Thursday, April 26, 2007

Drug company pays $2.9 million to Mass. to settle price reporting litigation

California-based Dey, Inc., a manufacturer of generic pharmaceuticals, has paid the Commonwealth of Massachusetts $2.9 million to settle litigation pending in the Federal District Court in Boston. Massachusetts accused Dey of inflating the "wholesale acquisition cost" it reported to national price reporting services, causing the state to pay inflated amounts for Dey drugs dispensed by pharmacies to Medicaid recipients.

The settlement of the litigation (not a False Claims Act suit) was reported by the Massachusetts Attorney General on April 20, 2007.

U.S. joins qui tam suit against HealthEssentials Solutions

The U.S. Dept. of Justice announced on April 26, 2007 that it has intervened in three qui tam suits accusing HealthEssentials Solutions Inc. (HES) of false claims billings to Medicare. HES is accused of upcoding, improperly assigning a diagnosis code to a patient discharge that is not supported by the medical record for the purpose of obtaining a higher level of reimbursement.

HES, a provider of geriatric care, is also accused of knowingly charging Medicare for medically unnecessary services.

Former employees of HES filed three separate suits under the whistleblower provisions of the False Claims Act.

Supreme Court will not review U. of Phoenix FCA suit

The U.S. Supreme Court has declined to hear an appeal by the University of Phoenix from a decision by the Ninth Circuit. That decision (as reported here on September 8, 2006) reinstated a suit brought under the qui tam provisions of the federal False Claims Act, alleging that school officials violated federal rules barring incentive payments to employees who recruit students to enroll in the college.

The suit will now proceed to trial in federal court in Sacramento.

The Los Angeles Times ran a story on the Court's decision on April 24, 2007.

California hospital settles qui tam suit for over $2 million

Loma Linda Behavioral Medicine Center has paid the government more than $2 million to settle allegations that it fraudulently overbilled Medicare and Medi-Cal, the state Medicaid program.

The suit originated as a whistleblower case filed by Mark Razin, a former employee of Healthcare Financial Advisors. HFA is a consulting company that assists hospitals in preparing cost reports. The suit alleged that Loma Linda filed cost reports prepared by HFA that sought reimbursement for unallowable costs.

This is the latest in a string of settlements by former clients of HFA. Information on other settlements, by Lovelace Health System, Jackson Memorial Hospital, Eisenhower Medical Center, St. Elizabeth Regional Medical Center, and St. Joseph's Hospital in Houston, is available at the website of Phillips & Cohen, the law firm that represented Mr. Razin.

Corporate Crime Reporter ran an article on the settlement on April 25, 2007.

Senate report says drug companies use continuing medical education grants to influence doctors

The Finance Committee of the U.S. Senate issued a report on April 25, 2007 on pharmaceutical manufacturers' use of educational grants.

The press release from Committee Chairman Max Baucus says that risks exist for kickbacks, veiled advertising of drugs, efforts to bias clinical protocols and off-label promotion. “This report shows some separation between medical education and marketing efforts, but this process still isn’t clean enough,” said Baucus. “As long as drug companies’ medical education efforts can influence Medicare and Medicaid spending, the Finance Committee has to insist that there be more improvement.”

The report reviewed the practices of the 23 largest pharmaceutical manufacturers.

According to the report, drug companies spent a total of about $1 billion on continuing medical education sponsorship in 2004 and that they routinely fund programs that favorably discuss their newer and more lucrative products. The report concluded that "[t]here is a risk that physicians will allow favorable drug messages learned in an educational context to change their clinical practices to favor use of those drugs, without critically appraising the evidence or fully assessing information from other sources.”

Thursday, April 19, 2007

US intervenes in suits against Hewlett-Packard, Accenture and Sun Microsystems

The United States Dept. of Justice announced that it has intervened in three whistleblower suits alleging that Hewlett-Packard, Accenture LLP, and Sun Microsystems Inc. violated the False Claims Act.

The suits, originally filed under the qui tam provisions of the FCA, allege that defendants made payments to a number of companies with whom they had global "alliance relationships." The government's lawsuit contends the relationships and resulting "alliance benefits" that were paid amounted to kickbacks and raised undisclosed conflicts of interest.

The government complaints outline how Sun and HP paid millions of dollars annually either in cash or rebates to companies that sold their products to the government, without the knowledge of government negotiators. Accenture, in contrast, received millions of dollars in kickbacks, according to prosecutors.

Companies alleged to have received "influencer fees" from HP include Accenture, BearingPoint, Capgemini Ernst & Young, Electronic Data Systems, GTSI, Northrop Grumman, and Science Application International. Accenture is the only one accused of any wrongdoing. HP also paid partners rebates for buying products and then reselling them to the government. Under federal rules, the rebates should have been disclosed.

Sun allegedly engaged in similar conduct and is also accused of deceiving the government in contracts for general purpose IT equipment, software maintenance, and professional services. Prosecutors claim Sun didn't tell the GSA it was charging some commercial customers less, in violation of contract clauses.

Accenture, acting as a consultant for the government, allegedly accepted kickbacks in the form of "system integrator compensation," rebates, and marketing assistance fees. The company earned all three from Sun and HP, according to the complaint.

The DOJ released an April 19, 2007 press release on the intervention. Information Week ran an April 23, 2007 article on the suits.

Medicare fraud costs billions each year

The acting head of Medicare told a congressional subcommittee that Medicare fraud costs billions of dollars each year. Leslie Norwalk said, "The fraudulent business practices of unscrupulous durable medical equipment, orthotics, prosthetics and supplies suppliers continue to cost the Medicare program billions of dollars," adding that CMS "has seen a marked increase in fraud and abuse activities over the past few years that can be directly tied to provider enrollment issues." Her remarks were summarized at

Stuart Wright, Deputy Inspector General for Evaluation and Inspections at the Department of Health and Human Services, also testified before the Subcommittee on Health of the U.S. House Committee on Energy and Commerce.

Mr. Wright described how the OIG identifies Medicare program vulnerabilities, using the office's experience with durable medical equipment as a specific illustration.

Cell Therapeutics to settle qui tam suit

Cell Therapeutics, a Seattle-based biotech start-up, has agreed to pay $10.5 million to settle charges that it illegally marketed the anti-cancer prescription drug Trisonex for uses that had not received approval from the Food & Drug Administration. These off-label uses were reimbursed by Medicare, although the regulations provided that Medicare would only pay for anti-cancer drugs when they were prescribed for FDA-approved uses or uses that were determined to be medically accepted.

The False Claims Act suit was originally filed as a qui tam action by a former Cell Therapeutics employee.

Corporate Crime Reporter ran an article on the settlement on April 18, 2007.

Tuesday, April 17, 2007

Georgia Senate passes Medicaid FCA

The Georgia Senate has passed HB 551, the State Medicaid False Claims Act.

The bill, introduced by Rep. Edward Lindsey of Atlanta, had already been passed by the Georgia House. If it is enacted, Georgia will become the nineteenth state with a False Claims Act. The District of Columbia also has an FCA, as do several cities, including New York City and Chicago.

The Deficit Reduction Act of 2005 created additional incentives for states to enact their own Medicaid False Claims Acts.

U.S. may intervene in oil royalty case

The United States has filed a motion in the District of Colorado, requesting that the court stay its dismissal of a whistleblower suit and allow the government time to decide whether it will intervene.

The suit was originally brought against Kerr-McGee by former Interior Department auditor Bobby Maxwell. While a jury found that the company had defrauded the government out of $7.5 million in oil royalties, the judge ruled that Maxwell didn't qualify to bring the suit under the False Claims Act.

The government's motion says that its intervention would mean that the court retains jurisdiction over the suit, even if the relator is dismissed.

The Corporate Crime Reporter reported on the government's motion on April 11, 2007.

We had previously reported on the relator's dismissal and the jury's verdict.

Senate committee approves bill penalizing war profiteering

The Senate Judiciary Committee has approved a bill that would impose stiff fines and prison sentences on war profiteers.

The bill, S.119, now goes to the Senate for consideration. It provides that anyone who attempts to defraud the United States or "materially overvalues" goods or services to gain excess profits
could be sent to prison for up to 20 years, and be subject to fines of $1 million or twice the gross profits gained through the profiteering scheme. ran an April 13, 2007 article on the bill.

Tuesday, April 10, 2007

U.S. files FCA suit against tribe's business entity

The federal government has filed a False Claims Act suit against the business arm of a Wisconsin tribe. The suit against Menominee Tribal Enterprises alleges that MTE falsely billed the Bureau of Indian Affairs for fire suppression and roadwork but instead used the money to purchase equipment and build a garage.

An Associated Press report on the suit was in the April 3, 2007 issue of the Milwaukee Journal Sentinal.

Wednesday, April 04, 2007

Environmental clean-up company settles whistle-blower suit

Environmental Management, Inc., an Oklahoma-based environmental clean-up company, has agreed to pay as much as $1 million to settle charges it defrauded the federal government. The suit, which began as a whistle-blower action under the qui tam provisions of the False Claims Act, alleged that the company
overbilled the Drug Enforcement Agency for the work it did cleaning up methamphetamine labs and improperly disposed of chemicals.

The AP report of March 21, 2007 can be found at the KOTV news site.

Tuesday, April 03, 2007

Judge says oil royalty whistleblower can't sue under False Claims Act

A federal judge has overturned a jury’s verdict in favor of an Interior Department whistle-blower. The whistle-blower, who was an auditor at the department, charged that the Kerr-McGee Corporation cheated the government out of millions of dollars of royalties for oil and gas the company pumped in publicly owned coastal waters.

The judge ruled that the former auditor was not eligible to sue Kerr-McGee as a private citizen under the False Claims Act because he had gathered most of his evidence while on the job. As an employee of the department, he was required to disclose that evidence to the government, which he did. The judge ruled that the "involuntarily disclosed" information could not later be "voluntarily disclosed," as required by the False Claims Act. The judge also found that Maxwell was also precluded from bringing the suit under the public disclosure bar.

We reported on the jury verdict on February 2, 2007.

The New York Times (subscription required) story on the judge's ruling ran on April 3, 2007.

Pfizer subsidiary will pay $35 million to settle civil and criminal charges

Two Pfizer subsidiaries, Pharmacia & Upjohn Company, Inc. and Pharmacia & Upjohn Company LLC, have settled criminal and civil charges related to the promotion of their human growth hormone product, Genotropin.

The first unit agreed to plea guilty to offering a kickback to a pharmacy benefits manager and will pay a criminal penalty of $19.68 million. The second subsidiary has entered into a deferred prosecution agreement and will pay $15 million in civil fines and penalties to resolve charges that illegally promoted Genotropin for off-label uses.

A former Pfizer vice president turned whistleblower was angered by the praise for Pfizer for self-reporting, contending that "Pfizer would have done nothing if I didn't twist its arm." Corporate Crime Reporter says it was whistleblower Peter Rost's False Claims Act suit that triggered the Justice Dept. investigation.

The U.S. Attorney's Office in Boston put out an April 2, 2007 press release on the settlement. Corporate Crime Reporter ran its story on whistleblower Peter Rost's reaction on April 3, 2007.

Monday, April 02, 2007

New York State has new False Claims Act

The budget bill enacted in New York State includes a state False Claims Act.

Governor Eliot Spitzer had favored a state False Claims Act while he was state attorney general. The new law has qui tam provisions, allowing private citizens who discover fraud against the state to bring an action on its behalf.

Spitzer's April 1, 2007 press release notes the inclusion of the False Claims Act in the budget bill.

Cabrini Medical Center settles FCA suit for $3.4 million

Cabrini Medical Center has agreed to pay $3.4 million to resolve civil charges that it defrauded the New York State Medicaid Program.

The suit, which began as a whistleblower suit brought under the qui tam provisions of the federal False Claims Act, alleged that Cabrini entered into an illegal scheme with Applied Consulting, Inc. Cabrini retained Applied to provide administrative services that were unneeded, not provided, or worthless, in order to cover payments made in exchange for patient referrals. These payments violated Medicaid regulations and state and federal antikickback statutes.

Corporate Crime Reporter ran a March 28, 2007 story on the settlement.

Medicare secondary payer lawsuit can't proceed as a qui tam action

Erin Brockovich's lawsuit against Fresno-based Community Medical Centers cannot proceed as a qui tam action, a federal judge has ruled. Brockovich, the legal assistant whose life was portrayed in a movie, claimed the medical centers violated the Medicare secondary payer statute (MSP) by injuring Medicare beneficiaries and improperly billing Medicare for treatment of those injuries.

Under the MSP statute, a Medicare payment "may not be made . . . with respect to any item or service to the extent that payment has been made or can reasonably be expected to be made" under a primary plan. According to Brockovich, hospitals must reimburse Medicare for any medical service, treatment, or medication necessary to treat injuries they caused.

The court ruled that the MSP statute is not a qui tam statute because it does not expressly authorize a private citizen to sue on behalf of the government.

Additional details can be found in a March 29, 2007 article by CCH and a March 9, 2007 article in the Fresno Bee.

Texas whistleblower to collect $2.8 million reward

A patient accounts representative who blew the whistle on improper billing practices at the Harris County Hospital District in Texas will receive nearly $2.8 million for his role in uncovering the improprieties.

Bob McCaslin's information triggered an investigation by the the U.S. Department of Health and Human Services' inspector general. The inspector general found improper billings including treatment of patients injured in car wrecks, whose claims should have gone to private insurance companies, and treatment of hospitalized jail inmates. The hospital district agreed to pay the government $15 million to settle the case.

The Houston Chronicle ran a March 28, 2007 story on McCaslin's recovery.