Whistleblower Qui Tam Law Blog

Just over a year ago, GlaxoSmithKline paid $750 million to resolve a False Claims Act lawsuit arising out of significant violations of current Good Manufacturing Practice (cGMP) regulations at its plant located in Cidra, Puerto Rico. The adulterated drugs manufactured at that plant were sold to government healthcare programs for use by patients.

Recently, the United States Attorney's Office for the District of Maryland filed a Statement of Interest in United States ex rel. Barry Rostholder et al. v. Omnicare, Inc. et al., Civ. Action No. 1:07 cv 01283. Rostholder's complaint alleges that Omnicare violated the False Claims Act by failing to comply with the cGMP regulations prohibiting manufacturers from packaging penicillin in the same facility as non-penicillin drugs.
In its Statement of Interest, the United States took the position that violations of cGMP regulations may be material to the government decision whether to pay for the affected products, and thus are relevant in FCA cases. The government made clear that violations of cGMP regulations may be relevant in FCA cases where the violations are "significant, substantial, and give rise to actual discrepancies in the composition or functioning of the product." Such is the case when, for example, "the affected drug's strength materially differed from, or the purity or quality fell below, the strength, purity, or quality specified in the drug's FDA-approved New Drug Application, the drug's labeling, and/or the standards set forth in official compendium."

In addition, "manufacturing deficiencies may affect the strength, purity and/or quality of the affected drug such that the drug is essentially 'worthless' and not eligible for payment by the government." Submitting claims, or causing claims to be submitted, to government healthcare programs for drugs that are so deficient as to be worthless may, according to the government, give rise to FCA liability.

In rejecting Omnicare's argument that this is a false certification case, the government argued that "when a claim is false because it is for a non-reimbursable item (e.g., a tainted drug), analysis under a 'certification theory' is inapposite." The government clarified that "the core issue for 'falsity' under the FCA is whether the government received the benefit of its bargain."

Manufacturing problems result in substandard products and directly affect the health and safety of patients who use the adulterated drug or device. If you have information regarding significant and substantial cGMP violations by a drug or device manufacturer, contact Andrew M. Beato, a experienced whistleblower attorney at the law firm of Stein, Mitchell & Muse in Washington, D.C. The False Claims Act provides significant protections for employees who step forward and report fraud.

The government relies on whistleblowers to uncover fraud in the procurement or performance of defense contracts. Some common schemes include bid-rigging, overcharging and overbilling, failing to follow contract specifications, use of inferior products, and making false statements regarding the cost of a project.

On September 29, 2011, the Department of Justice announced that Science Applications International Inc. (SAIC), Applied Enterprise Solutions (AES), and numerous individuals have agreed to pay over $22.6 million to settle a False Claims Act lawsuit alleging bid-rigging in the procurement of a Government Services Administration (GSA) contract.

In April 2004, the GSA awarded a $3.2 billion task order to SAIC to provide support services for the National Center for Critical Information Processing and Storage (NCCIPS) at the Naval Oceanographic Major Shared Resource Center (NAVO MSRC). SAIC teamed with Lockheed Martin and AES to perform work under the task order. For its part, SAIC was paid a total of $116 million under the contract.

In June 2009, David Magee, a former supercomputer specialist with NAVO MSRC, filed a qui tam lawsuit, United States ex rel. Magee v. Lockheed Martin et al., 1:09 cv 324 HSO (JMR), in the Southern District of Mississippi, alleging that defendants knowingly submitted, or caused to be submitted, false claims to the United States through their bid-rigging activities designed to procure the task order. Specifically, Magee alleged that prior to the issuance, and once the NCCIPS solicitation had been publicized, two individual defendants (then government employees) conspired with SAIC, AES, the AES CEO, and Lockheed Martin to ensure that SAIC and its partners were awarded the task order by, for example, sharing non-public, advance procurement information with the SAIC team that was not provided to the other bidders; sharing information about the solicitation with the SAIC team before providing that information to other bidders; and choosing a type of contract and putting language in the solicitation order to bias the selection process in favor of the SAIC team.

Continue reading "SAIC and Other Defense Contractors Pay Over to $22.6 Million to Settle False Claims Act Allegations " »

A new U.S. Department of Health and Human Services (HHS) report estimated there to be $60 billion in Medicare fraud each year. In the context of the False Claims Act, such fraud involves submitting false claims to Medicare for payment or reimbursement with the knowledge that the claims are false. Common schemes include off-label marketing by a drug or device manufacturer, overbilling, billing for services or goods not rendered, billing for medically unnecessary services, upcoding, and payment of kickbacks.

An ABC Action News clip on the new HHS report appears below.

The tax system is also ripe for fraud. In 2005, The Government Accountability Office reported that, for the tax year 2001, the Internal Revenue Service estimated a gross tax gap - the difference between the taxes that a individual or corporate is required to pay and what was actually paid for a specific year - to be between $312 billion and $353 billion. To read more about the GAO's findings, click here.

Successful government enforcement requires the assistance of whistleblowers to uncover and prosecute fraudulent schemes. If you have information about a fraud in a government program, including Medicare and tax programs, contact Andrew M. Beato, an experienced whistleblower attorney who represents individuals in reporting fraud throughout the nation.

The Department of Justice and the Securities and Exchange Commission recently announced their commitment to investigate and prosecute pharmaceutical and medical device companies that pay bribes to government physicians and hospital administrators in foreign countries to secure business.

This practice violates the Foreign Corrupt Practices Act of 1977, 15 U.S.C. § 73dd-1 et seq., which prohibits certain persons and entities from making payments to foreign government officials to assist in obtaining or retaining business. The anti-bribery provisions of the FCPA apply to all United States persons and certain foreign issuers of securities, as well as foreign firms and individuals who act in furtherance of a bribe to take place within the United States.

The FCPA also requires companies whose securities are listed in the United States to meet the accounting provisions set forth in 15 U.S.C. § 78m, which require corporations to (1) make and keep books and records that accurately and fairly reflect the transactions of the corporation and (2) devise and maintain an adequate system of internal accounting controls.

Like other types of fraud, whistleblowers play a key role in uncovering illegal bribes. Recognizing the importance of whistleblowers to government enforcement, the Securities and Exchange Commission has established a whistleblower reward program, which provides financial incentives to individuals who provide information to the government relating to violations of securities laws, including the FCPA. In cases where penalties against a corporation exceed $1 million, the SEC is required to award whistleblowers between 10% and 30% of the amounts recovered. For more information on the SEC Whistleblower Reward Program, click here.

Continue reading "U.S. Government to Scrutinize Pharmaceutical Companies that Pay Bribes to Foreign Physicians and Hospitals " »

Assistant Attorney General Tony West spoke at the 12th Annual Pharmaceutical Regulatory and Compliance Congress in Washington, D.C. on November 2, 2011, to emphasize the resolve of the United States Department of Justice to detect and deter health care fraud, waste, and abuse. In speaking to a group of compliance officers, pharmaceutical and health care executives, physicians, nurses, legal counsel, and other industry professionals, he emphasized the government's commitment to reducing health care fraud, protecting public health and safety in using the drugs manufactured by the pharmaceutical industry, and sustaining a sound and efficient health care system.

Mr. West stated that "the work of the Justice Department on health care fraud is part of a comprehensive approach this Administration has taken toward improving the Nation's overall health care delivery system; an approach that aims to secure better, quality coverage at lower costs for all of us: patients, health care providers, businesses and taxpayers." This approach includes the Affordable Care Act, which was passed by Congress and signed into law by President Obama in March 2011 and enhances the quality of care for all Americans through innovative reforms, anti-fraud measures, and improvements to the overall health care process, as well as the President's Executive Order, announced on Monday, October 31, 2011, which focuses on managing prescription drug shortages.

Mr. West discussed health care fraud enforcement. "For every dollar Congress has provided for health care enforcement over the past three years, we have recovered nearly seven," he told the audience. Since President Obama formed the Health Care Fraud Prevention and Enforcement Action Team ("HEAT") in May 2009, the Department of Justice, in coordination with the Department of Health and Human Services, U.S. Attorneys' Offices, and state law enforcement offices, have recovered over $8 billion in settlements, judgments, penalties, and fines.

These cases have included off-label promotion schemes, counterfeit drug fraud, payment of illegal kickbacks, home care fraud, and nursing home abuse:

So we've not hesitated to bring cases like the ones involving St. Jude Medical, a heart device manufacturer in Minnesota. There, the allegations involved unlawful payments to hospitals intended to secure a greater share of the heart-device business, as well as a second matter involving kickbacks to physicians to induce them to implant the company's pacemakers and defibrillators into heart patients. St. Jude has since settled with the Justice Department for a combined $20 million to resolve those allegations.

We are also taking a close look at fraud in the home health care industry. This past September, I, along with the New Jersey U.S. Attorney's Office, announced a $150 million civil and criminal settlement with Maxim Healthcare Services, which used patients as pawns in a fraudulent scheme to bill the government for services that were never rendered.

And I have taken a particular interest in cracking down on elder abuse in nursing homes. These cases, like many of our health care fraud matters, are about more than just dollars and cents, because when a nursing home bills our public health care programs for grossly deficient services, it not only wastes taxpayer dollars but often conceals heartbreaking tales of elder neglect.

Real-life stories we've uncovered in our cases include nursing homes that failed to dispense prescribed medications; facility residents whose basic needs were so neglected they suffered from dehydration and malnutrition; bed-ridden patients who were so long ignored by nursing home staff that they developed bed sores infected by maggots, leading to amputations.

These and other unsettling accounts uncovered by our investigators led to a multi-million dollar settlement, as well as criminal convictions and fines, against five nursing homes operated by Cathedral Rock, a Texas corporation, and its CEO. And we've not stopped there. We continue to investigate claims of elder abuse in other nursing home facilities around the country, and when we find evidence of fraud and abuse, we will be aggressive and vigilant in our enforcement response.

Continue reading "Assistant Attorney General Tony West Speaks at the 12th Annual Pharmaceutical Regulatory and Compliance Congress" »

GlaxoSmithKline announced on November 3, 2011 that it has reached an agreement in principle with the United States Government to resolve a number of federal investigations into GSK's improper sales and marketing practices, its use of the nominal price exception under the Medicaid Rebate Program, and the promotion of its diabetes drug, Avandia. The settlement, which will be finalized in 2012, will include civil and criminal penalties in the amount of $3 billion.

The settlement comes almost a year after GSK agreed to pay $750 million to settle Federal and State criminal and civil charges related a series of major violations of current good manufacturing practices at a plant located in Cidra, Puerto Rico, which resulted in adulterated drugs (Bactroban, Kytril, Paxil CR, and Avandamet) purchased by the government health care programs. The whistleblower, Cheryl Eckard, was awarded $96 million for her contribution in disclosing the fraud.

Several other leading drug makers have reached agreements with the United States to settle criminal and civil allegations surrounding their drugs. Recently, Abbott Laboratories agreed to pay $1.3 billion to settle charging stemming from a government investigation into allegations that it promoted its anti-seizure drug, Depakote, for unauthorized uses.
In 2009, Pfizer paid $2.3 billion for promoting Bextra, an arthritis drug, and another dozen other drug products for unapproved uses. That same year, Eli Lilly paid $1.4 billion to settle claims that it improperly marketed its antipsychotic drug Zyprexa for use in children and elderly patients.

If you have information regarding the unlawful marketing of a drug, contact Andrew M. Beato, an experienced whistleblower attorney, at the law firm of Stein, Mitchell & Muse.