The Department of Justice (DOJ) announced this month that it obtained over $3 billion in settlements and judgments from civil fraud and false claims cases during the fiscal year ending September 30, 2019 (FY 2019). Of this total recovery, the vast majority—$2.6 billion—arose from matters related to different sectors of the healthcare industry. DOJ noted that 2019 was the tenth consecutive year that recoveries from civil healthcare fraud cases have exceeded $2 billion, indicating that the government’s enforcement efforts remain focused on allegations of fraud in the healthcare sector.

Large Recoveries Related to Drug Manufacturers & EHR

Within the healthcare industry, the government reported significant recoveries against pharmaceutical manufacturers. Insys Therapeutics paid $195 million to resolve civil False Claims Act (FCA) allegations that it paid kickbacks to induce healthcare providers to inappropriately prescribe its fentanyl product, Subsys, to their patients. This civil settlement was part of a larger global resolution of civil and criminal allegations, with Insys agreeing to pay a total of $225 million. Reckitt Benckiser Group agreed to pay $1.4 billion to resolve criminal and civil allegations related to the marketing of the addition treatment drug Suboxone, a buprenorphine product. The global resolution included a $500 million civil settlement with the federal government.

The government also reported sizeable recoveries arising from the alleged misuse of Department of Health and Human Services (HHS) programs related to EHR technologies. Early in the year, a pathology laboratory company, Inform Diagnostics, agreed to pay $63.5 million to resolve FCA allegations that it paid kickbacks to physicians in the form of EHR subsidies and free or discounted technology consulting services. HHS regulations formerly permitted labs to provide EHR donations to physicians, but DOJ alleged that the lab did not comply with the requirements for doing so. In another substantial recovery, EHR software vendor Greenway Health agreed to pay over $57 million to resolve allegations that it misrepresented the capabilities of its EHR product “Prime Suite” and paid unlawful remuneration to its software users to induce them to recommend the product to other prospective customers. An HHS program made incentives available to healthcare providers who adopted qualifying EHR technologies, and DOJ alleged, among other things, that Greenway concealed its failure to comply with certain requirements in order to obtain certification as such a qualifying EHR system. Cases like these serve as a reminder that healthcare providers and companies who seek to satisfy an Anti-Kickback Statute safe harbor, Stark Law exception, or other regulatory protection should hew closely to the relevant provision’s requirements.

Remainder of Recovery Shows Diversity of FCA Enforcement Efforts

While the bulk of DOJ’s FY 2019 recovery arose from cases involving the healthcare industry, the government continued to pursue FCA allegations in a wide variety of other industries as well. As in past years, the government pursued numerous cases involving alleged procurement fraud. For example, five South Korean-based companies agreed to pay a combined $162 million to resolve FCA allegations that they engaged in anti-competitive conduct and made false statements about non-compete agreements related to fuel supply contracts with the U.S. military.

The government also pursued actions against educational institutions for different types of alleged fraud. In one settlement, Duke University agreed to pay $112.5 million to resolve FCA allegations that it submitted applications and reports to the National Institutes of Health and to the Environmental Protection Agency containing falsified research, resulting in the agencies paying grant funds they otherwise would not have. In another, North Greenville University agreed to pay $2.5 million to resolve allegations that it submitted false claims to the Department of Education related to prohibited incentive payments to student recruiters that were based on the number of students the recruiter successfully enrolled.

Continued Focus on Holding Individuals Accountable

While the dollars recovered from individuals are often, though not always, less than those recovered from corporations, the government nonetheless highlighted its now-anticipated focus on holding individuals accountable for their roles in alleged fraud schemes. In one significant recovery from an individual, the majority owner and former CEO of a defense contractor agreed to pay $20 million to settle FCA allegations that he made false statements in order to procure federal contracts reserved for small business that his company was not actually eligible to receive. In a separate settlement involving alleged kickbacks to generate referrals for medically unnecessary prescriptions, the CEO and the former vice president of operations of a compounding pharmacy agreed to pay $300,000 and at least $12,788, respectively to resolve FCA allegations. The September press release and FY 2019 announcement both recognized that those amounts were based on the defendants’ ability to pay.

$2.1 Billion of Recovery Arose from Whistleblower Lawsuits

DOJ’s FY 2019 recovery statistics show that FCA whistleblowers, known as relators, continue to drive federal government recoveries. Over $2.1 billion of the $3 billion in recoveries in FY 2019 arose from qui tam lawsuits filed by whistleblowers. Whistleblowers instituted 633 qui tam lawsuits last year, averaging 12 new cases per week. Under the FCA, the federal government is required to investigate all such claims. While the government saw higher aggregate recovery in cases where the government intervened in the lawsuit or otherwise pursued the case, the government still recovered nearly $300 million in lawsuits where the government declined to intervene, leaving the qui tam relators to pursue the cases on their own, standing in the shoes of the federal government. The government paid whistleblowers more than $265 million collectively in relator share awards in FY 2019.