FCA Alert

FCA Alert

Seventh Circuit Holds That Treble Damages Under The False Claims Act Are Based On Net Loss (Not Gross Loss As Argued By Gov’t)

Posted in Articles
Last Thursday, the Seventh Circuit addressed the issue of whether a net trebling or gross trebling approach should be used in calculating damages in False Claims Act cases. (See United States v. Anchor Mortgage Corp. et al, Nos. 10-3122, 10-3342 & 10-3423 (7th Cir. March 21, 2013).   After a bench trial, a district judge found that Anchor Mortgage Corporation and its Chief Executive Officer submitted false claims when applying for federal guarantees of 11 loans. The district court imposed a penalty of $5,500 per loan, plus treble damages of about $2.7 million pursuant to 31 U.S.C. § 3729(a)(1). The FCA’s trebling provision provides that a successful plaintiff shall recover “a civil penalty…plus 3 times the amount of damages which the Government sustains because of the act of that person.” Id. The district court calculated treble damages based on the government’s gross loss, rather than its net loss. Defendant appealed.

The Seventh Circuit agreed with defendants and held that treble damages under the False Claims Act should be calculated based on net loss: 

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U.S. Supreme Court Upholds Affordable Care Act: Significant Aspects of Affordable Care Act for Generic Pharmaceutical Companies

Posted in Legislation & Amendments

On June 28, 2012, the U.S. Supreme Court upheld the Patient Protection and Affordable Care Act (Pub. L. 111-148) (Affordable Care Act).  See National Federation of Independent Business et al. v. Sebelius, Secretary of Health and Human Services, et al., No. 11-393.  The Affordable Care Act makes the following changes in law that are of particular significance to manufacturers of generic drugs and biological products:  (1) creation of an abbreviated licensure pathway for biological products shown to be biosimilar to, or interchangeable with, an FDA-licensed biological reference product, pursuant to the Biologics Price Competition and Innovation Act (BPCIA); (2) revision of the definition of Average Manufacturer Price (AMP), a price used by the Medicaid program to calculate rebates paid by generic drug companies and reimbursement amounts paid to pharmacies that dispense generic drugs; (3) increase in the amount of Medicaid rebates paid by drug manufacturers; (4) change in the calculation of Federal Upper Limits (FULs), which are prices used to reimburse providers that dispense drugs under the Medicaid program; (5) expansion of the 340B drug pricing program, which limits the cost of drugs to certain providers; (6) alleviation of the labeling roadblock for FDA approval of generic drugs when the reference brand product changes its label; and (7) reduction of the Medicare Part D coverage gap, referred to as the “donut hole”.  The Affordable Care Act makes additional changes in law, not discussed in this advisory, that are applicable to all drug manufacturers not discussed in this advisory, such as amendments to the False Claims Act’s “public disclosure bar” and “original source” provisions.  See http://www.fcaalert.com/2010/11/articles/relator-jurisdiction-issues/tennessee-court-holds-selfreporting-to-government-does-not-bar-relator-action/; http://www.fcaalert.com/2010/06/articles/relator-jurisdiction-issues/supreme-court-denies-certiorari-on-original-source-question/.

To view the complete advisory, click here.

The Evolution of the False Claims Act and Anti-Kickback Allegations

Posted in Articles

Here is a copy of the Kickbacks & False Claims Act presentation that I prepared for ACI’s conference on Fraud and Abuse in the Sale and Marketing of Drugs being held today and tomorrow in New York.  The presentation slides include:

  • A discussion of how the legal standards applicable to the Anti-Kickback Statute and the False Claims Act have changed over time.  (Slide Nos. 3-8)
  • The evolution of kickback allegations in FCA Cases.  (Slide Nos. 9-11)
  • A case example:  United States ex rel. Jamison v. McKesson Corp. et al., Civil Action No. 2:08-cv-214 (N.D. Mississippi).  (Slides 12-21)
  • Appendix A:  Implied Certification Cases
  • Appendix B:  A chart summarizing the evolution of kickback allegations (1995-2009).  (Slides 26-33)


D. Mass. Dismisses FCA Claims Against Drug Manufacturer and Distributor

Posted in Articles

A recent case in the District of Massachusetts provides a good illustration of the application of the False Claims Act’s public disclosure and first-to-file bars in health care fraud cases.  See United States ex rel. Bartz v. Ortho-McNeil Pharmaceutical, Inc. et al., Civil Action No. 11-10316 (D. Mass. March 2, 2012).  In 2005, the relator, a former sales compensation manager for a drug manufacturer, filed a qui tam suit pursuant to the False Claims Act against the manufacturer, a distributor, and various related entities.  The amended complaint asserts three broad categories of alleged fraudulent conduct – the manipulation of Medicaid rebate amounts, false reporting of AMP and best price for certain drugs, and the payment of kickbacks to nursing home drug purchasers.  At the core of the relator’s allegations is the claim that the defendant pharmaceutical distributor took kickbacks from the manufacturer as an inducement to purchase the anti-psychotic medication Risperdal Consta.  In 2008, the United States declined to intervene.  As of the date of the court’s opinion, no State had moved to intervene.

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Arkansas District Court Denies DOJ’s Motion To Dismiss After Government Settled With Defendant

Posted in Articles, Relator Issues

In United States ex rel. Rille v. Sun Microsystems, Inc., Civil Action No. 04-CV-00986 (E.D. Ark. Jan. 30. 2012), an Arkansas district court denied the motions to dismiss brought by the Department of Justice (DOJ) and the defendant against the relators, although the DOJ and defendant already settled the underlying claims brought by the relators.

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Which Public Disclosure Bar Applies?

Posted in Articles

A recent case from the District of Massachusetts raises an interesting question under the False Claims Act’s public disclosure bar. See United States ex rel. Estate of Cunningham v. Millennium Laboratories of California, Civil Action No. 09-12209 (D. Mass. Jan. 30, 2012). The defendant Millennium Laboratories provides drug testing services to physicians who treat chronic pain conditions and need to closely monitor their patients’ drug use. The relator Robert Cunningham was a compliance officer for Calloway Laboratories, a competitor of Millennium. On December 29, 2009, Cunningham filed a qui tam complaint in the District Massachusetts against Millennium, alleging that the company was encouraging physicians to use incorrect billing codes to charge Medicaid, Medicare and other government funded health care programs in connection with initial drug screens the physicians performed in their offices.

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Federal False Claims Act Recoveries Cross The $30 Billion Mark

Posted in Articles

According to new statistics released by the Department of Justice, the U.S. government recovered $30.3 billion pursuant to the federal False Claims Act between 1987 and 2011. In the fiscal year ending September 30, 2011, 762 new FCA cases were initiated, consisting of 638 qui tam actions and 124 cases initiated by the United States without the aid of a relator.

More FCA cases were commenced in 2011 than ever before and recoveries amounted to $3.03 billion in 2011, slightly less than the $3.09 recovered in 2010. Of the $3.03 billion recovered in 2011:

  • $2.64 billion was recovered in matters in which the government intervened;
  • $148 million was recovered in cases in which the government declined intervention; and
  • $241 million was recovered in actions initiated by the United States.

As mentioned previously here, it is expected that FCA recoveries will reach a staggering $9 billion in 2012, due in large part to several possible settlements with pharmaceutical manufacturers hovering near, or exceeding, a billion dollars. Last week, it was reported that a one billion dollar settlement had been reached between a drug manufacturer and the U.S. attorney’s office in Philadelphia concerning the marketing practices for a former blockbuster antipsychotic drug.


HEAT Releases Provider Compliance Training Video On The False Claims Act

Posted in Articles

The Health Care Fraud Prevention & Enforcement Action Team (known as "HEAT") has produced a series of 11 short training videos covering high priority compliance topics.  The third training video discusses the False Claims Act.  Here are links to the video and transcript.

The other training videos released so far discuss (1) the OIG’s exclusion authorities and the effects of exclusion; (2) the federal Anti-Kickback Statute; (3) and the federal Physician Self-Referral Law.  New episodes are released at the beginning of each week on the OIG’s website and should continue to run through mid-February.  

More Federal Qui Tam Cases Filed In 2011 Than Ever Before

Posted in Articles

According to a press release issued today by the Department of Justice, 638 new whisteblower complaints under the qui tam provisions of the federal False Claims Act were filed under seal in fiscal year 2011, representing a peak in such filings over prior years.  The DOJ reports that it recovered more than $3 billion under the FCA in 2011, of which $2.8 billion was generated from qui tam actions.

As has been typical in recent years, FCA matters involving the health care and pharmaceutical industries were the largest source of recoveries in 2011. The DOJ recovered $2.4 billion in health care matters, of which $2.2 billion was obtained from pharmaceutical companies. 

Other sources of recoveries include consumer-related financial fraud cases and non-war related procurement cases, which accounted for nearly $358 million in FCA recoveries in 2011.  The DOJ also recovered $89.3 million under the FCA in connection with the wars in Southwest Asia in 2011.

Looking ahead, it is likely that federal FCA recoveries will be even larger in 2012.  One commentator has suggested that it is possible that FCA recoveries will reach $9 billion in 2012, due, in large part, to several possible settlements with pharmaceutical manufacturers hovering near, or exceeding, the billion dollar mark.    

D.C. Circuit Issues Opinion on First-To-File Bar

Posted in Relator Issues

The U.S. Court of Appeals for the District of Columbia in United States ex rel. Batiste v. SLM Corporation, Civil Action No. 10-7140 (D.C. Cir. Nov. 4, 2011) affirmed the dismissal of a relator’s complaint based on an application of the first-to-file bar of the FCA.  The first-to-file rule provides that “no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.”  In so holding, the court also ruled, as a matter of first impression in the D.C. Circuit, that first-filed qui tam complaints need not satisfy the heightened pleading requirements for fraud in order to bar subsequent qui tam complaints.  The United States did not intervene but supported the relator’s position as amicus curiae.

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