DOJ Confirms Epic Spike In FCA Penalties

The U.S. Department of Justice confirmed Wednesday that False Claims Act penalties will soon nearly double, making high-stakes FCA litigation all the more dramatic.

The development has been expected since May, when an obscure agency called the Railroad Retirement Board updated FCA penalties in accordance with a budget deal that Congress struck last year. Under Wednesday’s interim final rule, minimum per-claim penalties will jump to $10,781 from $5,500, and maximum per-claim penalties will rise to $21,563 from $11,000.

The DOJ has latitude under the spending law to enact a smaller increase if the full amount would produce “a negative economic impact." But the department said without explanation that it “is not invoking that authority in this rule.” The increase takes effect Aug. 1 and applies to violations after Nov. 2, 2015.

Many attorneys were caught off guard by the size of the increase, because they expected adjustments that would account for inflation since FCA penalties were last updated under a 1996 law. But the recent spending law actually required adjustments to account for inflation since FCA penalties were adjusted in 1986.

There has been a great deal of speculation about how the steeper penalties will affect FCA litigation. They could mean that common FCA targets — such as defense contractors, hospitals and drug makers — will be even less likely to take cases to trial, given the potentially existential risk. read more »

Heart Device Maker Pays $8M To End FCA Kickback Suit

A heart surgery device maker has agreed to pay $8 million to settle a whistleblower's False Claims Act allegations that it provided marketing support as kickbacks to doctors who charged government health programs for the devices' use, the federal government said Wednesday.

Minneapolis-based Cardiovascular Services Inc. agreed in a North Carolina federal court to pay $8 million and institute a five-year compliance program to end an FCA suit brought by a former CSI sales manager. Jill Westmoreland Rose, U.S. Attorney for the Western District of North Carolina, disclosed the settlement Wednesday.

“Doctors are expected to provide medical advice and treatment options that benefit patients, not their own practice,” Rose said in a statement posted to the U.S. Department of Justice’s website. “The type of kickback scheme alleged in this case compromises good medical care and can lead to inefficient use of limited health care resources.”

Travis Thams had worked for CSI between 2012 and 2013, during which the company offered kickbacks to doctors who used CSI devices and CSI promoted the devices for off-label purposes, according to his 2013 complaint.

Though the Wednesday-announced DOJ settlement did not mention the off-label promotion claims, government investigators had said that they found evidence that CSI was aiding physicians who used its products with developing their practices by helping them win referrals.

The government, which moved to intervene in the case Wednesday for purposes of settlement, said that such marketing support constitutes unlawful kickbacks and that because the physicians using the device were charging Medicare and Medicaid for their services, CSI was in violation of the FCA. read more »

D.C. Circuit Upholds Public-Disclosure-Bar Dismissal Based On Information Posted to Websites

Last week, the U.S. Court of Appeals for the D.C. Circuit upheld a district court’s dismissal of a qui tam action under the oft-litigated, “public disclosure bar,” where the transactions that gave rise to an inference of fraud were “available” on the internet. See United States ex rel Oliver v. Philip Morris USA Inc., No. 15-7049 (D.C. Cir. June 21, 2016).  The public disclosure bar requires dismissal of FCA claims that are based on information that have been publicly disclosed through one of the enumerated channels set forth in the FCA, unless the relator is an “original source of the information.”  31 U.S.C. § 3730(e)(4).

The underlying allegations in the lawsuit were that Philip Morris USA (“Philip Morris”) had violated the FCA by charging the Navy Exchange Service Command (“NEXCOM”) and Army and Air Force Exchange Service (“AAFES”) prices for cigarettes that violated the terms of their contracts. The “Most Favored Customer” provisions of their respective contracts required that Philip Morris sell cigarettes to NEXCOM and AAFES at prices equal to or more favorable than the prices that Philip Morris sold the same product to other non-governmental and governmental purchasers.  Despite this requirement, Philip Morris allegedly sold cigarettes to NEXCOM and AAFES at significantly higher prices than those offered to other customers. read more »

Furniture Makers Lied About Small Business Status, Relator Says

A whistleblower furniture maker moved for a partial win in its antitrust and False Claims Act lawsuit against rival companies, telling a Texas federal judge on Tuesday that the companies falsely certified to the government that they were women-owned small businesses.

Relator University Loft Co. asked U.S. District Judge Orlando Garcia to grant it partial summary judgment regarding women-owned small business allegations in its suit accusing Atveq Inc., KLN Steel Products Co LLC., Thurston Manufacturing Co. and Dehler Manufacturing Inc. of using unfair techniques to outbid it on furniture contracts for government buildings and student housing.

The Avteq companies had argued that University Loft failed to identify a contract or invoice in which they allegedly made a misrepresentation as to their women-owned small business status, but University Loft on Tuesday claimed that a database of federal contracting data shows that the rival furniture makers received government contracts set aside under the women-owned small business program, and that the companies have “simply refused to produce them.”

“Even though defendants have refused to produce those contracts, their limited production of documents confirms the accuracy of the Federal Procurement Data System, the falsity of defendants’ statements that they are unaware that they had received WOSB awards, and the falsity of their statements that they were unaware that direct ownership is required,” University Loft said.

In its June 2014 suit, University Loft accused the Avteq companies of bid-rigging, saying Avteq units would bid as separate companies on government contracts that required the government to obtain a set number of bids. Doing so, University Loft claims, allowed the companies to appeal to a purchaser inclined to get a project done quickly. The suit also says the Avteq companies would falsely certify Colombian products as made in the U.S. and falsely certify that some Avteq units were owned by women. read more »

'Kickbacks' In FCA Suit Were Just Discounts, Omnicare Says

Omnicare Inc. engaged in a perfectly legal drug discount program that was studiously noted in internal documents, the company told a Massachusetts federal judge Wednesday as it pressed for summary judgment in a qui tam case alleging false Medicaid claims and kickbacks.

The Peabody, Massachusetts-based company faces allegations that it submitted false claims to the Medicaid program because it engaged in kickbacks when it marketed antidepressant Remeron to long-term care facilities. 

Relators for the federal government claim that Omnicare got drug manufacturer Organon to give it price discounts in exchange for promising to press the drug on long-term care facilities, like nursing homes, that make up most of Omnicare’s client base. But there are exceptions in federal law that allow for such discounts so long as they're disclosed to the federal government by request, Omnicare told U.S. District Judge Rya Zobel.

“Everything was disclosed in the four corners of those agreements,” attorney Suzanne Jaffey Bloom said Wednesday morning at a motion hearing for summary judgment.

After extensive discovery — 1.3 million pages of documents and 18 depositions — the relators can’t show any sort of illicit side agreement, Bloom said. And there are exemptions in the anti-kickback statute for just this sort of discount program, Bloom said.

“There is absolutely not a shred of evidence of outside agreements,” Bloom said.

Lawyers for the relators countered that there are, in fact, side agreements, and that just because something is noted on paper doesn’t give the green light for fraud. In 2000, Medicaid was trying to close the gap between how much money it reimbursed for drugs like the antidepressant Remeron and how much money drug companies like Omnicare were making off of it. In response, the relators say, Omnicare hatched a scheme to buy Remeron from Organon at a discount from the manufacturers to increase the spread. read more »