Mintz Levin Health Care Qui Tam Update - Recent Developments and Unsealed Cases

by Mintz Levin - Health Law & Policy Matters
Contact

Trends and Analysis

  • We have identified 20 health care-related qui tam cases unsealed in July 2013. About a quarter of those were filed in 2013.
  • Among the cases unsealed in July, the government has declined to intervene in about 65% of the cases in which the unsealed filings included the government’s decision on intervention.
  • Cases from a variety of federal districts were unsealed this month, but, of note, declinations occurred in those known for active government pursuit of false claims cases.
  • Subject matter of claims:
    • One-fourth of the unsealed cases identified in July involved both state and federal claims.
    • Claims for relief under state or federal anti-whistleblower retaliation provisions appeared in one-fourth of the unsealed cases reviewed from July.
    • Cases involving emergency department (ED) issues, such as unnecessary inpatient admissions or upcoding of hospitalist evaluation & management (E&M) claims, appear to be growing in number and are being brought against very large hospital corporations or hospitalist contracting entities. Three of July’s unsealed qui tam cases involved such claims. One of these cases settled for $14.5 million, a significant amount.
    • Prompt unsealing of cases from calendar year 2013 suggests that the Department of Justice may be more confident about declining cases earlier on in the process, even in “hot” enforcement areas, such as home health, durable medical equipment (DME), and mental health outpatient services.
  • Identity of Relators:
    • All of the relators were former employees of health care organizations or employees of independent contractors to health care organizations.
    • Auditors are becoming more commonplace as relators. Their ability to access organizational data directly because of their job duties may potentially strengthen their claims.

Selected Cases Unsealed in July 2013

Nelson v. Alcon Laboratories, No. 3:12-cv-03738-M (N.D. Tex.)

Complaint filed: September 14, 2012

Complaint unsealed: July 16, 2013

Intervention status: Declined

Claims: False claims to Medicare, Medicaid, TRICARE and federal defense procurement programs in violation of the Civil False Claims Act (FCA), 31 U.S.C. § 3729 et seq.

Name of Relators: Michael Nelson and Steve Gonzales

Defendant’s Business: Pharmaceutical manufacturer

Relators’ Relationship to Defendant: Former employees

Relators’ counsel: Bell, Nunnally & Martin, LLP

Summary of case: Alcon Laboratories allegedly failed to adhere to U.S. Food and Drug Administration (FDA) regulations in manufacturing, packaging, and delivering non-prescription and prescription eye care products sold to the U.S. government under the Medicaid, Medicare, TRICARE, and other insurance programs for active and retired military personnel as well as federal civilian employees and dependents. Additionally, Alcon provided these drugs through procurement contracts with the U.S. Department of Defense.

Current Status: The U.S. declined to intervene in the case; the relators may proceed on their own.

Reasons to Watch: Similar to United States ex rel. Eckard v. GlaxoSmithKline and SB Pharmco Puerto Rico, (D. Mass.) a settled case from 2010, this case focuses on false certification of compliance with FDA laws and regulations regarding manufacturing practices and product quality as a basis for the FCA allegations. In contrast, however, the Eckard case involved both civil and criminal allegations and specific claims that the drugs, as a result of noncompliance with FDA laws and regulations, were adulterated and misbranded under the Food, Drug, and Cosmetic Act (FDCA). The Eckard resolution included a guilty plea from the subsidiary of the defendant, a civil settlement of $600 million, and a criminal fine of $150 million, and the facility where the local manufacturer produced the drugs ultimately closed. The government’s decision not to intervene in the Nelson qui tam case may indicate a reluctance, at least in Texas, to allocate governmental investigatory resources to cases with less egregious violations than those involved in Eckard.

United States v. Diagnostic Physicians Group, No. 1:11-cv-00364-KD-B (S.D. Ala.)

Complaint filed: July 8, 2011

Complaint unsealed: July 8, 2013

Intervention status: Intervened

Claims: False claims to Medicare, Medicaid, and TRICARE in violation of the Civil False Claims Act, 31 U.S.C. § 3729 et seq., with some premised on false certification of compliance with the Anti-Kickback Statute (AKS) and the Physician Self-Referral Law (Stark Law). The complaint also seeks relief for retaliation claims under the FCA.

Name of Relator: Christian Heesch

Defendants’ Businesses: Defendants are, respectively, a physician group practice, a non-profit health care practice management company, a subsidiary non-profit holding company, and the latter’s subsidiary professional corporation of health care providers

Relator’s Relationship to Defendant: The relator was a cardiologist with the Diagnostic Physicians Group from 2003 until the group fired him in 2011.

Relator’s counsel: Coumanis & York, P.C.

Summary of case: The complaint’s numerous allegations include claims that: (1) the group’s physicians received proceeds from “technology fees” based on the amount of referrals physicians made to the related clinics (the “Clinic Defendants”) in violation of the Stark Law (including referrals for medically unnecessary testing); (2) the group’s physicians were compensated based on a percentage of the Clinic Defendants’ collections from office/property leases in violation of the AKS and the Stark Law; and (3) the group’s physicians’ employment agreements did not include all of the types of compensation that they received, which resulted in the physicians receiving higher payments than contemplated in the agreements in violation of the Stark Law.

Current Status: The government elected to intervene on July 8, 2013.

Reasons to Watch: The intricacies of the financial relationships, as well as the substantial dollar value of the claims submitted to federal health care programs ($521 million) generating over $18.6 million in reimbursements subject to Stark and AKS penalties, may present particularly interesting issues as the government proceeds with its case.

United States ex rel. Davis v. Amgen, No. 2:12-cv-00570-R-MRW (C.D. Cal.)

Complaint filed: January 20, 2012

Complaint unsealed: July 9, 2013

Intervention status: Partial intervention/partial declination

Claims: Conspiracy to submit false claims to Medicare, TRICARE, the Federal Employees Health Benefits Program, and the Department of Defense in violation of the Civil False Claims Act, 31 U.S.C. § 3729 et seq. based on violations of the AKS.

Name of Relators: William Davis (Oncology Business Unit Sales Planning Director), Spencer Miller (Oncology Marketing Senior Manager)

Defendants’ Businesses: Pharmaceutical manufacturer and related businesses

Relators’ Relationship to Defendants: Davis was Amgen’s Oncology Business Unit Sales Planning Director, and Spencer Miller was an Oncology Marketing Senior Manager at the company.

Relators’ counsel: Miller Miller Menthe, LLP

Summary of case: The relators accused Amgen of providing kickbacks to physicians who prescribed Amgen’s oncology drugs. The increased number of prescriptions allegedly inflated the Best Price and Average Selling Price of the drugs, which caused Medicare, the Veterans’ Administration, the Public Health Service, and the Department of Defense to overpay for Amgen drug prescriptions. Prosecutors also claim that Amgen used data-purchase agreements, known within the company as “Deep Dive” contracts, to provide financial incentives to oncologists and urologists to prescribe Xgeva.

Current Status: The parties settled on July 8, 2013 for over $15 million (full amount not disclosed in the press), and the court granted a joint stipulation to dismiss the case on July 12, 2013. The relators received $2.75 million from the proceeds as part of the settlement.

Reasons to Watch: The government only intervened in part. Even though the Settlement Agreement is not publicly available for a comparative review of the differences between the Covered Conduct and the allegations in the initial Complaint, the government’s press release shows that it focused on the claims related to a single drug, Xgeva. Additionally, this case demonstrates the government’s dogged prosecution of multiple aspects of pharmaceutical companies’ sales and marketing activities, as evidenced by Amgen’s $24.9 million settlement with the government in April 2013 that resolved allegations that the company had paid kickbacks to long-term care pharmacy providers if they implemented “therapeutic interchange” programs designed to switch Medicare and Medicaid beneficiaries from a competitor drug to Aranesp, another Amgen oncology drug.

United States ex rel. Craig Thomas v. Sound Inpatient Physicians, Inc., No. 3:09-cv-05301-RBL (W.D. Wash.)

Complaint filed: May 21, 2009

Complaint unsealed: July 1, 2013

Intervention status: Intervened

Claims: False claims to Medicare in violation of the Civil False Claims Act, 31 U.S.C. § 3729 et seq.

Name of Relator: Craig Thomas

Defendant’s Business: The defendant is a corporation that employs more than 700 hospitalists and post-acute physicians who provide services at 70 hospitals and a growing network of post-acute facilities in 22 states.

Relator’s Relationship to Defendant: Regional manager for the Southwest region of the United States.

Relator’s counsel: James Ratner, solo practitioner, and Hagens Berman Sobol Shapiro, LLP

Summary of case: According to the government’s press release, between 2004 and 2012, Sound Physicians allegedly submitted inflated claims to federal health care programs on behalf of its hospitalist employees for higher and more expensive levels of service than were documented by hospitalists in patient medical records.

Current Status: The case was settled on July 3, 2013 for $14.5 million. The relator received $2.68 million.

Reasons to Watch: This case is similar to other cases involving ED-based claims (e.g., medical necessity of inpatient admissions, upcoding of evaluation & management services within hospitals, etc.). The defendant’s CEO was named in the complaint, but apparently was not subject to individual liability as a responsible corporate official. Finally, neither the complaint nor the settlement named the hospitals as potential defendant conspirators in the scheme.

United States ex rel. Kevin Ryan v. TranS1, Inc., No. 1:11-cv-01041-MJG (D. Md.)

Complaint filed: April 21, 2011

Complaint unsealed: July 1, 2013

Intervention status: Intervened (June 28, 2013)

Claims: False claims to Medicare in violation of the Civil False Claims Act, 31 U.S.C. § 3729 et seq., partially based on violations of the AKS.

Name of Relator: Kevin Ryan

Defendant’s Business: Medical device manufacturer that promoted its AxiaLIF system as an alternative to invasive spine fusion surgeries.

Relator’s Relationship to Defendant: Former employee sales manager.

Relator’s counsel: Joseph, Greenwald & Laake, PA

Summary of case: The complaint alleged that TranS1: (1) promoted the sale and use of its AxiaLIF System for uses not approved or cleared by the FDA; (2) allegedly counseled physicians and hospitals to bill for the AxiaLIF System as if it were a method to perform more invasive spine fusion surgeries; and (3) knowingly paid unlawful remuneration to certain physicians for participating in speaker programs and consultant meetings intended to induce them to use TranS1 products.

Current Status: The case was settled on July 3, 2013 for $6 million. The relator will receive $1.02 million from the proceeds as his share.

Reasons to Watch: This is another recently unsealed case partially premised on alleged FDA-based violations (see Alcon, above) and improper sales and marketing practices (see Amgen, above), which demonstrates multi-agency cooperation on FCA prosecutions. Unlike Amgen and other pharmaceutical cases, this case concerns medical devices, signifying a widening avenue of enforcement. Based on publicly available documents, the government apparently did not pursue individual physicians as a result of these allegations.

Written by:

Mintz Levin - Health Law & Policy Matters
Contact
more
less

Mintz Levin - Health Law & Policy Matters on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.