A review of key 2018 False Claims Act recoveries and developments

The U.S. Department of Justice (DOJ) announced Dec. 21 that it recovered more than $2.8 billion in False Claims Act judgments and settlements for fiscal year 2018. This was the lowest amount in over eight years and continues a downward trend. Healthcare recoveries slightly increased, however, totaling $2.5 billion.

The largest settlements again involved pharmaceutical companies. In October, AmerisourceBergen Corporation, along with several subsidiaries, agreed to pay $625 million to resolve claims that a facility had improperly repackaged oncology supportive injectable drugs into prefilled syringes and improperly distributed these syringes to physicians. In December, Actelion Pharmaceuticals agreed to pay $360 million to resolve claims it had improperly used a foundation to pay the copayments of thousands of Medicare beneficiaries taking hypertension drugs, a violation of the Anti-Kickback Statute. Similarly, Pfizer paid $23.8 million to resolve allegations it had used a foundation to pay copayments of Medicare beneficiaries taking various Pfizer medications.

Several healthcare providers also agreed to significant settlements. HealthCare Partners Holdings LLC agreed to pay $270 million to resolve allegations it had submitted inaccurate information that caused Medicare Advantage Plan beneficiaries to receive inflated Medicare payments. Former hospital chain Health Management Associates LLC agreed to pay $216 million for billing government healthcare programs for inpatient services that should have been billed as outpatient or observation services. The settlement also resolved alleged violations of the Stark Law and up-coding. William Beaumont Hospital paid $84.5 million to resolve violations of the Stark Law and the Anti-Kickback Statute. Banner Health agreed to pay $18 million to resolve allegations it had admitted patients who could have been seen on an outpatient basis.

Numerous other smaller healthcare settlements resolved allegations of kickbacks, up-coding, and medically unnecessary therapies or services. In addition to settlements with corporations and large hospitals or practice groups, the department recovered in excess of $132.5 million from individuals, including a $5 million settlement with former professional cyclist Lance Armstrong for violating anti-doping provisions as part of his U.S. Postal Service sponsorship in the Tour de France.

2018 also saw a few key policy directives. In January, Michael Granston, director of the DOJ’s Civil Fraud Section, issued a memorandum (the Granston Memo) explaining the circumstances in which the DOJ will move to dismiss whistleblower lawsuits under the False Claims Act. The Granston Memo identifies seven factors government attorneys should consider when deciding whether to pursue a case:

• when the complaint lacks merit, either because the claims are factually frivolous or the legal theory is defective,

• when the complaint duplicates a pre-existing government investigation and adds no useful information,

• when the complaint threatens to interfere with the agency’s policies or the administration of federal programs,

• when dismissal is “necessary to protect the department’s litigation prerogatives,”

• when necessary to safeguard classified information or national security,

• when the government’s expected costs are likely to exceed any expected gain, and

• when the complaint would “frustrate the government’s efforts to conduct a proper investigation.”

Shortly after the Granston Memo was issued, former Associate Attorney General Rachel Brand issued a memorandum (the Brand Memo) prohibiting the DOJ from converting agency guidance documents into binding rules. In other words, the department will not use a guidance document to prove a False Claims Act violation. The department may, however, use evidence that a party read a guidance document as proof it knew legal obligations.

In November, Deputy Attorney General Rod Rosenstein revised the department’s policy requiring corporations to assist the government in identifying individuals responsible for fraudulent conduct. While resolution of the case against the corporation “should not protect individuals from criminal liability,” investigations should not be delayed solely to allow corporations to gather evidence against individuals. In addition, the department may award credit in civil cases to corporations that identify some wrongdoers, even if the disclosure is not complete.

This revision marks a departure from the prior policy, which prevented a corporation from receiving any cooperation credit until it had provided the department with all relevant information about individual misconduct. The cooperation must still be significant. To earn any reduction in penalties, a company must identify “all wrongdoing by senior officials, including members of senior management or the board of directors.”

The implications of these policy changes are difficult to predict for 2019. It is certainly possible the department’s decreased reliance on agency guidance documents and increased willingness to dismiss whistleblower complaints will result in fewer recoveries. However, it is also possible these moves will increase the department’s ability to focus and litigate more quickly the cases it deems meritorious.

By adopting a more flexible approach to corporate cooperation, it is likely significant corporate investigations will result in quicker settlements. One thing, however, appears certain: Corporations and healthcare providers will continue to provide the largest source of False Claims Act settlements and awards.

Andrew Sparks, JD" target="_blank">Andrew Sparks, JD, practices in the area of litigation with a particular emphasis on healthcare and false claims act matters, government enforcement, white collar criminal defense, internal and government investigations, and complex business disputes. Before joining Dickinson Wright, Andrew worked as an Assistant United States Attorney in the Eastern District of Kentucky for 15 years, where he was responsible for all matters involving healthcare fraud.