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Insys Announces Settlement-in-Principle with DOJ Over Alleged Subsys Kickback Scheme

Last month, Insys Therapeutics, Inc. announced that it reached a settlement-in-principle with the U.S. Department of Justice (DOJ) to settle claims that it knowingly offered and paid kickbacks to induce physicians and nurse practitioners to prescribe the drug Subsys and that it knowingly caused Medicare and other federal health care programs to pay for non-covered uses of the drug. The drugmaker agreed to pay at least $150 million and up to $75 million more based on “contingent events.” According to a status report filed by DOJ, the tentative agreement is subject to further approval and resolution of related issues. The settlement does not resolve state civil fraud and consumer protection claims against the company. The consolidated lawsuits subject to the settlement allege that Insys violated the False Claims Act and Anti-Kickback Statute in connection with its marketing of Subsys, a sub-lingual spray form of the powerful opioid fentanyl. The Food and Drug...

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Massachusetts Lawsuit Against Long-Term Pharmacy Care Provider Fails to Clear the Legacy FCA Public Disclosure Bar

On April 30, 2018, the U.S. District Court for the District of Massachusetts dismissed the last remaining state False Claims Act (FCA) claims against long-term care pharmacy provider PharMerica, Inc. on the grounds that neither relator qualified as an “original source” under the applicable pre-2010 version of the FCA, thereby precluding their claims under the public disclosure bar. Critically, neither relator had firsthand, “direct” knowledge of the alleged fraud scheme. In 2007, two relators (employees of a pharmaceutical company) filed suit alleging that their employer had offered financial incentives to two long-term care pharmacy providers (LTCPs) in exchange for the pharmacy providers’ promotion of prescriptions of a specific antidepressant. Specifically, the relators alleged that their employer offered significant discounts and rebates to LTCP customers in exchange for increased promotion of the antidepressant, and that market-tier discounts were...

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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. Practice Note: Because the current false claims statute includes an express tax bar, this bill would represent a major policy departure in the District. See D.C. Code...

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Old Dog, New Tricks: Fraud and Abuse in the Age of Payment Reform

The good, reassuring news about that “old dog” fraud and abuse as it enters an age of payment reform is that criminal liability for fraud still requires a specific intent to defraud the federal health care programs, anti-kickback liability still requires actual knowledge of at least the wrongfulness, if not the illegality, of the financial transaction with a referral source, and civil False Claims Act liability for Stark Law violations still requires actual knowledge, a reckless disregard for, or deliberate ignorance of the Stark Law violation. This should mean that good faith and diligent efforts to comply with law, including seeking and following legal counsel, still go a long way in managing an organization’s and individual executive’s risk under the fraud and abuse laws. The bad, unsettling news about fraud and abuse in an age of payment reform, however, is that (1) anxiety about reform and stagnating and declining physician incomes are propelling a spike...

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Wisconsin Repeals State FCA

On July 12, 2015, Wisconsin governor Scott Walker signed into law the budget passed by the state legislature the previous week. The budget included a short rider that repeals Wisconsin's 2007 False Claims for Medical Assistance Act, Wis. Stat. s. 20.931—the state's version of the federal False Claims Act (FCA). Prior to its repeal, the law allowed relators to claim up to 30 percent of awards, and provided whistleblower protections and triple damages similar to the FCA. No hearings or public discussions regarding the repeal took place, and the lawmakers who introduced the bill gave no explanation. The Wisconsin attorney general did not take a position on the law's repeal, but a spokeswoman from his office stated that repeal of the law "will not have much impact—if any—given that there are numerous laws that allow the state to prosecute Medicaid fraud." However, according to the U.S. Chamber of Commerce, the repeal will save Wisconsin the cost of investigating...

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Illinois Appellate Court Affirms Dismissal of State Tax Qui Tam Lawsuit

On March 31, 2015, the Illinois Appellate Court issued an opinion affirming the dismissal of a qui tam lawsuit filed by a law firm acting as a whistleblower on behalf of the State of Illinois against QVC, Inc., under the Illinois False Claims Act.  The opinion affirmed an important precedent previously set by the court regarding the standard for dismissal of such claims when the State moves for dismissal, and established favorable precedent for retailers by holding that use tax voluntarily paid after the filing of a qui tam action does not qualify as “proceeds” of the action within the meaning of the Illinois False Claims Act. Read the full article.

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Update On False Claims Developments at the State Level

On March 21, 2015, the Maryland state senate passed a revised version of Bill No. 374, which, as previously noted, would create a state version of the federal False Claims Act (FCA) if signed into law.  As amended, however, the proposed statute is somewhat less plaintiff-friendly than before.  For example, it: imposes an absolute 10-year statute of limitations, whereas the original bill allowed actions to be filed up to three years “after the date when facts material to the right of action . . . reasonably should have been known,” regardless of how long after the actual violation this was; limits whistleblower protection, by narrowing the scope of actionable retaliatory conduct to omit the phrase “any other adverse action taken against an employee, contractor, or agent . . . .”; and removes the possibility of the government obtaining attorney’s fees for successful actions. See generally 2015 Md. Senate Bill No. 374.  The other house of the Maryland state...

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States Continue to Develop False Claims Act Analogs

On February 6, 2015, both houses of the Maryland legislature introduced bills that would add Maryland to the growing list of states with their own version of the False Claims Act (FCA).  If signed into law, Maryland will, effective October 1, 2015, impose a $10,000 civil penalty and triple damages for, inter alia, “knowingly present[ing] or caus[ing] to be presented a false or fraudulent claim for payment or approval.”  Act of Feb. 6, 2015, § 8-102, 2015 Md. Senate Bill No. 374 (establishing Maryland False Claims Act); Act of Feb. 6, 2015, § 8-102, 2015 Md. House Bill No. 405 (same).  Maryland already has a False Health Claims Act, which imposes similar liability only for false claims submitted to Maryland state health plans or programs (including Medicaid).  See Md. Code, Health–Gen. § 2-602 (2010). At present, 20 states (plus the District of Columbia) have their own versions of the federal FCA: California, Delaware, Florida, Georgia, Hawaii, Illinois,...

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