Archive for October, 2009

Flaws Found in Body Armor Tests

Thursday, October 29th, 2009

The Government Accountability Office has reported that the the Army deviated from established standards in testing conducted last year of ballistic vests that contain hardened ceramic plates that protect the upper bodies of soldiers from enemy bullets and shrapnel. The audit recommends pulling 33,000 ceramic plates from the Army’s inventory of nearly 2 million. While the Army disagrees with the report and notes that no U.S. troops have been killed in Iraq or Afghanistan due to failure of body armor, the Army voluntarily pulled the recommended 33,000 plates.

Testing of body armor is rigorous at the design stage. However, once the product enters full production by the government contractor, sample items are taken from each production batch and shot at on ranges to determine if the batch is up to the production standards. The greatest departure in testing procedure, as noted by the GAO, is the measurement of the amount of force a plate can withstand. The indentation left in the plate following a test fire demonstrates the amount of blunt force trauma to the soldier.

To view the full article, as reported by the Associated Press, visit: http://www.cbsnews.com/stories/2009/10/16/national/main5388988.shtml

Allergan Sues FDA to Overturn Restrictions on Drug Marketing

Friday, October 16th, 2009

In an attack on the regulation of drug marketing, Allergan, the makers of the antiwrinkle shot Botox, as well as popular Ophthalmic drugs Restasis and Lumigan, have filed a free-speech lawsuit against the federal government.   In the Complaint, filed in federal court in Washington, Allergan charged that restrictions on promoting unapproved uses of Botox for medical conditions like spasticity violate the company’s First Amendment rights to speak freely and truthfully with doctors about its drug products.  Allergan is suing the Food and Drug Administration (FDA), which is responsible for regulating drug promotion, and the Justice Department, which has prosecuted companies for unlawful drug promotion.

The Food and Drug Administration approves medicines for specific therapeutic indications. Once a drug is approved for a specific use, doctors are then free to use their medical judgment to prescribe the drugs for other nonapproved, or off-label, uses. Manufacturers, however, are prohibited from promoting off-label uses to medical providers or advertising such uses directly to the public.  

Companies that violate off-label marketing rules face prosecution and fines. Last month, for example, Pfizer agreed to pay fines of $2.3 billion to settle charges that the company had illegally promoted several drugs, including the painkiller Bextra, which has been withdrawn.

Allergan is seeking in its lawsuit invalidate federal regulations which prohibit drug manufacturers from promoting their drugs for off-label uses to medical providers or advertising such uses directly to the public.  The lawsuit filed by Allergan comes in the wake of a Department of Justice probe of Allergan’s alleged off-label marketing of Botox, which has reportedly already cost the company $7.4 million. 

Although Allergan denies that there is any connection between its suit against the FDA and the Justice Department investigation, the timing is certainly curious.  Allergan’s broad assault on the FDA’s core authority, especially given the ongoing Justice Department probe, raises the serious question of whether there is far greater, yet undisclosed, off-label promotion of drugs going on at Allergan. 

For more information on the Allergan lawsuit: http://www.nytimes.com/2009/10/03/business/media/03drug.html

Harborside Healthcare to Pay U.S. $1.375 Million to Resolve Allegations of Kickbacks and Sham Durable Medical Services

Friday, October 16th, 2009

The United States Department of Justice announced that Harborside Healthcare and HHC Nutrition Services will pay the United States $1.375 million to resolve False Claims Act allegations that the company received kickback and assistance under the guise of sham durable medical equipment (DME) provider.   The government alleged that McKesson Corp., and its affiliate MediNet Corporation provided the kickbacks and assistance and, in return, Harborside purchased its DME products, such as non-enteral supplies, from McKesson.

Violations of the federal Anti-Kickback Statute, 42 U.S.C. Section 1320a-7b(b), have served as the basis for many whistleblower (or “Qui Tam”)  cases under the federal False Claims Act.  The Anti-Kickback Statute, and a number of similar State laws, generally prohibit anyone from offering, paying, soliciting or receiving any remuneration to induce (or reward) a referral of a person for services or items paid for by Medicare, Medicaid, another federal healthcare program.  These improper payments can come in many different forms, including, but not limited to: referral fees; finder’s fees; productivity bonuses; discounted leases; discounted equipment rentals; research grants; speaker’s fees; excessive compensation; and free or discounted travel or entertainment.

The Press Release from the Department of Justice can be viewed at http://www.usdoj.gov/opa/pr/2009/October/09-civ-1091.html

Pennsylvania Senate Introduces State False Claim Act

Friday, October 16th, 2009

On October 8, 2009, the Pennsylvania Senate introduced a bill that would enact a Pennsylvania False Claims Act.  Senate Bill 1113 would enable the Commonwealth to collect treble damages and a civil penalty of $5,000 to $10,000 per claim from anyone who submits, or causes another to submit, a false or fraudulent claim for payment to the Commonwealth of Pennsylvania. 

The Pennsylvania False Claims Act would empower Pennsylvania to protect taxpayer spending from fraud, waste and abuse.  25 States already have enacted similar State False Claims Acts.  Pennsylvania is currently the largest State in the country without its own false claims act. 

The Pennsylvania False Claims Act would be similar to the Federal False Claims Act, which has recovered over $25 Billion since 1986.  The Pennsylvania False Claims Act would, like the Federal False Claims Act, allow whistleblowers (known as “qui tam relators”) to file lawsuits on behalf of taxpayers and share in any recovery that results from their exposing the fraud.

A copy of Senate Bill 1113 can be found on the Internet at http://www.legis.state.pa.us/CFDOCS/Legis/PN/Public/btCheck.cfm?txtType=PDF&sessYr=2009&sessInd=0&billBody=S&billTyp=B&billNbr=1113&pn=1483

A similar bill was introduced in the Pennsylvania General Assembly earlier this year, and can be found on the Internet at http://www.legis.state.pa.us/CFDOCS/Legis/PN/Public/btCheck.cfm?txtType=PDF&sessYr=2009&sessInd=0&billBody=H&billTyp=B&billNbr=1679&pn=2120

Lilly Settles Suit With South Carolina Over Zyprexa

Thursday, October 8th, 2009

Eli Lilly & Co. agreed to settle a lawsuit brought by South Carolina claiming the company improperly marketed its antipsychotic Zyprexa, averting a trial in which the state planned to seek $6 billion.   South Carolina sought reimbursement for the costs of Zyprexa prescriptions and alleged Zyprexa-related illnesses. The state claimed Lilly pushed doctors to prescribe the medication and withheld information about Zyprexa’s side effects such as weight gain.

Zyprexa, Lilly’s best-selling drug, has been the subject of federal and state investigations into marketing practices, including “off-label” marketing.  Lilly, the largest maker of psychiatric drugs, resolved a marketing investigation in January with the U.S. Justice Department, promising to pay $1.42 billion, including about $362 million to more than 30 states.

Pharmaceuticals and other drugs are highly regulated by numerous federal and state laws and regulations. Before any drug can be approved for use in the United States, it must first be approved by the Food and Drug Administration (“FDA”). The FDA determines precisely which medical conditions a drug may be used to treat. This determination is known as the drug’s “label” or “indication.” The label or indication is critical to pharmaceutical companies because federal law restricts pharmaceutical companies to marketing or promoting drugs only for the uses or indications approved by the FDA. Physicians, by contrast, generally may prescribe drugs to treat numerous medical conditions even if the drug has not been approved by the FDA to treat those conditions. This practice is known as “off-label” use of a drug because it goes beyond those uses specifically approved by the FDA.

One common scheme by pharmaceutical manufacturers has been to market or promote their drugs to physicians for an off-label or unapproved use. Although physicians may prescribe a drug for an off-label use, pharmaceutical companies violate federal law, including the False Claims Act, when they market, promote or encourage physicians to use their drugs in an off-label or non-FDA approved manner. Pharmaceutical companies that have engaged in illegal off-label marketing or promotion of their drugs have paid the Government hundreds of millions of dollars as a result of Federal False Claims Act cases, often times brought by pharmaceutical sales representatives, sales managers, compliance officers, other pharmaceutical company employees, physicians, nurses and/or employees of hospitals or physician practices.

The case is State of South Carolina v. Eli Lilly & Co., 2007-CP-42-1855, Common Pleas Court of South Carolina, Seventh Judicial Circuit (Spartanburg).  For more information:

http://www.bloomberg.com/apps/news?pid=20602085&sid=aN.rgzI8E4bY

25 States Have Enacted False Claims Acts

Tuesday, October 6th, 2009

As of October 1, 2009, 25 States have enacted their own State False Claims Acts.  Most of the State False Claims Acts are modeled after the federal False Claims Act, and provide that qui tam whistleblowers can bring claims on behalf of the state. There are, however, important differences between these State False Claims Acts, and potential whistleblowers must pay careful attention to the specific requirements of each statute.

The following is a list of the 25 States with State False Claims Acts:

California, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Louisiana, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Oregon, Rhode Island, Tennessee, Texas, Wisconsin, Virginia

In addition, the District of Columbia, New York City, and Chicago each have enacted False Claims Acts.

Each of the 25 State False Claims Acts can be viewed on the Internet at  http://www.falseclaimsact.com/sfca_overview.php

GAO Report Finds Widespread Problems at Defense Contract Audit Agency

Tuesday, October 6th, 2009

The Government Accountability Office (“GAO”) recently issued a report finding widespread problems with the quality of audits conducted by the Defense Contract Audit Agency (“DCAA”).  The DCAA under the Department of Defense (DOD) Comptroller plays a critical role in defense contractor oversight by providing auditing, accounting, and financial advisory services in connection with DOD and other federal agency contracts and subcontracts.

Last year, GAO found numerous problems with DCAA audit quality at three locations in California, including the failure to meet professional auditing standards.  In this latest report, GAO found audit quality problems at DCAA offices nationwide, including compromise of auditor independence, insufficient audit testing, and inadequate planning and supervision.  GAO found DCAA’s management environment and quality assurance structure were based on a production-oriented mission that put DCAA in the role of facilitating DOD contracting without also protecting the public interest.

To address these system-wide problems at DCAA, the GAO made a number recommendations ranging from possible Congressional action to 15 suggested changes at the DCAA that could be implemented by, or through, the Secretary of Defense. 

A copy of the GAO Report, 09-468, can be viewed on the Internet at http://www.gao.gov/new.items/d09468.pdf

IRS Reports Whistleblower Complaints On The Rise

Monday, October 5th, 2009

The Internal Revenue Service (“IRS”) recently reported an increase in the number of whistleblower complaints it has received under the new IRS Whistleblower Law that was enacted in 2006.  The IRS Whistleblower Law enables private individuals to report: (1) underpayments of tax; and (2) persons otherwise guilty of violating the internal revenue laws.  The IRS Whistleblower Law, like the False Claims Act, rewards whistleblowers who report allegations to the government.  In general, a whistleblower can receive an award of between 15% to 30% of the collected proceeds (including penalties, interest, additions to tax and additional amounts).

The IRS recently reported to Congress that it received 1,246 whistleblower claims in 2008.  To meet this increased volume of claims, the staff of the IRS’ Whistleblower Office grew in 2008 from 4 to 14, including 10 analysts with substantial experience in a wide variety of IRS compliance programs. 

A copy of the 2009 IRS Report to Congress can be found on the Internet at  http://www.irs.gov/pub/whistleblower/annual_report_to_congress_september_2009.pdf

Government Website Tracks Federal Stimulus Spending

Monday, October 5th, 2009

The United States Government has established a new website that allows citizens to track stimulus spending under the Recovery Act.  This interactive website allows stimulus spending to be tracked by state and/or zip code.  The website also contains links to reports by the Government Accountability Office (“GAO”), instructions for reporting fraud, as well as other resources and information about federal stimulus spending.

This interesting new Government’s website can be found on the Internet at www.recovery.gov.

The ‘New’ New Jersey False Claims Act: It Was Born to Run

Monday, October 5th, 2009

On Jan. 7, 2008, the New Jersey Legislature joined then 20 other states and the District of Columbia in passing its version of a civil false claims act.   The New Jersey False Claims Act, which is modeled on the Federal False Claims Act, allows whistleblowers (often referred to as “Qui Tam Relators”) to blow-the-whistle on those businesses and individuals who submit false or fraudulent claims to the State of New Jersey.  

In an article published by the Legal Intelligencer, Marc S. Raspanti and Pamela C. Brecht provide an in-depth analysis of the new New Jersey False Claims Act, and a comparison to the federal False Claims Act.  A copy of this detailed article about the new NJ FCA can be viewed at http://www.falseclaimsact.com/library/files/docs-1565842-v1-born_to_run_article-_legal_reprint.doc