Archive for November, 2009

Justice Department Recovers $2.4 Billion in False Claims Cases in Fiscal Year 2009; More Than $24 Billion Since 1986

Friday, November 20th, 2009

Earlier this week, the United States Department of Justice announced that it had secured $2.4 billion in settlements and judgments in cases involving fraud against the government in the fiscal year ending Sept. 30, 2009. This represents the second largest annual recovery of civil fraud claims in history, and brings total recoveries since 1986, when Congress substantially strengthened the civil False Claims Act, to more than $24 billion.

The government’s partnership with private citizens in the fight against fraud was cemented in 1986, when Congress amended the False Claims Act, the United States’ primary tool against government fraud. The amendments strengthened the act by, among other things, revising the statute’s qui tam provisions, which were intended to encourage whistleblowers to come forward with allegations of fraud. The 1986 amendments reduced the barriers to citizens suing on behalf of the government and increased the incentives to filing such suits.

Of the $2.4 billion in settlements and judgments obtained in fiscal year 2009, nearly $2 billion was recovered in lawsuits filed under the False Claims Act’s qui tam provisions. These provisions authorize private persons, known as “relators,” to file suit on behalf of the United States against those who have falsely or fraudulently claimed federal funds. Such cases run the gamut of federally funded programs, from Medicare and Medicaid to defense and other government procurement contracts, federally insured mortgage and other federal housing programs, disaster assistance loans, agricultural subsidies and more. Persons who knowingly make false claims for federal funds are liable for three times the government’s loss plus a civil penalty of $5,500 to $11,000 for each claim. Relators recover 15 to 25 percent of the proceeds of a successful suit if the United States intervenes in the qui tam action, and up to 30 percent if the United States declines and the relator pursues the action alone. In fiscal year 2009, relators were awarded $255 million. (This figure does not include relator shares awarded after Sept. 30, 2009.)

The government’s press release can be found at:

U.S. Proceeds with Related Action Against Two Nursing Home Chains and Their Principals

Friday, November 20th, 2009

The United States Attorney’s Office for the District of Massachusetts announced the settlement of multiple false claims act cases against Omnicare, Inc. of Covington, Kentucky,  for $98 million for soliciting and receiving multiple kickbacks.  The first scheme involved Johnson and Johnson and kickbacks for recommending that physicians prescribe Risperdal, a J&J antipsychotic drug, to nursing home patients.  The US also alleged that Omnicare regularly paid kickbacks to nursing homes by providing them with consultant pharmacist services at rates below Omnicare’s costs and below the fair market value for such services.  The government alleged that Omnicare also solicited kickbacks from IVAX, and IVAX paid $8 million, in exchange for Omnicare’s agreement to purchase $50 million in drugs from IVAX.  The US Attorney’s office settled related claims against IVAX for $14 million.  Finally, the government alleged that Omnicare and several nursing home chains conspired to arrange for Omnicare to pay the chains $50 million in exchange for the right to continue providing pharmacy services to the nursing homes.  As part of the settlements, Omnicare and IVAX agreed to enter into corporate integrity agreements with the OIG for the Department of Health and Human Services. 

More information on the lawsuits can be found here:

United States Sues Kaman Dayron, Inc., Under False Claims Act

Friday, November 20th, 2009

The US Department of Justice filed a lawsuit under the False Claims Act against defense contractor Kaman Dayron, Inc. for allegedly substituting non-conforming parts in sophisticated ignition devices supplied in “bunker buster” bombs.  The lawsuit contends that Kaman Dayron knowingly substituted non-conforming parts that might cause the ignition devices to fire prematurely, causing warhead misfires. 

The case is being prosecuted under the National Procurement Fraud Initiative, which was created in 2006 to promote the early detection and prosecution of procurement fraud in government contracting for national security. 

More information can be found at the following link:,1033336.shtml

AtriCure Pays $3.8M to Settle With U.S.

Friday, November 20th, 2009

The manufacturer of devices for treatment of atrial fibrillation (irregular heartbeats) tentatively settled with the US Department of Justice allegations of false claims for $3.8 million.  The DOJ claimed that the manufacturer, AtriCure, marketed its devices beyond the scope of its FDA clearance and by instructing hospitals to use incorrect Medicare billing codes. 

More information about the lawsuit can be found at the following link:

U.S. Sues Canadian Firm Over Bullet Vests

Friday, November 20th, 2009

The US Department of Justice sued a seller of bullet-proof vests, and several of manufacturers of component parts of the vests under the False Claims Act claiming that the vests were defective. The DOJ sued Lincoln Fabrics, Ltd. of Canada and its American subsidiary, Toyobo Co., Honeywell International, Inc. and others, The DOJ claimed that not only did the woven fabric, known as Zylon, degrade quickly over time, and particularly in hot and humid weather, but that the manufacturers were aware of the defect.

More information about the lawsuit can be found here:

Fourteen States Sue Amgen, Alleging Kickback Scheme To Promote Aranesp

Thursday, November 5th, 2009

Fourteen states and the District of Columbia have filed a false claims act suit against Amgen, accusing the biotech company of using kickbacks to sell its anemia drug Aranesp (darbepoetin alfa).

In court papers filed Oct. 30 in U.S. District Court for the District of Massachusetts, the states and D.C. alleged that the Thousand Oaks, Calif.-based company used cash and a fraudulent billing scheme to entice physicians to prescribe Aranesp. The 12-count suit stems from claims made by a former Amgen employee who turned whistleblower in 2006.

The whistleblower, who worked for the company from 2002 until 2005, claims that the company deliberately overfilled shipments of Aranesp and then encouraged physicians to bill government health care programs for the overage, a practice referred to as a “liquid kickback.” The whistleblower also contended that Amgen had strong ties to a professional organization called the International Nephrology Network and used medical conferences sponsored by the group as a chance to wine and dine physicians and office managers, often giving sizeable honoraria to those attending. Office managers who promoted the drug to administrators at other physician practices could receive additional honoraria as well, the suit claimed.

Participating in the suit are California, Delaware, Florida, Hawaii, Illinois, Indiana, Louisiana, Massachusetts, Michigan, Nevada, New Hampshire, New York, Tennessee, Virginia and the District of Columbia.

For more information:

United States Intervenes in False Claims Act Suit Against Virginia Medicaid Providers

Wednesday, November 4th, 2009

The United States and the Commonwealth of Virginia have intervened in a False Claims Act suit in the Western District of Virginia against the Medicaid providers Universal Health Services Inc., Keystone Marion LLC and Keystone Education and Youth Services LLC, the Justice Department announced today. They did business as the Keystone Marion Youth Center, a residential facility in Marion, Va., that receives Medicaid funds to provide psychiatric counseling and treatment for boys ages 11-17.

This False Claims Act lawsuit was filed by several former therapists who worked at the Marion residential facility. The suit alleges that defendants provided sub-standard care to adolescents in violation of federal and state Medicaid requirements, falsified records to cover up their serious violations and filed false Medicaid claims. Under the False Claims Act, a health care provider that submits false or fraudulent claims to a federal health care program is liable for three times the government’s damages, plus a civil penalty for each false claim.

For more information:

Texas Hospital Group Pays U.S. $27.5 Million to Settle False Claims Act Allegations

Wednesday, November 4th, 2009

A hospital group based in McAllen, Texas, has agreed to pay the United States $27.5 million to settle claims that it violated the False Claims Act, the Anti-Kickback Statute and the Stark Statute between 1999 and 2006, by paying illegal compensation to doctors in order to induce them to refer patients to hospitals within the group, the United States Justice Department announced today. McAllen Hospitals L.P., d/b/a/ South Texas Health System, is a subsidiary of Universal Health Services Inc., a company based in Pennsylvania that owns hospitals and other health care centers around the country.

The settlement announced today involved allegations that the defendants had entered into financial relationships with several doctors in McAllen in order to induce them to refer patients to the defendants’ hospitals. The government alleged that these payments were disguised through a series of sham contracts, including medical directorships and lease agreements. Under the Stark Statute, Medicare providers are prohibited from billing Medicare for referrals from doctors with whom the providers have a financial relationship, unless that relationship falls within certain exceptions.

The settlement resolves allegations raised against both the parent and the subsidiary in a qui tamor whistleblower lawsuit filed in 2005 by Bruce Moilan, a former employee of the defendants, United States ex rel. Moilan v. McAllen Hospitals, L.P., et al., Case No. M-05-CV-263 (S.D. Tex.).

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.

For more information:

AstraZeneca Settles Seroquel Probe

Wednesday, November 4th, 2009

AstraZeneca PLC announced that it has reached an agreement “in principle” to pay $520 million settle an investigation by the United States Department of Justice into the company’s marketing of schizophrenia drug Seroquel.

The U.S. Attorney’s Office in Philadelphia has been leading an investigation into AstraZeneca’s marketing of Seroquel, including allegations that the company promoted the drug for uses for which is not approved by the Food and Drug Administration (FDA).

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.

AstraZeneca said its net profit rose 22% in the third quarter to $2.12 billion from $1.73 billion a year earlier, while revenue increased 5.4% to $8.2 billion from $7.7 billion.

For more information see: