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The FCA and Medical Necessity: An Increasingly Tenuous Relationship

On January 19, 2017, another district court ruled that a mere difference of opinion between physicians is not enough to establish falsity under the False Claims Act.  In US ex rel. Polukoff v. St. Mark’s et al., No. 16-cv-00304 (Jan. 17, 2017 D. Utah), the district court dismissed relator’s non-intervened qui tam complaint with prejudice based on a combination of Rule 9(b) and 12(b)(6) deficiencies.  In so doing, the Polukoff court joined US v. AseraCare, Inc., 176 F. Supp. 3d 1282, 1283 (N.D. Ala. 2016) and a variety of other courts in rejecting False Claims Act claims premised on lack of medical necessity or other matters of scientific judgment.  This decision came just days before statements by Tom Price, President Trump’s pick for Secretary of Health and Human Services (HHS), before the Senate Finance Committee in which he suggested that CMS should focus less on reviewing questions medical necessity and more on ferreting out true fraud.  Price’s...

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Circumstantial Evidence Stretched Beyond Its Limits in Proving Kickback and Fraud-on-DrugDex Theories

Two decisions from the US District Court for the Southern District of Texas limit the extent to which relators can stretch the use of circumstantial evidence to support a False Claims Act case based on an anti-kickback or off-label marketing theory. In two separate decisions on December 10 and December 14 in US ex rel. King v. Solvay Pharmaceuticals, Inc. (SPI)., the court granted SPI’s summary judgment motion finding insufficient evidence for a reasonable juror to support either theory. For the anti-kickback claim, relators alleged that SPI engaged in a number of activities, such as speaker programs, preceptorships, honorariums, free continuing medical education, and provided gifts such as dinners and event tickets, as part of a national scheme to illegally induce physicians to prescribe SPI’s drugs. In dismissing this claim on December 10, the court first found that the allegations of a nationwide scheme were unsupported because in relator’s response to...

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DOJ Boasts About $3.5 Billion in Recoveries from False Claims Act Cases in FY 2015

The U.S. Department of Justice (DOJ) continues to tout its total annual recoveries in False Claims Act cases, as it does each year after the federal government’s fiscal year closes in September.  In its December 3, 2015, press release, DOJ disclosed that it obtained more than $3.5 billion in settlements and judgments from civil cases involving fraud and false claims against the government in the 2015 fiscal year.  DOJ boasts that this is the fourth consecutive year that these kinds of recoveries have exceeded $3.5 billion, raising the total recoveries from January 2009 through the end of the fiscal year to a whopping $26.4 billion. Cases involving the health care industry represented the largest chunk of recoveries in 2015, totaling $1.9 billion from companies and individuals.  This figure only includes monies paid to the federal government, not to state Medicaid programs or individuals.  Thus, the total sum paid out by the health care industry for False...

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U.S. Attorney Manual Revised To Reflect Yates Memorandum’s Focus on Individuals

On September 9, 2015, Deputy Attorney General Sally Quillian Yates issued a memorandum outlining the Department of Justice’s increased focused on individual responsibility in investigations of corporate wrongdoing, now colloquially referred to as the “Yates Memorandum.”  (We previously reported on the Memorandum here). Pursuant to the Yates Memorandum’s directive that the U.S. Attorneys’ Manual (USAM) be revised to reflect this increased focus on individuals, on November 16, 2015, such revisions were released.  In a speech on that date to the American Banking Association and the American Bar Association Money Laundering Enforcement Conference, Deputy AG Yates highlighted the important nature of the revisions: “We don’t revise the USAM all that often and, when we do, it’s for something important.  We change the USAM when we want to make clear that a particular policy is at the heart of what all Department of Justice attorneys do and when we want to make sure...

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DOJ Pursues Both Sides of an Alleged Kickback Arrangement Under the FCA

As many health lawyers know, the government usually only pursues the person or entity that offers or pays allegedly improper remuneration, even though the federal Anti-Kickback Statute (AKS) also applies to those to solicit or receive it.  This uneven enforcement pattern occurs for a variety of reasons — the alleged payor is the focus of the relator’s complaint and resulting investigation, the amount of time that this investigation and resolution takes can create practical and legal problems in pursuing additional defendants, and the increasing number of qui tam cases stretches the government’s limited resources. However, on October 7, 2015, the U.S. Department of Justice (DOJ) announced a settlement with an alleged kickback recipient over three years after it settled with the alleged payor.  PharMerica Corporation, identified by the DOJ as the nation’s second-largest provider of pharmaceutical services to long-term care facilities, agreed to pay $9.25...

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Supreme Court Denies Cert on Whether Government Investigations Are a Public Disclosure

On October 2, 2015, the Supreme Court of the United States denied a petition for writ of certiorari in a case that sought to resolve an apparent circuit split concerning one of the most frequently litigated issues under the False Claims Act (FCA)—the circumstances in which the disclosure of allegations in a government audit or investigation can trigger the public disclosure bar.  Chattanooga-Hamilton County Hospital Authority v. U.S. ex rel. Whipple, No. 15-96.  The petition emanated from a decision we reported on in March 2015 that was issued by the United States Court of Appeals for the Sixth Circuit.  U.S. ex rel. Whipple v. Chattanooga-Hamilton County Hospital Authority, 782 F.3d 260 (6th Cir. 2015). In Whipple, the Sixth Circuit held that information in the possession of the government does not trigger the public disclosure bar because it is not in the “public domain.” In the petition to the Supreme Court, the petitioner framed the issue for review as...

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OIG Announces New Penalty and Exclusion Litigation Team to ‘Level the Playing Field’

The federal government’s health care fraud enforcement efforts expanded this week with an announcement by the Office of the Inspector General (OIG), of the U.S. Department of Health and Human Services, that it has created a new litigation team dedicated to pursuing civil penalty and exclusion cases. Read the full On the Subject discussing the announcement.

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Supreme Court Rules on Wartime Tolling of FCA Statute of Limitations and FCA’s First-to-File Bar in Kellogg Brown & Root v. United States ex rel. Carter

On May 26, 2015, the Supreme Court issued a unanimous opinion in Kellogg Brown & Root v. United States ex rel. Carter (S. Ct. No. 12-1497), a case addressing several important issues under the False Claims Act (FCA).  In a previous post, we laid out the two issues in this case.  First, when the United States is at war, does the Wartime Suspension of Limitations Act (WSLA) toll the statute of limitations in civil FCA lawsuits?  Second, does the FCA’s so-called “first-to-file” bar prevent all future cases based on the same alleged fraud, or is it a one-case-at-a-time rule, allowing duplicative claims in the future as long as the first action is settled or dismissed? The Court ruled in favor of Kellogg Brown & Root (KBR) on the first issue, holding that the WSLA only tolls the statute of limitations for criminal offenses, not in civil false claims like the relator filed against KBR.  The WSLA tolls the statute of limitations for “any offense” involving...

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Use of Statistical Sampling to Establish Damages in FCA Cases Still Controversial

As we previously posted, on April 28, 2015, the United States District Court for the Middle District of Florida in U.S. ex rel. Ruckh v. Genoa Healthcare LLC et al, held that expert testimony based on statistical sampling was appropriate in False Claims Act (FCA) cases and could not be excluded solely due to the concern that sampling, by its nature, subverts individualized proof. The court did, however, preserve the importance of Daubert motions to assail a purported sample, noting that defects in methodology or other evidentiary defects could still result in exclusion of an expert’s sampling analysis. Given the difficulties inherent in identifying a reliable sample in FCA cases involving issues of individualized proof, effective Daubert challenges to a relator’s or the government’s sampling expert are critical when litigating in courts that are inclined to permit sampling, whether offered to prove liability or damages. In Ruckh, the relator alleged that the...

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DOJ Continues to Beat the Executive Drum in Recent Speeches

In the annual speeches at New York University Law School, Assistant Attorney General Leslie R. Caldwell specifically addressed the Department of Justice’s (DOJ) continued interest in examining corporate executives allegedly responsible for corporate misconduct.  Ms. Caldwell discussed this issue in the context of shaping corporate culture through deterrence and explained DOJ’s expectations of companies that want to obtain credit from DOJ for cooperation. At the New York University Law School’s Program on Corporate Compliance and Enforcement on April 17, 2015, Ms. Caldwell said that “true cooperation,” even in the context of making a voluntary criminal disclosure, “requires identifying the individuals actually responsible for the misconduct—be they executives or others—and the provision of all available facts relating to that misconduct.” At the New York University Center on the Administration of Criminal Law’s Seventh Annual Conference on Regulatory Offenses...

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