Over the past two years, the Department of Justice has collected over $2 billion from big pharmaceutical companies in fines, damages and civil penalties for defrauding Medicare and other health care programs funded with tax payer dollars.  Most of these cases were brought by corporate whistleblowers - insiders who came forward with information and allegations of kickbacks and off-label marketing schemes designed to increase sales and bilk the Medicare system out of hundreds of millions of dollars.  But are these settlements having any deterrent effect?  Or have the pharmecutical companies decided that the reward of big profits and higher stock prices is simply greater than the risk and dollars extracted by the Government when the company gets caught with its hand in the U.S. Treasury cookie jar?

Anectdotal evidence suggests that the pharmaceutical companies are simply willing to run the risk of getting caught and pay up if and when they do get turned in.  In the first five months of 2010, the United States Department of Justic has announced more than $1.134 billion of civil and criminal settlements with pharmaceutical companies including: Novartis; Alpha-pharma; Astrazeneca; Schwartz Pharma; and Ortho-McNeil.  The Department has also joined a whistleblower off-label marketing suit against Johnson & Johnson.  This latest wave of suits and settlements comes more than seven years after such suits became prominent news and eight years after the 2002 self-imposed Pharma Code of Interaction with Health Care Professionals (revised in 2008).  As a lawyer who represents whistleblowers in these types of cases, I am certain that there are more big settlements to follow.  Thus, it appears big Pharma has decided to continue with business as usual and pay the settlements along the way.  After all, if an off-label marketing scheme brings in profits of $3 billion and the company can settle the False Claims Act whistleblower case with the Department of Justice for $1 billion, the company is $2 billion in the black and the U.S. taxpayer is $2 billion in the red.

Do we need a change in the law to address this?  No.  The False Claims Act has an existing mechanism, often referred to as "the hammer," if the Department of Justice chooses to use it.  Under the False Claims Act, a defendant can be penalized up to $10,000 for each false claim for payment.  If the Department of Justice were to use this tool, it could extract a $10,000 penalty for each prescription originating as a result of an off-label marketing scheme.  Such severe penalties would prevent the pharmaceutical companies from reaping profits generated by their illegal schemes.  If a self-imposed code and billions of dollars in settlements won't make big Pharma change its ways, perhaps it is time for the Department of Justice to yield the hammer provided to it by the False Claims Act.

A team of surgical office employees that includes nurses, an office manager and certified registered nurse anesthetist decided that enough was enough and blew the whistle on health care fraud being committed by orthopedic surgeon Robert Tominson.  The whistle blowers are represented by Don McKenna of Hare, Wynn, Newell and Newton.  With guidance and assistance from their counsel, the team of whistle blowers disclosed their allegations and material evidence to the United States Attorney's Office for the Western District of Arkansas and then filed a civil lawsuit on behalf of themselves and the United States of America under the qui tam provisions of the False Claims Act. 

The Government's investigation of the whistle blowers' allegations and evidence lead to the Government's opening of a criminal investigation of Dr. Tomlinson.  The whistle blowers' suit and the Governments' investigation ultimately lead to Dr. Tomlison pleading guilty to Health Care Fraud against Medicare. Click Here to read the Northwest Arkansas Online article.  Tomlinson will likely lose his medical license, be required to pay restitution and serve jail time.  A settlement of the civil False Claims Act claims is expected in the near future.

For their efforts, the whistle blowers will share in a percentage of the Governments' monetary recovery against Tomlinson.  This case is a great example of co-employees banding together as whistle blowers to stop fraud against our nations healthcare system.  All of the whistleblowers continue to be employed in the health care profession.

 

According to a recent Reuters report, the United States healthcare system wastes up to $800 billion a year.  Incredibly, the report found that "fraud makes up 22 percent of healthcare waste, or up to $200 billion a year in fraudulent Medicare claims, kickbacks for referrals for unnecessary services and other scams."  Medicare fraud is outright theft of our tax dollars.  The False Claims Act is a potent weapon to combat fraud on the Medicare system.   But for the statute to be effective, whistleblowers with inside information about how medical providers are stealing from Medicare must step forward, report the fraud, and file False Claims Act lawsuits.

The new FERA amendments to the False Claims Act broaden the scope of conduct covered and the types of whistleblowers who are protected from retaliation (or at least compensated after the retaliation takes place).  Whistleblower bounties range from 15%-30% of the recovery.  Coupled with greater whistleblower protection, the incentives are in place for those with knowledge of fraud on our ever expanding Medicare system to step forward, serve our Country and be rewarded for their service.

 

The primary purpose of the qui tam provisions of the False Claims Act has been to encourage insiders with knowledge of fraud on the Government to come forward and blow the whistle.  The 2009 FERA amendments to the False Claims Act added further encouragement by providing greater protection for would be whistleblowers.  The amendments broaden the scope of conduct protected.  The amendments also include contractors and agents as persons protected - in addition to previously protected employees.

31 U.S.C. § 3730 (h) RELIEF FROM RETALIATORY ACTIONS. - now reads:

(1)IN GENERAL - Any employee, contractor, or agent shall be entitled to all relief necessary to make that employee, contractor or agent whole, if that employee, contractor, or agent is discharged, demoted, suspended, threatened, harassed, or in any manner discriminated against in the terms or conditions of employment because of the lawful acts done by the employee, contractor or agent on behalf of the employee, contractor, or agent or associated others in furtherance of other efforts to stop one or more violations of this subchapter. 

CONTRACTORS AND AGENTS NOW COVERED

Prior to the amendments, the only persons covered by the False Claims Act whistleblower protection statute were employees retaliated against by their employer.  Now the False Claims Act protects contractors and agents of a target defendant from retaliation.  The scope of persons now protected has been greatly expanded.  The terms “contractor” and “agent” are so broad that they can be argued to include most persons who do business with a potential target defendant. 

Examples include: independent sales persons for a medical device or pharmaceutical manufacturer;  an outside information technology contractor for a hospital who discovers the hospital has a computer program to systematically upcode charges to Medicare; outside testing inspectors for a defense contractor; independent quality auditors for government contractors.  The potential list is endless.  The hope is that including these new groups within the whistleblower protection of the False Claims Act will encourage more people with knowledge of fraud on the Government to come forward with their information.