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Of $3 billion DOJ recovered in fraud, $2.6 billion attributable to healthcare

Over $2.1 billion arose from lawsuits filed by whistleblowers under the qui tam provisions of the False Claims Act.

Susan Morse, Managing Editor

Of the more than $3 billion in fraud settlements and judgments the government recovered from civil cases involving fraud and false claims, $2.6 billion involved healthcare, according to the Department of Justice.

The cases include drug and medical device manufacturers, managed care providers, hospitals, pharmacies, hospice organizations, laboratories, and physicians. 

The amounts included in the $2.6 billion reflect only federal losses, but in many of these cases the department was instrumental in recovering additional millions of dollars for state Medicaid programs.

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Of the $3 billion in settlements reported for the fiscal year ending September 30, over $2.1 billion arose from lawsuits filed by whistleblowers under the qui tam provisions of the False Claims Act. The government paid out $265 million to the individuals who exposed fraud and false claims by filing these actions.

WHAT'S THE IMPACT

Two of the largest recoveries involved opioid manufacturers.

The department also investigated efforts by drug manufacturers to facilitate increases in drug prices by funding the co-payments of Medicare patients. Congress included copay requirements in the Medicare program, in part, to serve as a check on healthcare costs, including the prices that pharmaceutical manufacturers can demand for their drugs, the DOJ said. 

Seven drug manufacturers – Actelion Pharmaceuticals US, Amgen, Astellas Pharma US, Alexion Pharmaceuticals, Jazz Pharmaceuticals, Lundbeck and US Worldmeds – paid a combined total of over $624 million to resolve claims that they illegally paid patient copays for their own drugs through purportedly independent foundations that the companies in fact treated as mere conduits.

Except where indicated, the government's claims in the matters described below are allegations only and there has been no determination of liability. 

Insys Therapeutics paid $195 million to settle civil allegations that it paid kickbacks to induce physicians and nurse practitioners to prescribe Subsys for their patients.

The kickbacks allegedly took the form of sham speaker events, jobs for the prescribers' relatives and friends, and lavish meals and entertainment. 

The government also alleged that Insys improperly encouraged physicians to prescribe Subsys for patients who did not have cancer, and lied to insurers about patients' diagnoses to ensure payment by federal healthcare programs. 

Reckitt Benckiser Group paid a total of $1.4 billion to resolve criminal and civil liability related to the marketing of the opioid addiction treatment drug Suboxone, which is a formulation of the opioid buprenorphine. 

As part of the resolution, RB Group paid $500 million to the United States to resolve civil allegations that it directly or through subsidiaries promoted Suboxone to physicians who were writing prescriptions for uses that were unsafe, ineffective, and medically unnecessary; promoted Suboxone Film using false and misleading claims that it was less susceptible to diversion, abuse, and accidental pediatric exposure than other buprenorphine products; and took steps to delay the entry of generic competition in order to improperly control pricing of Suboxone.

In other healthcare settlements, Avanir Pharmaceuticals paid over $95 million to resolve allegations that it paid kickbacks and engaged in false and misleading marketing to induce healthcare providers in long term care facilities to prescribe the drug Neudexta for behaviors commonly associated with dementia patients, which is not an approved use of the drug.

Pathology laboratory company Inform Diagnostics, formerly known as Miraca Life Sciences Inc., paid $63.5 million to resolve allegations that it paid kickbacks to referring physicians in the form of subsidies for electronic health records systems and free or discounted technology consulting services. 

Greenway Health, an EHR software vendor, paid over $57 million to resolve allegations that it misrepresented the capabilities of its EHR product "Prime Suite" and provided unlawful remuneration to users to induce them to recommend Prime Suite to prospective new customers. 

Encompass Health Corporation (formerly known as HealthSouth Corporation), a large operator of inpatient rehabilitation facilities, paid $48 million to resolve allegations that some of its IRFs provided inaccurate information to Medicare to maintain their status as an IRF and to earn a higher rate of reimbursement, and that some admissions to its IRFs were not medically necessary.

The department negotiated separate settlements with the individual owners of seven Osteo Relief Institutes for a total recovery from the owners and their clinics of more than $7.1 million.  The settlements resolved allegations that the defendants knowingly billed Medicare for medically unnecessary viscosupplementation injections and medically unnecessary knee braces. 

In addition to negotiating a settlement with Vanguard Healthcare for approximately $18 million in allowed claims to resolve allegations of grossly substandard nursing home services, the department also pursued Vanguard's majority owner and CEO and Vanguard's former director of operations.

These two individuals collectively paid $250,000 to resolve allegations that five Vanguard-owned skilled nursing facilities submitted false claims to Medicare and Medicaid for nursing home services that were grossly substandard or worthless, including allegations that the facilities failed to administer medications as prescribed, failed to provide standard infection control or wound care, failed to take prophylactic measures to prevent pressure ulcers, and failed to meet basic nutrition and hygiene needs of their residents.

This year, the department also obtained a $21 million settlement with a compounding pharmacy, Diabetic Care Rx (which does business as Patient Care America), and a private equity firm, Riordan, Lewis & Haden, to resolve a lawsuit alleging that they submitted false claims to Tricare, the federal healthcare program for military members and their families, through their involvement in a kickback scheme to generate referrals of prescriptions for expensive pain creams, scar creams, and vitamins. 

THE LARGER TREND

This is the tenth consecutive year that the department's civil healthcare fraud settlements and judgments have exceeded $2 billion. 

Recoveries since 1986, when Congress substantially strengthened the civil False Claims Act, now total more than $62 billion.

The number of lawsuits filed under the qui tam provisions of the Act has grown significantly since 1986, with 633 qui tam suits filed this past year.
The department recovered over $2.1 billion in these and earlier filed suits.

In 1986, Senator Charles Grassley and Representative Howard Berman led the successful effort in Congress to amend the False Claims Act to, among other things, encourage whistleblowers to come forward with allegations of fraud. 

In 2009 and 2010, further improvements were made to the False Claims Act and its whistleblower provisions.

ON THE RECORD

"The accomplishments announced today reflect the extraordinary efforts of the men and women throughout the government committed to protecting the federal fisc and the integrity of the government's programs."

"The significant number of settlements and judgments obtained over the past year demonstrate the high priority this administration places on deterring fraud against the government and ensuring that citizens' tax dollars are well spent," said Assistant Attorney General Jody Hunt of the Department of Justice's Civil Division.

Matthew M. Curley, member at Bass, Berry & Sims PLC said, "DOJ's fraud enforcement results are largely in line with prior years and reflect DOJ's continued focus with respect to previously announced enforcement priorities and holding individuals accountable for their roles with respect to alleged wrongdoing."

Twitter: @SusanJMorse
Email the writer: susan.morse@himssmedia.com