False Claims Act Update: Enforcement in the Health Care Sector is White Hot

On July 22, 2019, the United States Department of Justice (DOJ) filed a Complaint-In-Intervention in Federal court in New York against medical device manufacturer Life Spine, Inc. and two members of its executive management team alleging violations of the False Claims Act (FCA). The DOJ and the Relator (four former Life Spine employee whistleblowers) contend that defendants engaged in an illegal kickback scheme by paying surgeons millions of dollars in consulting fees, royalties and acquisition fees to induce them to use Life Spine spinal implants and equipment in violation of the Anti-Kickback Statute (AKS) causing false claims for payment to be submitted to and paid by Medicare and Medicaid. It is further alleged that these problematic payments were in exchange for the paid surgeons’ high volume of Life Spine business and commitment to use defendants’ products in surgeries performed on Medicare and Medicaid patients. The alleged kickback scheme was lucrative and apparently successful.

This case is another example of the government’s increased appetite for pursuing drug manufacturers and medical device companies that engage in prohibited compensation arrangements with prescribers of their products. Recently, drug maker Insys filed for bankruptcy following the conviction of several of its executives for behavior similar to that alleged in the Life Spine matter. These cases, and a number of other high-profile enforcement actions, highlight the need for health care providers to create a robust compliance program and establish a corporate culture “from the top down” committed to adherence to such a program. Health care providers should review applicable state and federal laws and regulations concerning interactions with drug and medical device manufacturers, including the federal AKS, state-specific anti-kickback statutes, the federal Stark Law, and the FCA before entering into contractual arrangements with manufacturers to avoid civil liability or potential government criminal enforcement actions. In this case, the DOJ is seeking damages of up to three times the amount of the alleged illegal kickbacks plus civil penalties and interest. Other cases may involve potential criminal exposure and monetary penalties, including fines, as well as possible exclusion from participation in federal health care programs.

Frier Levitt represents a broad array of health care stakeholders, including physician practices, pharmacies, drug and device manufacturers, health care companies, private equity and other industry participants in healthcare transactions, self-disclosures and government investigations. Additionally, Frier Levitt counsels health care providers and hospital systems in structuring compliant arrangements with other market participants and helps these entities with proper claims submission. Contact Frier Levitt to speak with an attorney today to ensure that your claims comply with applicable laws and regulations, including AKS and FCA.