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

On March 6, 2019, the U.S. Department of Health & Human Services Office of Inspector General (OIG) issued a favorable advisory opinion that allows a nonprofit medical center (“Center”) to offer free, in-home follow-up care after a recent hospital admission for qualifying patients (the “In-Home Program”). In Advisory Opinion No. 19-03, the OIG concluded that although services furnished to qualifying patients under the In-Home Program would constitute remuneration to patients under the Anti-Kickback Statute (AKS) and the Civil Monetary Penalties law (CMP), the OIG would not impose sanctions on the Provider due to the low-risk nature of the In-Home Program.

The Provider furnishes a range of inpatient and outpatient hospital-based services, and currently offers in-home care to qualifying high-risk patients suffering from congestive heart failure (CHF) who (i) are currently admitted as inpatients of the Provider or (ii) were admitted within the previous 30 days and are being treated by the Provider’s outpatient cardiology department (“Current Arrangement”). Under the Current Arrangement, a clinical nurse leader must determine that the patient is a high risk for inpatient readmission using an industry-standard risk assessment tool, the patient must be willing to enroll in the program after consultation with the clinical nurse leader, the patient must seek follow-up care at the Provider’s CHF center, and the patient must live in the Provider’s service area.
Continue Reading OIG Approves of Free In-Home Follow-Up Care Program Targeting High Risk CHF and COPD Patients in Advisory Opinion

Since the beginning of 2019, federal and state authorities in Connecticut have announced a number of enforcement actions targeting alleged health care fraud in the state. These cases are a reminder to providers of heightened criminal and civil scrutiny of arrangements implicating health care fraud and abuse laws in the state, and also reflect the extensive federal-state cooperation between the Department of Justice (DOJ) and Office of the Attorney General (AG) in investigating fraud and abuse. That federal-state cooperation is part of Connecticut’s Interagency Fraud Task Force, an initiative started in 2013 to prosecute fraud that includes multiple Connecticut agencies, as well as DOJ and the Office of Inspector General (OIG) within the Department of Health & Human Services (HHS).
Continue Reading Series of 2019 Enforcement Actions Highlight Continued Federal and State Scrutiny of Health Care Billing in Connecticut

On November 30, 2018, the Solicitor General of the United States filed a long-awaited amicus brief in response to the U.S. Supreme Court’s request for the government’s view of the False Claims Act (FCA) case U.S. ex rel. Campie v. Gilead Sciences, Inc. (see here for previous analysis of the Ninth Circuit decision in the case, and here for discussion of the Supreme Court’s request).

In its brief, the Solicitor General states that the conclusion of the Ninth Circuit – that “the fact of continued government payments did not by itself require dismissal of [the relator’s FCA] claims at the pleading stage” – was “correct and consistent with decisions issued by other circuits in comparable circumstances” and as a result no further review is warranted. The Solicitor General’s brief appears to advocate for a more narrow reading of the Ninth Circuit decision than many commenters have undertaken, explaining that “the relevance of a governmental payment decision turns on whether the government had ‘actual knowledge’ of violations at the time of payment” but in this case it is disputed what the government knew about alleged violations and when it learned about such violations.
Continue Reading In Amicus Brief, Government Discourages Supreme Court Review of Pro-Relator Ninth Circuit FCA Decision, but Pledges to Seek Dismissal of Case Upon Remand

In late August, the U.S. Court of Appeals for the Ninth Circuit issued a long-awaited decision in U.S. ex rel. Rose v. Stephens Institute that interprets key aspects of the implied false certification theory of False Claims Act (FCA) liability under the Supreme Court’s 2016 Escobar decision. As the Ninth Circuit explains in its decision, Escobar “unsettled” Ninth Circuit law related to the standard for proving falsity and materiality in an FCA case. The Ninth Circuit therefore sought to reconcile its precedents with Escobar in Rose, which was before it on an interlocutory appeal from a denial of summary judgment sought by the defendant.
Continue Reading Ninth Circuit Issues Long-Awaited Interpretation of Escobar Two-Part Test

The Department of Justice (DOJ), recently intervened in a civil False Claims Act (FCA) case filed against Insys Therapeutics, Inc. (Insys) in the Central District of California that alleges FCA violations arising from the payment of kickbacks in violation of the Anti-Kickback Statute (AKS) as well as other fraudulent activities. Insys is an embattled Arizona-based pharmaceutical manufacturer of a highly-addictive sublingual opioid spray known as Subsys, and is currently the subject of a number of criminal and civil suits ongoing across the country (certain of which were consolidated into this case in connection with DOJ’s intervention). 
Continue Reading DOJ Intervenes in False Claims Act Case Against Insys Therapeutics

The Department of Justice (DOJ) recently resolved two health care fraud cases – one criminal and one civil – that demonstrate the government’s continued scrutiny of lavish meals and “speaker’s bureaus” sponsored by pharmaceutical and device manufacturers as potential avenues for the payment of kickbacks to physicians for referrals of health care items and services. These cases indicate the criminal and civil risk that providing lavish meals or purported speaker’s bureau payment can pose, and the corresponding need to proactively assess the legitimacy of such programs and events.
Continue Reading Recent Anti-Kickback Cases Emphasize Government Scrutiny of Speaker’s Bureaus and Lavish Meals Funded by Pharmaceutical and Device Manufacturers

Recent decisions in the Fourth and Fifth Circuit Courts of Appeals demonstrate the central role that the Supreme Court’s Escobar decision continues to play in fraud litigation despite, or as a result of, continued uncertainty as to the application of the “rigorous” and “demanding” materiality standard endorsed in that decision. The decisions discussed below provide

In May 2017, the U.S. Court of Appeals for the Third Circuit relied on the “heightened materiality standard” endorsed by the U.S. Supreme Court in its 2016 Escobar decision in dismissing a False Claims Act (FCA) whistleblower suit filed against pharmaceutical giant Genentech related to its billion dollar cancer drug Avastin. In Escobar, the Supreme Court upheld the validity—“at least in some circumstances”—of the “implied false certification” theory of FCA liability, and provided that this theory can attach where at least two conditions are met: a defendant must (1) make a specific representation on a claim for payment to the government, and (2) fail to disclose noncompliance with a material requirement for payment, which failure renders that representation a “misleading half-truth” (even if the representation is true on its face).
Continue Reading Third Circuit Recognizes Escobar “Heightened Materiality Standard” in Dismissal of False Claims Act Case Tied to Avastin

The U.S. Court of Appeals for the Fourth Circuit recently declined to rule on the validity of statistical sampling as a method to establish liability and damages in a False Claims Act (FCA) whistleblower case that was closely watched within the FCA bar, U.S. ex rel. Michaels v. Agape Senior Community, Inc. et al. (Nos. 15-2145, 15-2147). In a victory for the government, however, the Court did hold that the FCA grants the Department of Justice (DOJ) an “unreviewable veto” over proposed settlements of FCA cases – even cases in which the DOJ declines to intervene.

The case was brought in 2012 by former employees of Agape Senior Community Inc. and its affiliated entities (collectively, Agape), who own and/or operate elder care facilities throughout South Carolina. The plaintiffs, who were qui tam relators, alleged violations of the federal Anti-Kickback Statute (42 U.S.C. 1320a-7b), the FCA (31 U.S.C. 3729-3733), and Health Care Fraud law (18 U.S.C. 1347) related to claims filed by Agape for services provided to ineligible individuals or for services not actually provided. Because the allegations implicated up to 50,000 claims involving over 10,000 patients, the relators (plaintiffs in FCA cases are known as “relators”) sought to establish damages via the use of statistical sampling in lieu of having to review every claim. The relators argued that a comprehensive review of each patient’s chart for evidence of fraud could cost over $30 million, potentially exceeding the actual damages in the case. In 2015, a federal district court in South Carolina rejected the relators’ argument and sided with Agape, finding that the use of statistical sampling in this case would be improper because the relevant patient medical records were available for the relators to review.


Continue Reading Fourth Circuit Upholds DOJ’s Absolute Veto Power but Declines to Address Validity of Statistical Sampling in FCA Case