On November 8, 2017, the US District Court for the Middle District of Florida dismissed a relator’s non-intervened claims in United States ex rel. Stepe v. RS Compounding LLC for failure to satisfy the particularity requirement of Federal Rule of Civil Procedure 9(b). Relator originally filed her complaint under seal on December 16, 2013, under the federal False Claims Act (FCA) and Florida’s analogous statute. Over three years after the complaint was filed, the government elected to partially intervene as to fraudulent pricing allegations relating to TRICARE. Relator amended her complaint in July 2017 and added state false claims counts under the laws of 16 additional states. All 17 states declined to intervene in the case in September 2017.

The complaint alleges that Relator, through her work as a sales representative for defendant RS Compounding, became aware of Defendants’ purported schemes to defraud the government on prescription compound and gel products. The relator alleged that prescription pads were prepopulated for physicians, with RS Compounding’s most expensive compounds pre-checked on the pads and six refills listed by default. Relator further alleged that this scheme involved sales representatives “coaching” physicians to number three different products on the pads, with priority given to products containing ketamine because those products had a higher reimbursement rate from the government. Continue Reading Dismissed in Florida: Former Compounding Pharmacy Sales Representative’s FCA Whistleblower Suit

While medical practices are generally aware that relators and the government pursue allegations of false or duplicative claims to federal health care programs, a recent settlement reflects a growing trend of False Claims Act (FCA) allegations concerning the failure to report and return identified overpayments. On October 13, 2017, the US Department of Justice (DOJ) announced that it had reached a $450,000 settlement with First Coast Cardiovascular Institute, P.A. (FCCI) of Jacksonville, Florida in a qui tam lawsuit alleging that FCCI failed to promptly return identified overpayments from federal health care programs after the overpayments came to the attention of the practice’s leadership. Continue Reading DOJ Settlement with Florida Medical Practice Serves as a Reminder: Delayed Repayment to Federal Programs Can Have Significant Consequences

In the fourth of a related set of qui tam False Claims Act (FCA) suits, the United States District Court for the Northern District of Illinois granted summary judgment in favor of generics manufacturer Par Pharmaceutical Companies (Par). The court’s August 17, 2017, opinion in U.S. ex rel. Lisitza et al v. Par Pharmaceutical Co, Inc. held that the relator had not presented sufficient evidence to support an implied certification theory of FCA liability.

Like its sister cases, the relator in Par Pharmaceutical alleged that the defendant caused the submission of false claims to the Medicaid program via an unlawful prescription-switching scheme. The alleged scheme involved manufacturing generic drugs in forms and dosage strengths that were atypical and not covered by existing Medicaid reimbursement limits, then marketing the drugs to pharmacies based on their higher reimbursement potential. The pharmacies would then fill the scripts with the more expensive forms and dosages manufactured by Par. The relators also alleged that the drugs were dispensed without physician approval and without meeting the medical necessity and economic requirements of governing state and federal Medicaid regulations, in violation of the FCA.

Continue Reading Par Pharmaceutical Beats FCA Prescription-Switch Allegations

In US ex rel. Michaels v. Agape Senior Community, the Department of Justice has assented to a $275,000 settlement after having rejected a $2.5 million settlement two years ago (despite declining to intervene in the case). This case garnered substantial attention because the relators sought to employ statistical sampling to establish liability on hundreds of millions of dollars of allegedly false claims to Medicare and Medicaid.

Previously, the Fourth Circuit heard–on interlocutory appeal–argument as to (1) whether statistical sampling could be used to establish liability in a False Claims Act case; and (2) whether the government could veto a False Claims Act settlement in a case in which the government declines to intervene. The Fourth Circuit ruled that the government did possess the authority to veto a settlement in a non-intervened case, and refused to address whether sampling could be used to establish liability. We discussed the Fourth Circuit’s decision here.

Although the Fourth Circuit declined to reach the question of whether False Claims Act plaintiffs can establish liability by using statistical sampling, the presiding district court judge had already concluded that plaintiffs could not do so. Having represented to the court that they could not marshal the resources to establish liability on a claim-by-claim basis, the court granted partial summary judgment on the vast majority of claims at issue. The relators subsequently settled for the value of the claims originally at issue: approximately one percent of the claims at issue in this case and 11 percent of what the relators and defendants previously agreed to.

The Fourth Circuit was to be the first appellate court to address the sampling issue, and this case demonstrates the importance of this issue. Where plaintiffs in this arena may lack sufficient resources to prove their cases on a claim-by-claim basis, the use of statistical sampling makes it far more cost-effective to prosecute their cases. If appellate courts rule on this issue in the future, and in favor of defendants, such rulings will deprive plaintiffs of this potential shortcut. This would appropriately limit plaintiffs’ recovery to claims plaintiffs actually prove are false by a preponderance of the evidence.

On July 10, 2017, US Circuit Court of Appeals for the Ninth Circuit reversed a December 3, 2014, district court dismissal of False Claims Act (FCA) claims against Salish Kootenai College (College), a tribal college of the Salish Kootenai Tribes (Tribe).  United States ex rel. Cain v. Salish Kootenai College, Inc. (July 10, 2017). The 9th Circuit directed the district court to reconsider whether the College is subject to liability under the FCA under a different standard than used by the district court.

The district court had entered its order dismissing claims by the qui tam relators that the College filed false progress reports to the US Department of Health and Human Services and the Indian Health Service in order to retain grant funding from the agencies, holding that the College was an arm of the Tribe and shared the Tribe’s sovereign immunity, which had not been waived by the Tribe or Congress. (The district court also dismissed claims against the members of the College board of directors and the College foundation. Relators, however, only appealed the dismissal of claims against the College.)

The court of appeals disagreed with the district court’s framing of the question. The central question is not, as the district court found, whether the College enjoyed tribal immunity and whether such immunity had been waived. Rather, the central issue in a FCA case is whether the College is a “person” within the meaning of the FCA, and, thus subject to liability under the FCA. Accordingly, the court undertook a two-part analysis to decide the question: (1) whether the Tribe is a person under the FCA or a sovereign not subject to the FCA, and, if the latter; (2) whether the College is an arm of the Tribe that shares the Tribe’s sovereign status for purposes of the FCA. Continue Reading Ninth Circuit Remands False Claims Act Case against Tribal College for Determination of Sovereign Status

We reported back in March on the US District Court for the District of Columbia’s summary judgment decision in the Lance Armstrong/Floyd Landis/US Postal Service (USPS) False Claims Act (FCA) litigation, centered on Lance Armstrong’s use of performance enhancing drugs (PEDs) while he was leading a professional cycling team sponsored by the USPS. A pack of motions in limine (MILs) filed by the parties over the past few weeks suggest that the case may well be headed to trial this fall, and raise some notable legal issues to watch as it continues to unfold, including: Continue Reading Motions in Limine Filed in Lance Armstrong/US Postal Service Litigation Raise FCA Damages, Government Knowledge and Relator Character Issues on Which Court’s Rulings May Have Widespread Impact

In a case of first impression, a federal court found that the federal physician self-referral law’s (Stark Law) requirement that financial arrangements with physicians be memorialized in a signed writing could be material to the government’s payment decision. This case raises troubling questions about applying the False Claims Act (FCA) to what many in the industry consider “technical” Stark issues, especially given the Supreme Court’s description of the materiality test as “demanding” and not satisfied by “minor or insubstantial” regulatory noncompliance.

United States ex rel. Tullio Emanuele v. Medicor Associates (Emanuele), in the US District Court for the Western District of Pennsylvania, involves Medicor Associates, Inc., a private medical group practice (Medicor), and Hamot Medical Center’s (Hamot) exclusive provider of cardiology coverage. Tullio Emanuele, a qui tam relator and former physician member of Medicor, alleged that Hamot, Medicor, and four of Medicor’s shareholder-employee cardiologists (the Physicians) violated the FCA and Stark Law because Hamot’s multiple medical director compensation arrangements with Medicor failed to satisfy the signed writing requirement in the Stark Law’s personal services or fair market value exceptions during various periods of time. The US Department of Justice declined to intervene in the case, but filed a statement of interest in the summary judgment stage supporting the relator’s position. Continue Reading Is the Stark Law’s “Signed Writing” Requirement Material to Payment: One Federal Court Says Yes

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 the 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 Another District Court Dismisses Improperly Pled Implied Certification Claims

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 Relators Denied Permanent Seal on FCA Case Record after Voluntary Dismissal

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