Since the mid-late 1990s, plaintiffs have been testing the limits of the False Claims Act in health care litigation and have been asserting increasingly creative and far-fetched theories of liability against drug and device companies for various types of alleged conduct, including deceptive marketing practices, off-label marketing, failure to pay the appropriate Medicaid rebate, and inflated published prices. Here are some statistics:
- In 2010 alone, the federal government has already collected $3.1 billion in FCA cases. Eighty percent (80%) of these proceeds came from health care companies, including insurers and hospitals.
- Pharmaceutical companies made up 8 of the 10 largest FCA settlements in 2010.
- Ten of the world’s top twelve pharmaceutical companies have entered into corporate integrity agreements (CIAs) with the federal government in connection with large scale FCA settlements.
Last month’s $750 million GSK settlement indicates that a new theory of liability is in play – the violation of Good Manufacturing Practices in the production of drugs and devices. Two weeks ago, in United States ex rel. Steury v. Cardinal Health, Inc., 2010 WL 4276073 (5th Cir. Nov. 1, 2010), the Fifth Circuit rendered a decision that brings yet another potential theory of FCA liability into play – whether the FCA is violated if a company sells the government medical equipment that the company knew was defective and unsafe.
Why would a plaintiff want to bring an FCA action when it can simply file a products liability suit to address such conduct? There are two principal reasons for this. First, an FCA plaintiff does not need to establish that it was injured by a product defect to bring a claim. Rather, an FCA plaintiff must simply be aware of an alleged fraud committed against the government and then establish that the allegations in the qui tam complaint were not previously publicly disclosed, or if they were, that the plaintiff is the original source of the information. Second, the damages in an FCA case can be extremely large. Once FCA liability is established, the plaintiff is entitled to treble damages and penalties which can range from $5,000 - $10,000 or more per violation. Moreover, the relator’s “cut” ranges between 15-30% of the recovery, which can be quite large in a case against a major drug or device manufacturer. In the recent GSK settlement, the whistleblower received $96 million, which is reported to be the largest FCA payout to a single individual in history.
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