On May 2, the U.S. Department of Justice announced the indictment of two New York state pharmacy owners for their participation in an alleged $29 million healthcare fraud scheme. They face charges of conspiracy to commit healthcare fraud, conspiracy to commit money laundering and conspiracy to pay illegal healthcare kickbacks and bribes.
Read on for analysis of the case and takeaways for healthcare providers and pharmacies.
On May 3, 2023, the US Court of Appeals for the Seventh Circuit sided with the policyholder, resolving a large insurance coverage dispute relating to a $100 million settlement involving claims under the federal Anti-Kickback Statute and the federal False Claims Act. Astellas US Holding, Inc. v. Fed. Ins. Co., No. 21-3075, 2023 WL 3221737 (7th Cir. May 3, 2023). In so doing, the court held that Illinois public policy does not forbid a liability insurer from covering its insured’s payments to resolve compensatory damages it may owe even if characterized by the government and insured as “restitutionary,” while reiterating that Illinois public policy prohibits insurance for “genuine restitution it owes the victims of its intentional wrongdoing.”[1] Determining the amount of a False Claims Act (“FCA”) settlement that is compensatory in nature was made easier by a change in the tax code implemented by The Tax Cuts and Jobs Act of 2017 requiring all False Claims Act settlements to detail the percentage of the settlement amount that is compensatory in nature (and, therefore, is tax deductible), providing an important marker for policyholders seeking insurance coverage for at least a portion of the settlements they reach to resolve FCA investigations.
The Office of Inspector General (OIG) has announced that it is expanding the topics it considers for new Frequently Asked Questions (FAQs) submitted by healthcare stakeholders. OIG will now answer general questions about the Federal anti-kickback statute (AKS), questions related to the civil monetary penalty (CMP) provision prohibiting remuneration to Medicare and State health care program beneficiaries, and questions relating to OIG’s enforcement authority under these statutes. OIG has stated it will respond to inquiries in the FAQ asking for general applications of AKS to a given type of arrangement. OIG also said it would answer questions regarding compliance and its healthcare fraud self-disclosure protocol.
A Texas federal court recently denied a pharmaceutical supplier’s motion to dismiss claims brought by a whistleblower under the federal False Claims Act (FCA) alleging violations of the Anti-Kickback Statute (AKS) and manipulation of Average Wholesale Pricing (AWP) rules. The complaint was filed by a pharmacist (the Relator) who previously worked for the defendant, Professional Compounding Centers of America Inc. (PCCA), a pharmaceutical supplier which sells active ingredients to compounding pharmacies. The Relator alleged that PCCA reported inflated AWPs for the ingredients it sold to its compounding pharmacy customers as part of a scheme that violated the FCA and AKS. The Government filed its complaint in partial intervention in November 2021, asserting FCA claims against PCCA for causing the submission of false claims to TRICARE and for reporting false AWPs to the pricing compendia upon which TRICARE reimbursement is based.
On February 28, 2023, a federal jury in the District of Minnesota found the Cameron-Ehlen Group, d/b/a Precision Lens, and its founder and owner Paul Ehlen (the “Defendants”) guilty of paying kickbacks to ophthalmic surgeons in violation of the False Claims Act, 31 U.S.C. 3729 (“FCA”) and Federal Anti-Kickback Statute, 42 U.S.C. 1320a-7b(b) (“AKS”) between 2006 and 2015.[1] This case serves as an excellent example of the risks that medical device manufacturers and distributors incur by not having an effective compliance program that identifies and corrects compliance issues.
The Centers for Medicare & Medicaid Services recently announced updates to the voluntary self-referral disclosure protocol for reporting and resolving technical violations under the physician self-referral law commonly known as the Stark Law.
Read on for details about these updates, intended to streamline the reporting process and reduce burdens on self-disclosing healthcare providers.
Government investigators focus on pandemic-related fraud has culminated in a recent criminal conviction As announced by the Department of Justice (DOJ), on Friday, January 13, 2023, a federal jury convicted a Colorado physician of theft for misappropriating almost $250,000 in federal COVID-19 relief funds, including both the Medicare Accelerated and Advance Payment Program (“MAAPP”) and the Paycheck Protection Program (“PPP Loans”). This is the first conviction we are aware of with respect to MAAPP to date, but marks another example of the government’s enforcement efforts to address COVID-19-related fraud. It is also a reminder for healthcare providers to remain vigilant in complying with COVID-19 relief fund program requirements as such government focus on COVID-19-related fraud continues unabated.
The U.S. Department of Justice recently announced it recovered over $2.2 billion under the False Claims Act in fiscal year 2022 — the lowest annual recovery since 2008. Despite declining recoveries, the number of new matters suggests that investigation activity will remain vigorous and businesses should be prepared for more robust enforcement as promised by the Biden campaign and administration.
Read on to learn more about the expected increase in enforcement activity over the next few years.
On Jan. 13, the U.S. Supreme Court granted a writ of certiorari to petitioners in two False Claims Act cases to determine whether the law’s knowledge requirement reaches defendants who can offer an “objectively reasonable” interpretation of an ambiguous legal or contractual requirement material to government payment.
Read on for details about this case, likely to produce one of the most significant FCA decisions in decades, with important implications for government contractors and healthcare providers whose businesses must comply with complex and sometimes opaque regulatory regimes.
On July 20, Biogen Inc. agreed to pay $900 million to settle claims the company violated the False Claims Act by allegedly paying improper consulting and speaker fees and providing lavish meals and entertainment to medical providers to induce them to prescribe the multiple sclerosis drugs it manufactures.
Read on for details about this unusually large settlement, which highlights the risks associated with pharmaceutical and device manufacturers hiring providers as consultants and conducting speaker programs.