Another District Court Dismisses Improperly Pled Implied Certification Claims

On March 27, 2017, the United States District Court for the Eastern District of Pennsylvania dismissed a False Claims Act (FCA) complaint due to failure to satisfy the Supreme Court’s pleading standards for implied certification claims.

In U.S. ex rel. Schimelpfenig v. Dr. Reddy’s Labs. Ltd., the relators alleged that defendant Dr. Reddy’s Labs violated with False Claims Act (FCA) by causing the submission of claims for prescription drugs, which allegedly did not comply with two federal statutes; the Poison Prevention Packaging Act of 1970 (PPPA) and Consumer Product Safety Improvement Act of 2008 (CPSIA). As alleged by the relators, the defendants that manufactured the drugs failed to issue general conformity certificates for the prescription drugs imported and distributed in the United States, in violation of the CPSIA, and failed to test the packaging of the drugs for child-resistance in violation of the PPPA. The relators alleged that as a result of the noncompliance, drug retailers (also joined as defendants) submitted claims to government payers for federal reimbursement of noncompliant drugs. Continue Reading

District Court Finds Oregon University Immune to FCA Suit Brought by Federal Government

On April 11, 2017, the US District Court for the District of Oregon sided with the Oregon Health and Sciences University (OHSU), finding that as an arm of the state, OHSU is not subject to liability under the False Claims Act (FCA) even when the claim is brought by the federal government. In United States ex rel. Doughty v. Oregon Health and Sciences University, No. 3:13-CV-1306-BR (April 11, 2017 D. Or.), the district court dismissed the qui tam FCA claims, in which the federal government intervened, but granted leave to file an amended complaint on other grounds.

The United States asserted, among other claims, that after relocating its Vaccine and Gene Therapy Institute (VGTI) to its Oregon National Primate Research Center (ONPRC), OHSU wrongly applied to VGTI the higher billing rates applicable to ONPRC, allegedly resulting in inflated reimbursement through a National Institutes of Health grant. OHSU filed a motion to dismiss the case on the grounds it is an arm of the state and not a “person” subject to FCA liability. The United States argued that OHSU is a not an arm of the state for purposes of the FCA, and, even if it were, the bar against FCA liability is limited to cases brought by private individuals. Continue Reading

DC Council Introduces False Claims Expansion – Taxpayers Beware!

Last month, a bill (The False Claims Amendment Act of 2017, B22-0166) was introduced by District of Columbia Councilmember Mary Cheh that would allow tax-related false claims against large taxpayers. Co-sponsors of the bill include Chairman Jack Evans and Councilmember Anita Bonds.

Specifically, the bill would amend the existing false claims statute to expressly authorize tax-related false claims actions against persons that reported net income, sales, or revenue totaling $1 million or more in the tax filing to which the claim pertained, and the damages pleaded in the action total $350,000 or more.

The bill was referred to the Committee of the Whole upon introduction, but has not advanced or been taken up since then. Nearly identical bills were introduced by Councilmember Cheh in 2013 and 2016. Continue Reading

Relators Denied Permanent Seal on FCA Case Record after Voluntary Dismissal

On March 20, 2017, the US District Court for the Southern District of Mississippi denied a motion to permanently seal the record of previously dismissed False Claims Act (FCA) claims.  The three relators, who initially brought the claims in US v. Apothetech Rx Specialty Pharmacy Corp., claimed they would face potential reputational damage and retaliatory actions if the case was not permanently sealed. The court ultimately held, however, that such “generalized apprehensions of future retaliation” were not enough to overcome the strong public right of access to judicial proceedings.

The underlying qui tam complaint was initially filed on August 14, 2015, and alleged the defendants engaged in a fraudulent scheme of improperly compensating independently contracted sales representatives for referrals. The relators voluntarily dismissed the complaint a year later in August 2016. Upon dismissal, however, the court temporarily sealed all case records related to the case to permit the relators time to file the present motion to seal.  Continue Reading

How to Use the New OIG-HCCA Compliance Resource Guide in Your Compliance Program

Released on March 27, 2017, the Compliance Program Resource Guide (Resource Guide), jointly prepared by the US Department of Health and Human Services Office of Inspector General (OIG) and the Health Care Compliance Association (HCCA) reflects the result of a “roundtable” meeting on January 17, 2017, of OIG staff and compliance professionals “to discuss ways to measure the effectiveness of compliance programs.” The resulting Resource Guide document catalogues the roundtable’s brainstorming discussions to “…provide a large number of ideas for measuring the various elements of a compliance program…to give health care organizations as many ideas as possible, to be broad enough to help any type of organization, and let the organization choose which ones best suit its needs.”

Here are a few main takeaways from the Resource Guide:

  • Ideas for Auditing: The Resource Guide contributes to the critical conversation about how to evaluate compliance program effectiveness by listing additional ideas on what to audit and how to audit those areas. The items listed in the Resource Guide generally center on ideas on auditing and monitoring compliance program elements, such as periodically reviewing training and policies and procedures to ensure that they are up-to-date, understandable to staff and accurately reflect the business process as performed in practice. Legal and compliance can use this document to identify those particular elements that may be most applicable to their individual organization.

Organizations would also benefit from considering the questions listed in the new compliance program guidance issued in February by the US Department of Justice (DOJ) Criminal Division’s Fraud Section, “Evaluation of Corporate Compliance Programs” (DOJ Guidance), as part of examining compliance program effectiveness. (We covered the DOJ Guidance previously.) Health care organizations may also use the various provider-specific compliance program guidance documents created by OIG over the years as another source for ideas on what to measure.

  • Not a Mandate: The Resource Guide is very clear that it is not intended to be a “best practice”, a template, or a “‘checklist’ to be applied wholesale to assess a compliance program.” This clarification is an important one since there is the potential for the Resource Guide to be (incorrectly) viewed by qui tam relators or others as creating de facto compliance program requirements or OIG recommendations.
  • How to Measure: The Resource Guide does not delve into how or who should undertake or contribute to the effectiveness review. Who conducts the review is a question that may have legal significance given the nature of a particular issue. General counsel and the chief compliance officer should consider this issue as part of the organization’s ongoing compliance program review. It may be valuable to include the organization’s regular outside white collar counsel to comment on such critical, relevant legal considerations as the proper conduct of an internal investigation; preserving the attorney-client privilege in appropriate situations; coordinating communications between legal, compliance and internal audit personnel; and applying “lessons learned” from the practices of qui tam relators and their counsel. Outside consultants may also have useful expertise and insight to contribute. In some situations, the organization may want to undertake a compliance program assessment conducted under attorney-client privilege as part of advising the executive team and the board audit and compliance committee.

Perhaps the greatest benefit of the Resource Guide is the extent to which it serves as a catalyst for closer, coordinated consideration of the metrics by which compliance program effectiveness may be measured by legal and compliance personnel and the audit and compliance committee. The Resource Guide is one of several resources that can be referenced by the general counsel and the chief compliance officer as they work together to support the organization’s audit and compliance committee in reviewing compliance program effectiveness.

New OIG Rules Change Patient Incentive Program Landscape: Where Are the Limits Now?

With health care becoming more consumer-driven, health care providers and health plans are wrestling with how to incentivize patients to participate in health promotion programs and treatment plans. As payments are increasingly being tied to quality outcomes, a provider’s ability to engage and improve patients’ access to care may both improve patient outcomes and increase providers’ payments. In December 2016, the Office of Inspector General of the US Department of Health and Human Services (OIG) issued a final regulation implementing new “safe harbors” for certain patient incentive arrangements and programs, and released its first Advisory Opinion (AO) under the new regulation in March 2017. Together, the new regulation and AO provide guardrails for how patient engagement and access incentives can be structured to avoid penalties under the federal civil monetary penalty statute (CMP) and the anti-kickback statute (AKS).

Read the full article.

In Calculating FCA Damages, Another Court Rejects Government Windfalls Based on Purportedly “Tainted Claims”

Last month, the US District Court for the District of Columbia delivered another blow to the “tainted claims” theory of False Claims Act (FCA) damages frequently espoused by the government and qui tam relators.

From the 1990s through 2004, the US Postal Service sponsored a professional cycling team led by Lance Armstrong, who won the Tour de France seven consecutive times during that span shortly after surviving metastatic cancer. It was later revealed that Armstrong and his teammates had used performance enhancing drugs (PEDs) during the relevant time period. Armstrong ultimately was stripped of his titles and banned from the sport permanently. After years of denials, Armstrong publicly admitted his PED use in a 2013 interview with Oprah Winfrey.

In 2010, former Armstrong teammate Floyd Landis filed a qui tam FCA suit under seal against Armstrong, the team’s owner (Tailwind Sports Corporation) and others. United States ex rel. Landis v. Tailwind Sports Corp., et al., No. 1:10-cv-00976 (CRC) (U.S. Dist. Ct. D.D.C.). The government intervened against certain defendants, including Armstrong, shortly after the 2013 interview aired. The government and Landis seek to recover as damages the entire $32 million the Postal Service paid to Tailwind during the last four years of the sponsorship, trebled to nearly $100 million, on the grounds that the defendants sought payment while actively concealing Armstrong’s and his teammates’ PED use, which violated both the rules of the sport and the Postal Service’s sponsorship agreement—thereby violating the FCA. Continue Reading

Medicare Part B Provider Secures Dismissal of FCA Claims Under First-to-File Bar

On February 27, 2017, the US District Court for the Southern District of Mississippi granted a defense motion to dismiss False Claims Act (FCA) claims in United States ex rel. Dale v. Lincare Holdings, Inc., on the grounds that the claims were precluded by the FCA’s first-to-file bar.

The defendant, Lincare Holdings, Inc., is a national respiratory care provider that serves Medicare Part B patients via the sale and rental of medical oxygen supplies. The relator, a former salesperson for a Lincare subsidiary, filed his complaint on February 23, 2015, under seal, alleging that Lincare implemented a scheme to falsify and manipulate medical necessity testing in order to generate false reports that would allow it to sell oxygen and other Medicare-covered services to patients who were not medically qualified for coverage. The relator alleged that an office manager and nurse instructed employees to direct patients to take a variety of steps, such as raising their arms while attached to an oxygen sensor, in order to generate falsely low arterial oxygen saturation levels. The relator further claimed retaliatory discharge under the FCA. The United States declined to intervene on August 17, 2015, and the complaint was unsealed on August 24, 2015.

Granting a nearly year-old motion to dismiss, the court held that the relator’s FCA claims were precluded by the FCA’s first-to-file bar, finding that the “fraudulent scheme depicted in Relator’s complaint is largely based on the same underlying facts as the [United States ex rel. Robins v. Lincare, Inc.] scheme.”  The first-to-file bar prohibits plaintiffs from being a “related action based on the facts underlying [a] pending action.” 31 U.S.C. § 3730(b)(5).  The Robins suit was filed first in the US District Court for the District of Massachusetts and the court found that there was a “substantial overlap in material facts” underlying the schemes alleged in each case such that the complaints are sufficiently related for purposes of the first-to-file bar. Continue Reading

SDNY Dismisses Sub-Prime Mortgage Crisis Complaint on Materiality Grounds Because Government Paid Claims Despite Notice of Alleged Fraud

On March 2, 2017, the US District Court for the Southern District of New York applied the materiality standard announced by the Supreme Court of the United States in Universal Health Services, Inc. v. United States ex rel. Escobar to dismiss a relator’s complaint because the relator, a former managing director of Moody’s, failed to plead materiality as a matter of law.

In United States ex rel. Kolchinsky v. Moody’s Corp., the district court had previously dismissed with prejudice four of five categories of claims, and dismissed without prejudice the relator’s “Ratings Delivery Service” claim, i.e., that Moody’s provided inaccurate ratings directly to subscribers, including government agencies.  In his Second Amended Complaint, the relator attempted to cure the pleading defects of Ratings Delivery Service claim in a “124-page tome,” but to no avail. Continue Reading

New OIG Exclusion Regulations About to Go into Effect

The Office of Inspector General (OIG) recently published a final rule regarding its exclusion authorities. The final rule goes into effect March 21, 2017, and expands OIG’s authority to exclude certain individuals and entities from participating in federal health care programs under section 1128 of the Social Security Act.

Read full article.

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