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The California Insurance Commissioner’s Suit Against AbbVie Highlights Lurking Risks Under State Insurance Fraud Prevention Acts

Earlier this week, the California Insurance Commissioner filed a wide-ranging lawsuit against AbbVie, alleging classic illegal kickbacks to physicians as well as an intricate network of “nurse ambassadors” designed to improperly boost prescriptions for Humira, and seeking over $1.2 billion in damages.  Apart from representing a growing scrutiny on pharmaceutical manufacturers and other ancillary providers supplying nursing services allegedly in an effort to supplant the role of the prescribing physician, this lawsuit highlights a second phenomenon – namely, State Insurance Commissioners filing civil actions under Insurance Fraud Prevention Acts over claims submitted to private insurers.

This case stemmed from a qui tam whistleblower case filed in Illinois federal court alleging similar conduct as it related to governmentally-funded claims (i.e., Medicare, Medicaid, TRICARE, etc.), and earlier this year, the U.S. Department of Justice and various states, including California, declined to intervene in that suit.  Instead, in an interesting turn of events, the California Insurance Commissioner brought the current lawsuit under California’s Insurance Frauds Prevention Act seeking to recover on losses to private insurance carriers and payors.

Insurance Fraud Prevention Acts – or IFPAs – are State legislation aimed at creating public and private tools to aggressively confront alleged insurance fraud, that, in addition to developing statutory fraud prevention programs, typically allow for public agencies or private entities to bring claims for restitution of fraudulently obtained insurance benefits, along with multiple damages, attorneys’ fees and other penalties.  Virtually every State has some form of an IFPA on the books, and over forty States allow for criminal penalties as well.

The current action by the California Insurance Commissioner highlights the fact that, while an arrangement might avoid federal scrutiny, it may nevertheless face liability to private insurance carriers.  This is especially so in the case of arrangements involving “carve outs” of federal programs, as even if there is no jurisdictional nexus for OIG or the DOJ to get involved from a False Claims Act perspective, State Insurance Commissioners or even private insurance companies could nevertheless bring similar cases, couched on the same underlying improper conduct, and exposing companies to treble damages and attorneys’ fees.  While State lawsuits like this have historically been less common than federal False Claims Act cases, the current case against AbbVie shows that the risk is equally there.

Frier Levitt has represented numerous healthcare providers and life science companies in successfully defending claims under the IFPAs.  If you are facing an IFPA action, or are concerned about your operations as they relate to private insurance programs, contact Frier Levitt today.