The Fallacy of Qui Tam Immunity

Recently, the United States filed a Notice of Settlement in the Middle District of Florida seeking to resolve its allegations that a pharmacy and its owner violated the False Claims Act. Notably, this matter was originally filed as qui tam complaint, a coordinated effort by two relators who were employees of different organizations. While the original complaint named as defendants both relators’ employers, it also named several individuals and entities outside of the relators’ respective organizations.

This case highlights two important points: First, that relators are not limited to bringing qui tam complaints against their own employers or those within their organization and, second, that relators need not file a complaint in isolation; that is, they can work together, even with of other companies. Indeed, anyone with information that a person or company has defrauded the government is able to file a qui tam.

The federal False Claims Act contains whistleblower provisions that permit private citizens with knowledge that a person or organization has defrauded the government to file suit on the government’s behalf. A case brought by a private citizen rather than by the government itself is called a qui tam complaint, and that private citizen is dubbed a “relator.” Individual citizens are financially incentivized to bring forward allegations the False Claims Act has been violated as they are authorized under the qui tam provisions to share in between 15% and 30% of the government’s recovery, which can be significant, especially after multipliers and per-claim civil monetary penalties are imposed. There is no cap on the recovery amount a relator can collect. The False Claims Act, with its whistleblower provisions, makes this statute one of the most powerful tools in the government’s arsenal for prosecuting fraud perpetrated against it. Hundreds of qui tam actions have been filed each year since 19921 which has resulted in a yearly government recovery of billions of dollars each year, in which the filing relators share. The rate at which these cases are being filed does not appear to be slowing, as individuals become savvy to, and continue to be financially incentivized by, this mechanism for reporting and prosecuting fraud. However, as fruitful as these provisions are for the government and successful whistleblowers, these provisions are far more destructive to an unsuspecting organization.

Companies often believe they can enjoy a certain immunity to qui tam exposure in large part because they trust their employees. However, as displayed above, this is a fallacy in which no entity should seek comfort. Due to the enormous financial incentives to bring a qui tam complaint, no employer should assume that its employees are loyal. Additionally, as discussed above, qui tam complaints can be lodged by anyone with information about that organization’s operations, including those from outside the organization. That means that an organizations’ vendors, contractors, manufacturers, patients, and even affiliate or competing entities are all potential whistleblowers with the potential to cause the organization’s demise.

It is of utmost importance that an organization’s operations remain above board. This means appropriate structuring of arrangements and relationships at the outset, implementation of robust standard operating procedures throughout the entire course of operation, and proper redressal and reporting of misconduct. A misstep in any one of these areas may expose an organization to liability, inviting qui tam actions.

It has never been more important for healthcare providers to be vigilant in ensuring compliance in their organizations and appropriately and proactively redressing noncompliance. Frier Levitt attorneys have in-depth experience in all areas of healthcare and life sciences law. If you need assistance with structuring an arrangement or have recently discovered or are suspect of noncompliance, contact Frier Levitt.