June 3, 2005

Illinois Supreme Court Upholds Whistleblower Act

On June 3, 2005, in a highly anticipated opinion in Scachitti v. UBS Financial Svcs. et al, the Illinois Supreme Court rejected a constitutional challenge to the Illinois Whistleblower Reward & Protection Act, 740 ILCS 175/1 et seq. (the "Act"). The primary issue before the Court was whether a private citizen has standing to bring a lawsuit on behalf of the State pursuant to the Act's qui tam provisions. In holding that private citizens may maintain an action on behalf of the State, the Court explained:

Rather than usurping the constitutional power of the Attorney General, the qui tam provisions of the Act support the Attorney General's law enforcement duties. As the Attorney General's brief points out, private citizens and their attorneys play a vital role in bringing cases involving fraud and abuse of government-funded programs to the attention of the state. Since the Act was enacted in 1991, the Attorney General has brought or intervened in approximately 130 cases, almost all being brought to the attention of the Attorney General by private citizens filing qui tam actions.

Scachitti v. UBS Financial Svcs. et al.; Case Nos. 97023 and 97866 at p. 22 (June 3, 2005).

The Law Office of Tracy L. Netzel, along with three other Illinois-based law firms represented AARP and Taxpayers Against Fraud as amici curiae in the Illinois Supreme Court appeal.

Read the Illinois Supreme Court Opinion here.

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October 22, 2004

Congress Ends Double Taxation For Whistleblowers

The American Jobs Creation Act of 2004 included an important provision for whistleblowers. Prior to the new law’s enactment date of October 22, 2004, whistleblowers (and certain other civil litigants) found themselves paying taxes on attorneys’ fees awarded to their lawyers. The attorneys’ fee portion of an award was also taxable to the attorney so was, in effect, taxed twice. The tax relief, contained in Section 703 of the Civil Rights Tax Act, goes into effect on October 22, 2004 and applies to settlements entered into or judgments awarded on or after that date.

Read the Press Release

View the New Law

July 30, 2004

Pharmaceutical Companies: Continuing Targets And Record Recoveries In False Claims Enforcement

On July 30, 2004, another pharmaceutical giant, Schering Plough agreed to pay $345 million to resolve criminal and civil charges that the company defrauded the Medicaid insurance program. The negotiations, conducted by the US Attorneys’ Office for the Eastern District of Pennsylvania, were the result of a whistleblower lawsuit brought pursuant to the False Claims Act by three high level execs at Schering Plough and centers on the company’s best-selling drug, Claritin.

The allegations of the lawsuit include that the Company paid HMOs kickbacks which lowered their price for Claritin, while at the same time, charging Medicaid top dollar. In addition to the monetary settlement, the Company will plead guilty to criminal charges. The “whistleblowers” who initiated the lawsuit will receive $31 million for their efforts.

Read the DOJ’s Press Release

The Schering Plough settlement follows on the heels of $430 million settlement the federal government reached in May 2004 with Warner-Lambert in connection with the marketing of its drug, Neurontin. Despite that Neurontin is only FDA-approved for anti-seizure use by epilepsy patients, the Company began an aggressive marketing scheme to promote the drug for unapproved or “off-label” uses including bipolar disorder, pain disorders, attention deficit disorder, migraine, drug and alcohol withdrawal, among others.

The settlement includes payment of a $240 million criminal fine, the second largest criminal fine ever imposed in a health care fraud prosecution. The “whistleblower” who filed the lawsuit back in 1996 will receive over $26 million for bringing the fraud to the government’s attention.

Read the DOJ’s Press Release

The recent landmark False Claims Act settlements and continuing probes sparked US Senator Chuck Grassley, Chairman of the Committee on Finance, to write letters to the major pharmaceutical companies urging them to launch systematic campaigns preventing fraud in federal health care programs, including informing all employees about the False Claims Act. Senator Grassley is the author of the 1986 whistleblower amendments strengthening the False Claims Act, including its qui tam or whistleblower provisions. As Grassley explained,

“The government’s settlement with Schering-Plough is a good example of the importance of the False Claims Act’s whistleblower provisions…Without whistleblowers, this fraud might have never been exposed. Despite the value of these recoveries, some companies continue to be repeat offenders. With billions of dollars of profits at stake in the health care industry, more must be done to deter the perception that fraud settlements are the cost of doing business with the federal government. Taxpayers can’t continue to subsidize those drug companies that rely on ill-gotten profits. That’s why I’m urging all the major drug companies to launch meaningful anti-fraud programs, with informing all employees about the False Claims Act as the centerpiece.”

Grassley’s letter was sent to Schering-Plough, Pfizer, Inc., GlaxoSmithKline, Johnson & Johnson, Merck & Co., Inc., Bristol-Myers Squibb Company, Novartis Pharmaceuticals Corporation, among others.

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April 21, 2004

TAF Report Reveals Huge Success in the Fight Against Health Care Fraud

A report released by Taxpayers Against Fraud (TAF) reveals that for every dollar spent to investigate and prosecute civil health care fraud, the federal government receives nearly thirteen back in return.

Read the TAF press release and full report.

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February 15, 2004

New Mexico Becomes Newest State To Enact Qui Tam Statute

New Mexico joins thirteen other states and the District of Columbia in enacting a false claims statute. The new statute, the New Mexico Medicaid False Claims Act, is effective as of May 19, 2004.

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November, 10 2003

DOJ Announces Record FCA Recoveries in 2003 and Whistleblower Rewards Totalling $319 Million

The Department of Justice reports government recoveries from fraud and abuse prosecutions in 2003 totaled more than $2.1 billion dollars, a 75% increase over last year. According to the government report, more than two-thirds of this amount was the result of qui tam cases brought by private whistleblowers. These private whistleblowers received $319 million for their efforts.

Read the DOJ press release here.

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November, 6 2003

Federal and State Governments Recover $1.6 Billion from Whistleblower FCA Cases Against Drug Companies

Seven False Claims Act (FCA) cases against pharmaceutical manufacturers initiated by whistleblowers have resulted in government recoveries of $1.6 billion dollars since 2001, according to a recently released report by the Taxpayers Against Fraud (TAF). Each case was brought by private whistleblowers under the qui tam provisions of the FCA and later joined by federal and/or state governments. More pharmaceutical fraud recoveries are expected in 2004.

Read the TAF report here.

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October, 15 2003

Government Report Releases 2003 Medicare and Medicaid Statistics and Highlights Key Findings

The Center for Medicare and Medicaid Services (CMS), the government agency which oversees federally subsidized health care programs, reports that Americans spent more than $1.42 billion on health care in 2001, more than 14.1% of the gross national product (GNP). CMS also reports that government subsidized health care expenditures totaled more than $337 billion dollars in 2002, more than 18.6% of the total federal budget. The CMS report details the financial impact the spiraling costs of health care coverage is having on the Medicare and Medicaid programs.

Read the CMC report here.

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June 13, 2003

Leading federal prosecutor James G. Sheehan outlines the next wave of FCA enforcement

At a conference of qui tam relators' counsel sponsored by Taxpayers Against Fraud, www.taf.org, leading federal prosecutor James G. Sheehan of the US Attorneys' Office in Philadelphia described "pharmaceutical quality of care" as the next new area of False Claims Act enforcement. These new cases will focus on the serious risk of patient harm associated with drug prescription and administration. Medical providers, health care facilities, pharmacists and drug manufacturers who fail to meet their responsibilities in ensuring patient safety risk exposure under the FCA. The following is just a sampling of the types of practices that may trigger prosecution in this new area:

• Using prescription drugs to improperly restrain patients in long-term or other medical care facilities;
• Failing to monitor patient responses to prescription medications;
• Failing to review patient drug profiles prior to dispensing prescription medication;
• Continuing the use of drugs with adverse side effects or in medically unnecessary situations;
• Failing to advise physicians of possible adverse side effects of drug;
• Improperly or unnecessarily switching or inducing the switch of a patient's prescription from one drug to another;
• Failing to notify FDA of adverse side effects associated with use of a particular drug.

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April 28, 2003

Office of Inspector General (OIG) Issues Compliance Program Guidance for Pharmaceutical Manufacturers

The OIG issued its final, voluntary compliance guidelines for the pharmaceutical industry today, identifying potential risk areas and recommending how drug companies can guard against violating federal fraud and abuse laws, including the Anti-Kickback Act, Stark Act and Best Price regulations. Violation of these laws may give rise to a claim under the False Claims Act, 31 U.S.C. §3729 et seq.

The three major fraud and abuse risk areas identified by the OIG are: (1) inaccurate reporting of average wholesale price (AWP) (i.e., drug companies must account for discounts, rebates, or other "freebies" offered to some or all purchasers); (2) the payment of money or other remuneration to doctors and others for the purpose of influencing prescription writing; and (3) illegal drug sampling.

The OIG noted the following drug company marketing practices are particularly suspect:

• "Switching" programs where the drug company pays cash or other value each time a doctor switches a patient's prescription to its product from a competing product;
• Paying doctors a "consultant" fee to attend a meeting, read a journal article, listen to marketing information, or perform other de minimis tasks;
• Paying a doctor to "train" a drug company sales rep (including the so-called "shadowing" or preceptor-type programs where the sales rep follows the doctor around as he or she treats patients)
• Providing lavish meals, entertainment, trips and other gifts to doctors or other parties in a position to influence referrals; and
• Furnishing of unrestricted "educational" and "research" grants to doctors.

Read the OIG press release and full report.

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