The topic of the Continuing Legal Education (CLE) seminar is “Blowing the Whistle in 2012: New Developments in Qui Tam Litigation” and will focus on a discussion of recent developments in qui tam litigation including:

• New law on the false certification theory;
• The first-to-file bar;
• The public disclosure bar;
• Other elements and defenses for False Claims Act (FCA) cases in the Eastern District of Virginia

The seminar will include both relators’ counsel and defense attorneys who will discuss FCA liability following amendments and regulatory changes in recent years.  In addition, the talk will include a discussion on practical considerations in qui tam relator suits including:

• What relators’ attorneys consider in choosing potential claims;
• The factors used by the U.S. Attorney’s Office in deciding whether to intervene;
• Litigation of FCA retaliation claims along with pending relator lawsuits

The seminar is being held in at the Westin in Alexandria, VA from 12:00-2:30pm.  Registration will remain open until February 29, 2012.  The Northern VA Chapter of the Federal Bar Association is offering a discount on registration fees to government attorneys to encourage participation

The Employment Law Group® law firm has an extensive nationwide whistleblower practice representing employees who have been victims of retaliation.

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On January 5, 2012, the U.S. Court of Appeals for the Fifth Circuit held that a two-year statute of limitations was the appropriate period for assessing the timeliness of an action brought by a private employee alleging retaliation by a former employer in violation of the False Claims Act (FCA).

The plaintiff, Michael Riddle, allegefs that after he complained to his supervisors at Dyncorp International, Inc. that the company had not fulfilled its obligations to finish a contracting project with the U.S. government, he was “marginalized” and “eventually terminated” on September 21, 2009.  Riddle then filed suit against Dyncorp on March 18, 2010 in the U.S. District Court for the Northern District of Texas, alleging that his employer had violated the FCA when he purportedly sought to prevent the company from making a fraudulent claim for payment to the government.

When Riddle filed suit, the FCA contained no relevant limitations period. In the absence of an express statute of limitations, courts have generally used analogous state statutes of limitations to determine the timeliness of a FCA action.  The district court dismissed Riddle’s suit, holding that the most analogous statute to the FCA is the Texas Whistleblower Act (TWA) which has a 90-day statute of limitations.

The Fifth Circuit reversed the lower court’s dismissal, disagreeing with the district court and finding that the analogy between the FCA and the TWA was “lacking”.  The appeals court noted that the TWA only provides a cause of action to public employees and Mr. Riddle alleged retaliation by a private employer.  In addition to restricting its retaliation protection only to public employees, the court noted that the TWA was also not analogous to the FCA because the TWA requires public employees first “to pursue an administrative remedy before suing”.  This results in TWA limitations periods often exceeding 90 days because the running of the limitations period is suspended while the required administrative proceedings are pending.

In its decision, the Fifth Circuit held that the most analogous Texas state statute for determining the FCA statute of limitations is the two-year period applied to personal injury cases.  The court favored this analogy “because of its association with…a cause of action for wrongful discharge where a person is terminated for refusing to commit an illegal act”. In reversing the district court’s ruling, the court remanded the case for further proceedings.

The appeals court also declined to apply the new three-year statute of limitations for FCA retaliation cases created by the Dodd–Frank Wall Street Reform and Consumer Protection Act because newly-created statute of limitations under Dodd-Frank was not yet in effect when the plaintiff filed his complaint.

The Employment Law Group® law firm has an extensive nationwide whistleblower practice  representing employees who have been victims of retaliation.

The case, U.S. ex rel. Peter Rost v. Pfizer Inc., began in 2003 when relator Peter Rost, a former Pfizer vice president, alleged that the company and its affiliate Pharmacia Corp. engaged in practices involving kickbacks that led to pharmacies submitting false Medicaid claims for Pfizer’s drug Genotropin and that Pfizer induced pharmacies to prescribe the drug for off-label uses. The suit was unsealed in 2005 after the U.S. government opted not to intervene in the case.

In 2010, Judge Patti Saris of the U.S. District Court for the District of Massachusetts ruled that the alleged kickbacks did not constitute a cause of action under the FCA. The ruling, which was based on a theory of implied certification, held that the Medicaid claims that innocent third-party pharmacies submitted were not considered fraudulent within the meaning of the FCA even if Pfizer had violated the Anti-Kickback Statute. The judge also found the companies had not engaged in any illegal off-label marketing of Genotropin.

The government noted that it filed the amicus brief because of its interest in ensuring that the FCA would be used in qui tam lawsuits involving kickback claims. According to the brief:

“an entity that knowingly causes the submission of kickback-tainted claims to Medicare or Medicaid cannot avoid liability under the FCA simply because such claims are submitted by ‘innocent’ third parties…who have no knowledge of the underlying kickbacks.”

In urging the First Circuit to revive the case, the amicus brief also indicates that the First Circuit recently reopened similar qui tam cases against Amgen Inc. and Blackstone Medical Inc. that alleged kickbacks.

Mr. Rost’s attorney recently told reporters that he thinks that the government believes that it is “important to try to prevent the pharmaceutical industry from using these kickbacks to try to taint the judgment of doctors.”

The Employment Law Group© law firm focuses in the areas of employment law and whistleblower protection law, has helped many clients file suit against employers that fraudulently billed the U.S. government, and has established favorable precedents under the retaliation provision of the False Claims Act.

If the Justice Department succeeds in proving that AseraCare knowingly submitted false claims, the federal government could recover from AseraCare three times the amount of the false claims submitted, and $5,500 to $11,000 in penalties for each claim. This lawsuit joins another whistleblower lawsuit originally filed in 2009 in the U.S. District Court for the Northern District of Alabama by former employees, Dawn Richardson and Marsha Brown.   If the Justice Department prevails, Richardson and Brown would be entitled to receive a portion of the money recovered.

The DOJ brought the suit in the U.S. District Court for the Northern District of California under the whistleblower provisions of the False Claims Act (FCA). The suit was initially filed in 2004 against another shipping firm, American President Lines (APL), by its former employee, Jerry H. Brown. In 2007 the suit was amended to include Maersk as a defendant.

APL agreed to settle the suit with the government for $26.3 million in 2009 with the whistleblower, Mr. Brown, receiving $5.19 million. Mr. Brown is entitled to $3.6 million of the current settlement with Maersk.

According to the allegations, the companies “inaccurately billed the U.S. military for certain…services rendered during war-time conditions in Iraq, Pakistan, and Afghanistan.” Specifically, the DOJ alleged that Maersk “knowingly overcharged the Department of Defense to transport thousands of containers from ports to inland delivery” and that Maersk “inflated its invoices in various ways” including overcharging the government.

Maersk attorney, James Philbin, claims that “once Maersk became aware of the allegations [it] commenced an extensive internal review…and voluntarily disclosed these findings” to the government.

U.S. Attorney for the Northern District of California, Melinda Haag, noted that “contractors that submit false claims for monies they are not owed cost the government millions of dollars every year,”  and that this settlement “should send a strong signal that the government is committed to safeguarding taxpayer funds by ensuring that contractors operate ethically and responsibly.”

Of the $3 billion recovered during fiscal year 2011, a record $2.8 billion was recovered under the whistleblower, or qui tam, provisions of the FCA which allow individuals to file lawsuits on behalf of the government and, as an incentive, offers whistleblowers a portion of the amount recovered. $2.4 billion of the amount recovered for fiscal year 2011 involved fraud against federal healthcare programs such as Medicaid, Medicare, and the Department of Defense’s TRICARE program.

Assistant Attorney General Tony West offered his praise for whistleblowers who have come forward to report fraud, saying “we are tremendously grateful to whistleblowers who have brought fraud allegations to the government’s attention and assisted us in this public-private partnership to fight fraud.”

In 1986, the FCA was amended to increase the incentives offered to whistleblowers. According to Sen. Chuck Grassley (R-IA), a co-sponsor of the amendments, the FCA has “[proven] to be the most powerful tool in rooting out fraud against the federal treasury.”

“The whistleblowers who bring these cases to light know the secrets hidden by those who are ripping off federal taxpayers,” he added. Since the 1986 amendments, the DOJ has successfully recovered more than $30 billion.

The Department of Justice alleged that Medtronic paid physicians between $1000 and $2000 for every patient implanted with a Medtronic defibrillator or pacemaker as a part of post-market studies designed to assess the performance of medical devices after approval by the Food and Drug Administration (FDA). According to the allegations, Medtronic solicited physicians for the studies to encourage them to use the company’s devices which, in turn, caused false claims to be submitted to Medicaid and Medicare.

The settlement resolves two whistleblower lawsuits pending in California and Minnesota which were brought under the qui tam provisions of the False Claims Act.  As part of the settlement, the whistleblowers will receive a portion of the federal government’s share of the recovery totaling more than $3.96 million.

According to Benjamin Wagner, U.S. Attorney for the Eastern District of California, the “settlement highlights one of the key purposes of the Anti-Kickback law – to ensure that the judgment exercised by healthcare providers in treating Medicare and Medicaid patients is not influenced by unlawful payments.”

Medtronic denied any wrongdoing in settling the lawsuit, saying that the settlement is not an admission that any of the studies it sponsored were improper or unlawful.

Medtronic is facing another probe by the Department of Justice and U.S. Senate over concerns that physicians paid by the company may have failed to report side effects of one of its products, Infuse, which is a medical device used in spinal surgery.

The proposed rules aim to increase the transparency of the relationships between health care providers and the manufacturers of drugs, medical devices, biological, and medical supplies covered by Medicaid, Medicare, or the Children’s Health Insurance Program.  The proposed rule would require such manufacturers to report certain “payments or transfers of value provided to physicians or teaching hospitals” to the federal government every year. In addition to these reports, the ownership interests or investments of physicians in these kinds of manufacturers or companies would also have to be reported. These reports would be made publically available online under the proposed rules.

CMS noted that while Section 6002 of the ACA requires that physician payment data be collected beginning January 1, 2012, the agency has proposed that manufactures not start collecting the data until the rules are finalized. Collected data for 2012 would still need to be disclosed to CMS by March 31, 2013.

The proposed rules will be published in the December 19, 2011 edition of the Federal Register and CMS will accept comments on the rules until February 17, 2012.  The final rules are expected sometime in 2012.

According to the complaint filed by the Department of Justice (DOJ), Ethex falsified Food and Drug Administration (FDA) certifications of two products, Nitroglycerin ER and Hyoscyamine Sulfate ER, to CMS, thereby allowing the company to sell these unapproved drugs to Medicare patients.  The Food, Drug, and Cosmetic Act requires that all drugs must be approved by the FDA for safety and effectiveness before they can be marketed for mass consumption.  Neither drug has received FDA approval, which potentially places consumers at risk.  Ilisa Bernstein, acting director of the Office of Compliance for the FDA, outlined the seriousness of this violation, stating, “This settlement sends a strong message to those who seek to put the health of American patients at risk by distributing and promoting drugs which have not been approved by the FDA.”

To settle the case, KV has agreed to pay the federal government $10,158,695 and $6,841,305 to the state Medicaid Services.  The whistleblower who reported the company’s unlawful actions received $1,523,804 of the federal share and additional amounts from the state share.

Pharmaceutical laws and regulations permit physicians to prescribe drugs for off-label, unapproved uses; however, drug companies such as Genentech are not  permitted to market those unapproved or off-label uses.  According to the lawsuit, Genentech marketed Rituxan to treat chronic lymphocytic leukemia, atoimmune hemolytic anemia, and rheumatoid arthritis – all of which constitute off-label uses of the drug.

Genentech Headquarters

Responding to questions regarding a whistleblower lawsuit alleging that United Healthcare and its subsidiary, AmeriChoice New Jersey, provided illegal kickbacks in violation of the False Claims Act, Mr. Oswald explained that such activity is “not an isolated incident” and that Medicare is aware of it.

The article noted that accepting money as an incentive to enroll patients in Medicare-managed care plans may constitute a violation of the anti-kickback portions of the False Claims Act, even though a physician hasn’t directly billed Medicare.

In the publication, Mr. Oswald recommends that medical practices refuse to accept inducements if approached by a private payer representative, because “even small [payments] are a violation.”

The article, entitled “Beware of Private Payers That Offer Deals Too Good to Be True – Result Could Be Fraud”, appeared in the October 3, 2011 edition of the newsletter.

For more information or to subscribe to Medical Practice Compliance Alert, visit www.decisionhealth.com/mca.

Rossomando allegedly directed a hygienist to see patients on their first visit, but then the hygienist- instead of a dentist- made treatment recommendations. However, Rossomando billed Medicaid as if she were the one performing a comprehensive oral evaluation. Medicaid would even receive bills on days Rossomando was not in the office. This was discovered after Olivia Estrada, the mother of a child treated by Rossomando, discovered the unlawful practices and reported those practices to the government.

Fraudulently billing Medicaid is a violation of both state and federal False Claims Acts, under which whistleblowers are entitled to a percentage of the settlement money. Accordingly, Estrada will receive $31,800 from the $212,000 settlement.

This settlement relates to a contract Oracle entered into in 1998 to sell software licenses and technical support to government entities through GSA’s Multiple Award Schedule (MAS) program.   The MAS program provides the government and other GSA-authorized purchasers with a streamlined process for procurement of commonly used commercial goods and services.  To be awarded a MAS contract, contractors must agree to disclose commercial pricing policies and practices, and to abide by the contract terms.  The settlement resolves allegations that, in contract negotiations and over the course of the contract’s administration, Oracle knowingly failed to meet its contractual obligations to provide GSA with current, accurate and complete information about its commercial sales practices, including discounts offered to other customers, and that Oracle knowingly made false statements to GSA about its sales practices and discounts.

Tony West, Assistant Attorney General for the Civil Division of the Department of Justice sates:

“Companies that engage in unlawful or fraudulent practices to secure government business undermine the integrity of the procurement process and create an unfair advantage against the majority of companies that are playing by the rules.  Resolutions like this one – the largest GSA false claims settlement in history – demonstrates our commitment to ensure taxpayers are not overpaying for the products and services they receive.”

The settlement resolves a lawsuit filed on behalf of the U.S. government by former Oracle employee, Paul Frascella, who will receive $40 million as his share of the recovery in the case.   Under the whistleblower provisions of the False Claims Act, private citizens can bring lawsuits on behalf of the United States and share in any recovery obtained by the government.

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In U.S. ex rel. Lee v. Corinthian Colleges, The United States Court of Appeals for the Ninth Circuit reversed the District Court’s holding dismissing whistleblowers Nyoka Lee and Talala Mshuja’s False Claims Act complaint alleging Corinthian Colleges violated the Higher Education Act’s (HEA) ban on recruiter-incentive compensation.    Under the HEA, the federal government distributes funds to assist with the costs of secondary education.  In order to qualify for these funds, institutions must comply with a recruiter-incentive ban, which prohibits schools from providing any commission, bonus, or other incentive to recruiters based on the number of students they enroll.

Corinthian Colleges, a public company headquartered in Orange County, California, operates for-profit vocational schools throughout the United States.  On March 26, 2007, the whistleblowers filed a qui tam action on behalf of the United States government against Corinthian.  They allege that Corinthian, who receives billions of dollars from the federal government under the HEA, had fired recruiters and paid other recruiters bonuses amounting to 2.5% to 10% of their base pay based on the number of students they recruit.   The complaint also alleges that Corinthian falsely certified that it was in compliance with the HEA recruiter compensation prohibitions.

The case is remanded to the District Court.