On November 7, 2019, the Department of Justice (DOJ) announced it had settled a False Claims Act (FCA) lawsuit against Life Spine, a spinal device manufacturer, and two of Life Spine’s senior executives. The settlement totaled $5.99 million and included various admissions of responsibility to settle allegations of kickbacks paid by Life Spine that the DOJ claimed were designed to induce surgeons to utilize Life Spine devices and submit claims to federal health programs for these improperly-induced utilizations in violation of the federal anti-kickback statute (AKS) and FCA. The settlement includes $5.5 million to be paid by Life Spine and $490,000 to be paid by its CEO and VP of business development.

Continue Reading DOJ Announces FCA Lawsuit Settlement with Spinal Device Manufacturer and Senior Executives for Alleged Kickbacks Paid to Surgeons

On October 9, 2019, the Department of Health and Human Services (HHS) released its long-awaited proposals (the Proposed Rules) to update regulatory exceptions and safe harbors, for the federal Physician Self-Referral Law (also known as the Stark Law), the Anti-Kickback Statute (AKS), and the beneficiary inducement Civil Monetary Penalties Law (CMP). The Centers for Medicare & Medicaid Services (CMS) issued a proposed rule to update exceptions to the Physician Self-Referral Law (the PSR Rule), and the HHS Office of Inspector General (OIG) issued a proposed rule to update the AKS safe harbors and expand exceptions to the CMP’s beneficiary inducements prohibition (the AKS Rule). The Proposed Rules are intended to reduce perceived regulatory barriers to beneficial health care arrangements, and to facilitate the implementation of new approaches to health care service delivery and coordination, including value-based care models.
Continue Reading Government Releases Proposed Rules on Physician Self-Referral Law (Stark Law), Anti-Kickback Statute and CMP Law; Significant Regulatory Changes Intended to Encourage Care Coordination and Value-Based Care

On September 18, 2019, the Department of Justice (DOJ) announced a $21.36 million settlement with compounding pharmacy Patient Care America (PCA), as well as PCA’s Chief Executive, PCA’s former Vice President of Operations, and a private equity firm (PE Firm) that managed PCA on behalf of investors. The settlement resolves a False Claims Act (FCA) lawsuit alleging involvement in a kickback scheme designed to generate unnecessary referrals for prescription pain creams, scar creams, and vitamins reimbursed by TRICARE, the federal health care program for military members and their families. No determination of liability was made as part of the settlement. See our prior analysis of DOJ’s intervention in this case here.
Continue Reading DOJ Reaches $21.36 Million Agreement with Compounding Pharmacy, Two of its Executives, and Managing Private Equity Firm to Resolve FCA Allegations

On September 4, 2019, the Department of Justice (DOJ) announced a $15.4 million settlement with pharmaceutical company Mallinckrodt ARD LLC (Mallinckrodt) to resolve alleged violations of the Anti-Kickback Statute (AKS) in two whistleblower suits filed under the False Claims Act (FCA). The settlement addresses allegations of AKS violations between 2009-2013 by sales representatives of a company later acquired by Mallinckrodt via the “wining and dining” of physicians to induce Medicare prescriptions of that company’s drug. Interestingly, the settlements do not cover related allegations within those FCA suits that Mallinckrodt improperly used a patient assistance foundation to “pay illegal kickbacks in the form of copay subsidies” for the same drug.
Continue Reading Government Continues to Closely Scrutinize Pharmaceutical Marketing Practices

“A mere difference of opinion between physicians, without more, is not enough to show falsity.”

In a 3-0 decision issued September 9, 2019, the U.S. Court of Appeals for the Eleventh Circuit affirmed a three-year-old district court ruling in United States v. AseraCare, Inc. that a Medicare claim for hospice services cannot be deemed false under the False Claims Act (FCA) based on a difference in clinical judgment. This decision – apparently the first circuit-level determination of the “standard for falsity [under the FCA] in the context of the Medicare hospice benefit” – will affect all hospice providers, as the Department of Justice (DOJ) and whistleblowers will not be able to rely on disagreements between physician opinions as the basis for establishing falsity under the FCA. Instead, the Eleventh Circuit instructs that a claim for hospice reimbursement “cannot be “false” – and thus cannot trigger FCA liability – if the underlying clinical judgment does not reflect an objective falsehood.” The Eleventh Circuit’s decision emphasizes that reasonable differences of opinion between physician reviewers of medical documentation are not sufficient to suggest that the judgments concerning a particular patient’s eligibility for Medicare’s hospice benefit, or any claims submitted based on such judgments, are false for purposes of the FCA.
Continue Reading Eleventh Circuit Endorses Objective Falsehood Standard for False Claims Cases Concerning Physician Judgment of Hospice Eligibility

In its second quarter Securities Exchange Commission (SEC) filing, Allscripts addressed its announced agreement in principle with the Department of Justice (DOJ) to resolve investigations into certain alleged practices of Practice Fusion, an electronic health records (EHR) vendor acquired by Allscripts in February 2018 for $100 million. Allscripts indicated the agreement is still subject to further negotiation and government approval, and would likely include additional non-monetary terms, including a deferred prosecution agreement, if a finalized settlement is reached.
Continue Reading Allscripts Announces $145 Million Preliminary Settlement with DOJ Related to an Investigation of Practice Fusion, a Recently Acquired EHR Company

In a complaint filed on July 22, 2019, the U.S. Attorney’s Office for the Southern District of New York (DOJ) intervened in a qui tam False Claims Act (FCA) suit against Life Spine Inc. (Life Spine), and senior executives of Life Spine. DOJ alleges that the company – a maker of spinal implants, devices and equipment – offered and paid kickbacks in the form of consulting fees, royalties, and intellectual property acquisition fees to surgeons to induce the use of its products in violation of the Anti-Kickback Statute (AKS). DOJ further alleges that Life Spine’s President and Chief Executive Officer (who is also its founder and majority shareholder), as well as its Vice President of Business Development, had knowledge of and participated in the alleged kickback arrangements, and named the individuals as co-defendants. DOJ claims that by paying the alleged kickbacks to physicians in order to induce the use of Life Spine products, Life Spine “caused false claims to be submitted to Medicare and Medicaid.”
Continue Reading DOJ Intervenes in FCA Suit Against Spinal Device Manufacturer and Senior Executives that Allegedly Paid Kickbacks to Surgeons

On June 5, 2019, the Department of Justice (DOJ) announced a global settlement with Insys Therapeutics (Insys) that preliminarily resolves criminal and civil cases against the opioid manufacturer in a number of jurisdictions. Under the terms of the settlement, Insys agreed to pay a total of $225 million – $195 million in civil remedies and $30 million in criminal restitution (comprising a $2 million fine and $28 million in forfeiture). In addition to the monetary penalties, Insys entered into a five year deferred prosecution agreement with DOJ, as well as a five year Corporate Integrity Agreement (CIA) and Conditional Exclusion Release with the Office of Inspector General (OIG). Additionally, an operating subsidiary of Insys pleaded guilty to mail fraud.
Continue Reading DOJ Enters into $225 Million Settlement with Opioid Manufacturer to Resolve Criminal and Civil Investigations

In a unanimous decision issued on May 13, 2019, the U.S. Supreme Court sought to resolve lingering confusion over the statute of limitations under the False Claims Act (FCA) for qui tam suits in which the federal government declines to intervene. In Cochise Consultancy, Inc. v. United States Ex Rel. Hunt, the Court held that a relator’s claim may be brought within 3 years after the government was made aware of underlying material claims, even where the government did not intervene in the case, because 10 years had not passed since the actions giving rise to such claims occurred, applying the periods in 31 U.S.C. § 3731(b)(2) to the case. Cochise addresses confusion over applicability of 31 U.S.C. § 3731(b), which contains two separate limitations periods (along with a repose period) that can apply to an FCA suit. Under that law, an FCA action may be brought (1) 6 years from the date of the violation, or (2) 3 years from the date the U.S. official responsible for acting knew or should have known of the violation, but no later than 10 years from the date the violation occurred.

The FCA makes it unlawful for individuals or entities to knowingly submit or cause to be submitted false claims for government payment. FCA suits may be brought by the government, or by private citizens in qui tam actions in the name of the United States. In qui tam actions the relator must serve the complaint on the government, and the government then has an opportunity to intervene in the suit.


Continue Reading U.S. Supreme Court Clarifies Scope of False Claims Act Statutes of Limitations

On May 7, 2019, the U.S. Department of Justice (DOJ) provided important new guidance addressing cooperation credit that may be available to defendants in False Claims Act (FCA) investigations (Guidance).  The Guidance – issued in the form of an update to DOJ’s Justice Manual – explains how defendants in an FCA investigation may be awarded credit by DOJ for certain disclosures, cooperation, and remedial activities.

The Guidance is intended to incentivize companies and individuals to (i) be forthcoming with the government upon discovery of potential FCA violations, (ii) aid ongoing FCA investigations, and (iii) undertake appropriate remedial actions in response to misconduct. The Guidance provides examples of actions that FCA defendants may be able to take to reduce potential penalties under the FCA. As discussed below, DOJ’s examples appear to re-emphasize DOJ’s focus on individual accountability for corporate wrongdoing.
Continue Reading Seeking to Incentivize Self-Disclosures, DOJ Issues Guidance on Credit for Cooperation with FCA Investigations