnel would understand the need for physician or pharmacist input on certain drug fills.[3] The whistleblower…
In Part II of our series, we discussed government knowledge. When the government knows of a claim’s falsity, but nevertheless pays the claim, the falsity of the claim is not material to the government’s decision to pay. In other words, the falsity of the claim must not matter to the government and, consequently, there can be no liability under the implied certification theory. But what about the situation in which the government could have refused payment, but did not have actual knowledge relating to the claim’s alleged falsity? Could the fact that the government retains the option to refuse payment…
A judge recently unsealed portions of the Department of Justice’s criminal discovery manual that provides Department policy for investigating and prosecuting criminal cases. As the DC Circuit explained two years ago, “[i]t contains information and advice for prosecutors about conducting discovery in their cases, including guidance about the government’s various obligations to provide discovery to defendant.” It was developed in large part in response to the horribly flawed prosecution of the late Sen. Ted Stevens – a case in which the judge threw out the conviction because the federal prosecutors hid evidence from the defense team, including contradictory statements by a…
Memorandum dated January 10, 2018 and authored by Michael Granston, Director of the Commercial Litigation Branch of the Fraud Section of the U.S. Department of Justice, was published on January 24, 2018 (the “Memorandum”). The Memorandum, addressed to DOJ attorneys, describes the factors that government attorneys should consider in deciding whether the government should voluntarily dismiss unmeritorious qui tam suits pursuant to 31 U.S.C. § 3730(c)(2)(A). This policy guidance, which was picked up by the legal press just yesterday, comes after a three-month period in which the DOJ, the relator’s bar, and the defense bar alike have paid…
In United States, et al., ex rel. Ruckh v. Salus Rehabilitation, LLC, et al., Case No. 8:11-cv-1303-T-23TBM (M.D. Fl. Jan. 11, 2018), a federal district court judge offered a thoughtful, cogent analysis of both the letter and spirit of the Supreme Court’s decision in Universal Health Services, Inc. v. Escobar, 136 S. Ct. 1989 (2016) to reverse a jury’s $350 million verdict in favor of the United States and Florida (as well as the relator). The decision provides valuable guidance concerning how the Escobar holding should be applied to analyzing the actual evidence established under a False Claims Act (“FCA”)…
On January 9, 2017, the Supreme Court denied certiorari in United States ex rel. Purcell v. MWI Corp., No. 16-361, ending one of the longest running False Claims Act cases in history—18 years and 136 days, to be exact. We followed this case closely in previous blog posts here, and here. The case is significant because it held that there is no False Claims Act liability for a contractor’s objectively reasonable interpretation of an ambiguous contract provision. On the one year anniversary of the Supreme Court’s denial of certiorari, this objectively reasonable D.C. Circuit opinion remains good law.…
Editor’s Note: This is the second in a five-part series on how U.S. district courts and courts of appeal have applied the materiality standard set forth in Universal Health Services, Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016). In the context of implied certification cases brought under the False Claims Act (FCA), materiality is simply whether an alleged statutory, regulatory, or contractual violation has some bearing on the government’s decision to pay claims. It follows that when the government knows of an alleged statutory, regulatory, or contractual violation and pays a claim anyway, then that violation…
On December 21, 2017, the United States Department of Justice (DOJ) released its annual False Claims Act (FCA) recovery statistics for fiscal year (FY) 2017. The press release measures the DOJ’s total haul at $3.7 billion. Although this is a significant piece of news in its own right, we analyze these statistics each year for any potential trends. (See our post on the 2016 statistics, here, and our full analysis of the 2016 statistics in Robert T. Rhoad’s West Year-In-Review conference brief, available here.) And this year, like the years before it, the trendlines have been far from…
An early report from the Health Care Compliance Association’s Health Care Enforcement Compliance Institute states that DOJ will be moving to dismiss False Claims Act cases that it concludes lack merit. DOJ has not yet posted the speech on its website but RACmonitor, an online news and information source for healthcare providers, reports that: In announcing a significant policy change, the U.S. Department of Justice (DOJ) said that when it concludes that a qui tam case lacks merit, it will file a motion to dismiss the case rather than allowing the relator to continue. The surprise announcement was made…
The story behind the Trinity Industries False Claims Act (FCA) litigation is one that is becoming too familiar for companies that do business with federal and state governments. Luckily, that story now has some silver lining, after the Fifth Circuit recently overturned a massive $663 million jury verdict against the company.…
Editor’s Note: This is the first in a five-part series on how U.S. district courts and courts of appeal have applied the materiality standard set forth in Universal Health Services, Inc. v. U.S. ex rel. Escobar. In Escobar, the Supreme Court described several factors that a district court should consider in assessing whether a particular contractual, regulatory, or statutory violation was material to a government’s decision to pay. One of those factors was whether a “reasonable man [acting on the Government’s behalf] would attach importance to [the representation] in determining his choice of action in the transaction.” at 2003.  It…
Opportunistic relators have made a cottage industry of filing claims under the False Claims Act (FCA) alleging that contractors are violating the Trade Agreements Act (TAA) by misrepresenting the country of origin of products being sold to the government. Many of these relators are not company insiders and, as a result, lack detailed information regarding the sales practices of their targets. Instead, these relators cobble together publicly available information and often base their claims of fraud on inferences and innuendo. Courts, however, have steadfastly required relators to allege their claims of fraud with particularity – i.e., pleading details regarding the…