Archive for the ‘State False Claims Acts’ Category

Sanofi Aventis Can’t Invoke the First Amendment to Escape FCA Liability

Monday, January 23rd, 2017

United States ex rel. Gohil v. Aventis, Inc. is a long-running False Claims Act suit filed in the Eastern District of Pennsylvania by an ex-sales specialist against his former employer, behemoth pharmaceutical company, Sanofi Aventis.  Relator Yoash Gohil filed this qui tam suit in 2002 alleging that his former employer engaged in a fraudulent marketing scheme to promote off-label the chemo-therapy drug, Taxotere.

The Relator alleges that Aventis trained and directed its sales force to misrepresent the safety and effectiveness of the chemotherapy agent in order to expand the market share for Taxotere beyond its FDA approval as a “second line treatment.”  A second line treatment is one that is approved for limited use only after the failure of a prior treatment.  Relator also alleges that Aventis had engaged in a kickback scheme that included sham grants, exorbitant speaking fees, and excessive preceptorship fees paid to physicians in order to incentivize them to prescribe Taxotere.

Aventis moved for a partial judgment on the pleadings and raised two grounds for dismissal.  First, Aventis argued that some of the claims (those from 1996 to 2000) were barred by the statute of limitations.  Federal District Court Judge Lawrence Stengel rejected this argument finding that the pharmaceutical company was given fair notice of the claims when the First and Second Amended Complaints were filed.  The Court accepted Relator’s argument that all of the new claims “related back” to the claims laid out in his original complaint.

Second, Aventis argued that some of Relator’s claims were precluded by the First Amendment.  This argument has been made with increasing frequency by the pharmaceutical industry in trial and appellate courts throughout the United States.  Aventis argued that First Amendment protections extend to commercial speech and that parts of Relator’s claims were based on truthful, non-misleading speech regarding Taxotere.  Judge Stengel rejected this argument as well, finding that Relator’s Complaint had asserted that the off-label promotion was false and/or misleading.  Ultimately, the dispute over the whether the speech was false or misleading is material to the outcome of the case.  Judge Stengel held that the First Amendment issue was not ripe for disposition and denied the motion for partial summary judgment.  He wrote, “This question is better answered by a jury.”

United States ex rel. Gohil v. Aventis, Inc., No. 02-2964, 2017 U.S. Dist. LEXIS 3236 (E.D. Pa. Jan. 9, 2017)


Confidentiality Agreement Does Not Curb Former Employee’s Whistleblower Suit

Thursday, May 12th, 2016

A whistleblower’s retention and disclosure of confidential documents did not amount to breach of his employment contract, according to the U.S. District Court for the Northern District of Illinois.

In United States ex rel. Cieszyski v. LifeWatch Services, Case No. 13-cv-4052 (N.D. Ill.), relator and one-time LifeWatch salesperson Matthew Cieszyski alleges that his former employer violated federal and state False Claims Acts (“FCAs”) by submitting for government reimbursement claims for heart monitoring services that violated relevant Medicare and Medicaid regulations. LifeWatch counterclaimed that Cieszyski had breached a confidentiality agreement and privacy policy – both of which, it contended, were components of his employment contract – by retaining and disclosing to the government confidential company documents.

Breach of Contract Must Be Independent from Any Fraud Investigation

The court held that LifeWatch failed to state a claim for breach of contract and thus dismissed the counterclaims. There was no dispute that Cieszyski had signed a confidentiality agreement as a condition of his employment, or that he removed documents from the company’s premises, contrary to the agreement’s terms. But, according to the court, enforcing the agreement would undermine the protections against retaliation afforded relators by the federal and state FCAs.

At root of the dismissal was the court’s conclusion that LifeWatch’s counterclaims derived completely from the FCA claims lodged against it. LifeWatch did not contend that Cieszyski had retained or disclosed the information for any reason other than alleging the company’s FCA violations. There was no evidence that he shared the documents with anyone other than his attorneys or the government. Nor did LifeWatch claim harm beyond its exposure to the FCA suit or damages beyond the fees and costs associated with bringing the counterclaims – “a self-inflicted wound,” in the court’s parlance. Cieszyski had not, for example, revealed trade secrets that could have jeopardized LifeWatch’s standing in the market.

Interest in Confidentiality Subordinate to Anti-Retaliation Protections

Finally, the court rejected LifeWatch’s argument that Cieszyski had collected and shared more information than was needed to support his allegations of fraud. The court declined to burden relators with the obligation to know the precise quantum of evidence necessary to make their FCA cases and to limit their disclosures accordingly. The key question is whether the relator has gathered the evidence for a reason other than furthering an investigation of possible FCA violations. LifeWatch could not persuasively attribute an ulterior motive to Cieszyski. Accordingly, his statutory right to be free from retaliation overwhelmed LifeWatch’s interest in having its confidential information protected.

Vermont Governor Signs State False Claims Act into Law

Wednesday, June 10th, 2015

On May 19, 2015, Vermont Governor Peter Shumlin signed into law a state false claims act that largely mirrors the federal False Claims Act, including the ability of a qui tam relator to bring an action on behalf of the state. Whistleblowers will be enticed to report fraud in companies doing work for state and local governments through the new Vermont False Claims Act, rewarding them with a portion of the reclaimed funds as reward for their honesty, while also providing protection from on-the-job retaliation.

Vermont joins 33 states and the District of Columbia that have enacted False Claims Acts to date. This trend is partially driven by the significant recoveries that the federal government is obtaining in fraud cases related to the health care industry and other sectors. According to the Department of Justice (DOJ), it recovered nearly $6 billion in civil false claims cases in FY2014, nearly half of which was a result of whistleblower suits. A state false claims act is critical for the state to maximize its recoveries in these fraud cases. A state with a false claims act that meets the requirements of the Deficit Reduction Act of 2005, as determined by the Health and Human Services Office of Inspector General (OIG), receives a 10% increase in its share of any amounts recovered under these laws.

The Vermont False Claims Act can be found here.

Strengthened Maryland FCA Signed Into Law – 30 States Now Have FCAs

Friday, May 22nd, 2015

Bills signed by Governor Larry Hogan, Speaker of the House Michael Busch and Senate President Mike Miller include, expanding the Maryland False Claims Act protecting whistleblowers.

Whistleblowers will be enticed to report fraud in companies doing work for state and local governments through the new Maryland False Claims act, rewarding them with a portion of the reclaimed funds as reward for their honesty, while also providing protection form on-the-job retaliation.

While Maryland’s previous false claims act only included medical fraud, the new act casts a larger net to include state and local government contractors.

Those who are found to have committed fraud will be subject to a civil penalty of up to $10,000 for each violation.

Bharara Says Whistleblower Awards May Aid Corruption Fight

Wednesday, March 18th, 2015

Speaking at a Fordham University School of Law event on Friday, March 6, U.S. Attorney for the Southern District of New York, Preet Bharara said that whistleblower bounties and leniency agreements could be useful tools for uncovering public corruption. Bharara is the latest law enforcer to endorse the benefits of rewarding tipsters who come forward with information about misconduct.

Bharara noted that other federal statutes, including the False Claims Act and the Dodd-Frank Act, already offer payments to whistleblowers, and the U.S. Department of Justice’s antitrust division runs a “first-in-the-door” leniency program for individuals and companies who are first to approach the government with a confession of participating in criminal antitrust violations. Bharara also noted that the law allows prosecutors some discretion to seek leniency for those who cooperate in other investigations. “If there is some proposal that would not unduly let blameworthy people off the hook but would simultaneously help to bring more blameworthy people in the system, that’s obviously something people should look at carefully because it has worked in other contexts.

Bharara’s comments were not part of any formal proposal, but they echo other calls to ramp up the government’s ability to offer incentives to recruit individuals to come forward with evidence of wrongdoing that might otherwise not makes its way into the government.

On Feb.26, New York Attorney General Eric Schneiderman announced plans for legislation to create a whistleblower rewards and protection program, a program modeled after the U.S. Securities and Exchange Commission program instituted following the Dodd-Frank Act.

In September of last year, U.S. Attorney General Eric Holder called for increasing the rewards available for whistleblower tips made pursuant to the Financial Institutions Reform, Recovery and Enforcement Act. As it stands, the law caps these awards at $1.6 million, markedly smaller than the multibillion-dollar penalties that government has imposed upon big financial institutions under FIRREA.

West Virginia Rejects False Claims Legislation

Thursday, February 27th, 2014

The West Virginia House of Delegates has refused to adopt false claims legislation for the state.

The Government Fraud Prevention Act, previously known as the False Claims and Taxpayer Protection Act of 2014, was intended to uncover fraud against the state, would have given the West Virginia Attorney General the power to investigate such activity and would have permitted individuals to bring suit against anyone who knowingly caused the state to pay a false claim.

Opponents of the bill expressed concern that enactment would have a negative impact on job growth because it would make small businesses reluctant to come to the state. House Delegate John Shott stated that the businesses community has been “open, hostile and well-organized” in its response to the proposed act. According to House Delegate Paul Espinosa, the legislation was duplicative because fraud prevention laws already exist.

Supporters of the bill, on the other hand, stated that the monetary compensation produced by the act would be funneled back into the economy and could help balance the budget. House Delegate John B. McCuskey responded that while this was possible, it was not a guarantee.

In the end, by a small margin, West Virginia’s proposed false claims act was voted down.

West Virginia Re-Examining Enactment of False Claims Legislation

Wednesday, February 26th, 2014

On Thursday, the West Virginia House Judiciary Committee again sent legislation which would establish a West Virginia False Claims Act to the House of Delegates. 

According to House Judiciary Chairman Timothy Manchin, the leadership of the House asked the Judiciary Committee to re-examine the legislation because of concerns that the bill would result in a wave of baseless lawsuits.  Language in the bill has been changed to address this issue and the bill was returned to the full House of Delegates following a 15-9 vote. 

 HB4001, also known as the False Claims and Taxpayer Protection Act of 2014, is modeled after the federal False Claims Act and is intended to uncover and encourage the reporting of fraud which is being committed against the state.  The bill urges the reporting of suspicious activity involving taxpayer funds and gives the West Virginia Attorney General the power to investigate this fraud.  Individuals – both inside and outside the government – can bring suits against anyone who knowingly causes the state to pay a false claim and would share in the proceeds of any recovery which is obtained. 

In addition to the federal government, 29 states and the District of Columbia, have already enacted some type of false claims legislation.  In 2012, federal and state suits recovered $9 billion in taxpayer funds.  In fiscal year 2013, the federal government, alone, received $3.8 billion in settlements and judgments.  Some of those judgments are being appealed, though.

West Virginia currently receives up to about 30% of funds recovered in connection with Medicare fraud.  States that have false claims statutes approved by the federal government receive up to about 40% of the monies recovered. 

Mr. Manchin believes that the False Claims and Taxpayer Protection Act of 2014 has the potential to return up to $90 million a year to West Virginia taxpayers.  This money could then be used for road repair, in-home care for seniors and assistance for volunteer firefighters. 

PA Lawmakers Say Massive J&J Risperdal Settlement Proves Need For State False Claims Law

Friday, November 8th, 2013

In early June, two Pennsylvania State legislators introduced House Bill 1493, a state version of the federal False Claims Act. The bill would reportedly provide the state with a crucial tool in fighting healthcare waste, fraud, and abuse.

“Pennsylvanians lose as much as $200 million a year through Medicare and Medicaid fraud and abuse,” said Democratic State Rep. Brandon Neuman in a press release introducing the bill. “Our Pennsylvania False Claims Act legislation… would go a long way toward deterring this dishonesty.” The proposed bill would allow the Pennsylvania attorney general or a whistleblower to file a civil suit against those committing fraud against the Commonwealth while holding violators liable for triple the damages sustained by the state. It would also aim to protect whistleblowers who suffered harassment, career consequences, or discrimination for lawfully pursuing a false claims case.

According to Neuman, this bill would provide the essential tools for the commonwealth to recover the “maximum amount possible from those who cheat or attempt to cheat the government.” He claims that this bill would serve the dual purpose of providing a new source of revenue while punishing and preventing those who attempt to steal taxpayer dollars.

Neuman, along with fellow Democratic legislator Tony DeLuca, of Allegheny County, introduced the bill in the wake of Johnson & Johnson’s multibillion dollar settlement for the off-label marketing of its drug antipsychotic drug, Risperdal.

More than half of the states in the U.S. and the District of Columbia have already implemented false claims acts. Kathleen Kane, Pennsylvania Attorney General, is said to be in support of the proposal.

Fougera Pharmaceuticals To Pay $22.75M For Medicaid Fraud

Wednesday, October 23rd, 2013

Greg Abbott, Texas Attorney General, announced that Fougera Pharmaceuticals, Inc., a New York-based subsidiary of Sandoz Inc., fraudulently reported inflated drug prices to the Medicaid program and will now have to pay up.

Under the settlement agreement, Fougera will pay the state and the federal government a total of $22.75 million.  More than $10 million of the $22.75 million total will be paid to the state of Texas.  Because the Medicaid program is jointly funded by the State and U.S. taxpayers, the federal government is entitled to a percentage of the settlement proceeds.

Attorney General Abbott determined that Fougera had misreported the prices of various drugs to the Medicaid program over a period of several years.  Medicaid, in turn, was overcharged for some of the companies’ products.

For more information, please see:

Michael A. Morse Presented At The Thirteenth Annual Pharmaceutical Regulatory And Compliance Congress And Best Practices Forum

Wednesday, November 7th, 2012

MorseMPHILADELPHIA, PA – Michael A. Morse, a partner in the law firm of Pietragallo Gordon Alfano Bosick and Raspanti, LLP, presented at the Thirteenth Annual Pharmaceutical Regulatory and Compliance Congress and Best Practices Forum in Washington, DC on November 6, 2012.  The Compliance Congress is sponsored by the Pharmaceutical Compliance Forum, a coalition of senior compliance professionals and legal counsel from more than 50 of the largest research-based pharmaceutical manufacturers.

Mr. Morse participated in a plenary panel entitled, “Leading Qui Tam Counsel.”  The panel discussed qui tam whistleblower litigation under the federal False Claims Act and analogous state whistleblower laws.  Mr. Morse discussed emerging trends in whistleblower cases in the pharmaceutical industry, and his experience representing whistleblowers in pharmaceutical fraud cases across the United States.

Mr. Morse is a former prosecutor who has developed a nationwide practice representing whistleblowers under federal and state false claims acts.  Mr. Morse serves as the chair of the Federal and State Whistleblower (Qui Tam) Litigation Practice Group. He has represented whistleblowers in some of the most ground-breaking false claims cases in the country, resulting in hundreds of millions of dollars in recoveries for federal and state taxpayers.  Since 1986, more than $33 Billion has been recovered under the False Claims Act. 

Mr. Morse has been selected as a Pennsylvania Super Lawyers Rising Star for 2005 through 2008 and 2010 through 2012 in the area of White Collar Criminal Defense.  He has also been selected by The Legal Intelligencer as a Lawyer on the Fast Track for 2010.

Mr. Morse received his B.A. from the University of Michigan and his J.D. from Emory University Law School.

Pietragallo Gordon Alfano Bosick & Raspanti, LLP is an 85+ attorney regional business and litigation law firm with a national client base.  In addition to its Pittsburgh and Philadelphia offices, the firm has offices in Sharon, Pennsylvania; Steubenville, Ohio; and Weirton, West Virginia.