Justice Department Sets Record in Fraud Recoveries

The Department of Justice (DOJ) received $3.8 billion in settlements and judgments from civil cases involving fraud against the government in the fiscal year ending Sept. 30, 2013, according to Assistant Attorney General for the Civil Division Stuart F. Delery.

As in previous years, the DOJ said, the largest recoveries related to health care fraud, which reached $2.6 billion. Procurement fraud (related primarily to defense contracts) accounted for another $890 million—a record in that area.

The total $3.8 billion amount is the second largest annual recovery of its type in history and brings total recoveries under the False Claims Act (FCA) since January 2009 to $17 billion, the DOJ said.

The DOJ’s fiscal 2013 efforts recovered more than $3 billion for the fourth year in a row and are surpassed only by last year’s nearly $5 billion in recoveries.

The number of FCA qui tam suits filed in fiscal year 2013 rose to 752—100 more than the record set the previous fiscal year. Recoveries in qui tam cases during fiscal year 2013 totaled $2.9 billion, with whistleblowers recovering $345 million.

The DOJ noted that some of the largest recoveries this past fiscal year involved allegations of fraud and false claims in the pharmaceutical and medical device industries.

Of the $2.6 billion in federal health care fraud recoveries, $1.8 billion were from alleged false claims for drugs and medical devices under federally insured health programs that, in addition to Medicare and Medicaid, include Tricare, which provides benefits for military personnel and their families, veterans’ health care programs, and the Federal Employees Health Benefits Program.

The department recovered an additional $443 million for state Medicaid programs.

Many of these settlements involved allegations that pharmaceutical manufacturers improperly promoted their drugs for uses not approved by the Food and Drug Administration (FDA)—or “off-label” marketing. For example, drug manufacturer Abbott Laboratories Inc. paid $1.5 billion to resolve allegations that it illegally promoted the drug Depakote to treat agitation and aggression in elderly dementia patients and schizophrenia when neither of these uses was approved as safe and effective by the FDA.

The DOJ also said it settled allegations relating to the manufacture and distribution of adulterated drugs. For example, it said generic drug manufacturer Ranbaxy USA Inc. paid $505 million to settle allegations of false claims to federal and state health care programs for adulterated drugs distributed from its facilities in India. That settlement included $237 million in federal civil claims, $118 million in state civil claims, and $150 million in criminal fines and forfeitures.

In another major pharmaceutical case, biotech giant Amgen Inc. paid the government $762 million, including $598.5 million in FCA recoveries, to settle allegations that included its illegal promotion of Aranesp, a drug used to treat anemia, in doses not approved by the FDA and for off-label use to treat non-anemia-related conditions.

Tuomey Case
The DOJ noted that the Civil Division’s Consumer Protection Branch, together with U.S. attorneys across the country, obtained 16 criminal convictions and more than $1.3 billion in criminal fines, forfeitures, and disgorgement under the Federal Food, Drug and Cosmetic Act (FDCA). The FDCA protects the health and safety of the public by ensuring, among other things, that drugs intended for use in humans are safe and effective for their intended uses and that the labeling of such drugs bears true, complete, and accurate information.

In other areas of health care fraud, the DOJ obtained a $237 million judgment against South Carolina-based Tuomey Healthcare System Inc., after a four-week trial, for violating the Stark law and the FCA. The Stark law prohibits hospitals from submitting claims to Medicare for patients referred to the hospital by physicians who have a prohibited financial relationship with the hospital. Tuomey’s appeal of the $237 million judgment is pending. If the judgment is affirmed on appeal, it will be the largest judgment in the history of the Stark law.

The department also recovered $26.3 million in a settlement with Steven J. Wasserman, a dermatologist practicing in Florida, to resolve allegations that he entered into an illegal kickback arrangement with Tampa Pathology Laboratory that resulted in increased claims to Medicare. Tampa Pathology Laboratory previously paid the government $950,000 for its role in the alleged scheme. The $26.3 million settlement is one of the largest with an individual in the history of the FCA.

Takeaway: Record fraud recoveries by the federal government in recent years are likely to lead to an even more difficult enforcement climate for health care providers.

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