Last week, yet another pharmaceutical company entered into a settlement agreement with the Department of Justice, agreeing to pay $193 million to settle whistleblower claims that it marketed Lidoderm (a shingles drug) for purposes not approved by the FDA. This marks a continued trend of the U.S. government in pursuing healthcare companies for False Claims Act violations, having recovered over $3.8 billion in 2013.
However, this recent case involving the pharmaceutical company highlights a more concerning trend, particularly for healthcare companies. With the implementation of tort reform in many jurisdictions, many personal injury and plaintiffs’ medical malpractice attorneys have begun to shift their attention away from injury cases and toward a new breed of clients: whistleblowers in the healthcare industry
The Federal False Claims provides for a cause of action to be brought by a whistleblower as a qui tam plaintiff. A qui tam action involves a suit initiated by an individual, or “relator,” who with the help of the government, alleges that the defendant violated certain federal laws, including the Federal False Claims Act. Individuals who file under the False Claims Act are entitled to receive a portion of the monetary recovery from the defendant (normally between 15-25%).
Under the False Claims Act, a defendant can be liable if it knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval to the Federal Government or knowingly makes or uses a false statement or fraudulent claim. For example, by violating the Federal anti-kickback laws, a healthcare provider will be deemed to be submitting false claims to the government because it must otherwise certify compliance with government requirements at the point of sale. Similarly, if a particular product is marketed in a way that is not approved by the FDA, the healthcare company could also face liability.
Worryingly, this new trend poses new, greater concerns for healthcare providers, including compounding pharmacies. With the plaintiffs’ bar actively seeking whistleblower clients, healthcare providers must be vigilant to ensure compliance with laws and regulations. Disgruntled employees could now very easily turn whistleblower plaintiffs if the company’s practices and procedures are non-compliant. Important areas of focus, particularly for compounding pharmacies, are compensation relationships with marketers, marketing materials presented to physicians, and practices in billing and copayment collection.
The best way for providers to avoid these types of qui tam cases is to make sure your healthcare business is following Federal and State law. Frier Levitt helps healthcare businesses comply with laws and regulations, and avoid potential liability. Contact us today to speak to one of our attorneys.
