February 05, 2020

Both DOJ and OIG Announce Record-Breaking Year for Healthcare Fraud and Abuse Enforcement

By Scott R. Grubman, Esq., Chilivis Grubman Dalbey & Warner, LLP, Atlanta, GA

When William Barr was nominated by President Trump to be the new Attorney General in late December 2018, many suggested that Barr’s previously-expressed contempt for the False Claims Act (FCA)’s whistleblower provisions might lead to a dramatic decrease in FCA enforcement activity under his administration.  Combined with the fact that every new Department of Justice (DOJ) administration brings with it the possibility of shifts in enforcement priorities, many stakeholders in the world of healthcare fraud and abuse enforcement — including plaintiff and defense lawyers — feared that the multi-year trend of record-breaking enforcement in the healthcare industry would screech to a halt.

However, two recent reports — one from the DOJ, and the other from the Office of Inspector General for the United States Department of Health and Human Services (OIG) — both announcing that 2019 was yet another record-breaking year in terms of healthcare fraud and abuse enforcement activities, will certainly alleviate any such concerns that might still exist.  These reports make it clear that the federal government has not slowed its healthcare fraud and abuse enforcement activity but that such activity has, instead, actually increased and expanded in many respects.  

DOJ Announces Another Multi-Billion Dollar Year Under the FCA

On January 9, 2020, the DOJ announced that it had obtained more than $3 billion in settlements and judgments under the FCA in fiscal year 2019, and that of that total, $2.6 billion related to matters involving the healthcare industry.2  According to the DOJ’s press release, its 2019 enforcement activity affected virtually every type of healthcare business, including drug and medical device manufacturers, managed care providers, hospitals, pharmacies, hospice providers, laboratories, and physician groups.

Continued Focus on Opioids
.  As part of its press release, the DOJ noted that two of its largest 2019 FCA recoveries came from opioid manufacturers.  According to the DOJ, this reflects “the department’s commitment to holding drug companies accountable for their role in the opioid crisis.”  One of those matters was a $195 million settlement with Insys Therapeutics, resolving allegations that it paid kickbacks to induce physicians and other providers to prescribe Subsys (a sublingual fentanyl spray) for their patients.3 According to the government, the alleged kickbacks “took the form of sham speaker events, jobs for the prescribers’ relatives and friends, and lavish meals and entertainment.”4  Insys also allegedly encouraged its physicians to prescribe Subsys for patients who did not have cancer, and lied to government insurers about patient diagnoses.

Another opioid-related matter highlighted by the DOJ in its January 2020 press release was a $1.4 billion settlement with Reckitt Benckiser (RB) Group to resolve potential civil and criminal liability related to its marketing of Suboxone, an opioid addiction treatment drug.5  Of the total settlement, $500 million represented a civil settlement with the federal government; the remainder represented civil settlements with state governments and forfeiture.  One of the main allegations against RB Group was that it promoted Suboxone to physicians who were writing prescriptions for uses that were “unsafe, ineffective, and medically unnecessary.”6 The DOJ also alleged that RG Group promoted its drug using “false and misleading claims that it was less susceptible to diversion, abuse, and accidental pediatric exposure”7 and that it took steps to delay the entry of its generic competition into the market. 

Kickbacks and Beneficiary Inducement
.  Many of the DOJ’s largest settlements involving the healthcare industry included allegations of unlawful kickbacks.  In addition to the Insys matter discussed above, the DOJ highlighted in its January 2020 press release its settlement with Avanir Pharmaceuticals, which paid over $95 million to resolve allegations that it paid kickbacks in order to induce providers in long-term care facilities to prescribe Neudexta to dementia patients, although that was not an FDA-approved use of the drug.8  The alleged kickbacks from Avanir were in the form of money, honoraria, travel, and food, including payments to physicians to give talks as part of speaker programs.  According to the DOJ, those talks were “primarily social, with no educational value.”9  Another kickback investigation resulted in pathology laboratory company Inform Diagnostics agreeing to pay $63.5 million to resolve allegations that it paid kickbacks to referring physicians in the form of subsidies for electronic health records (EHR) systems and free or discounted technology consulting services.

Relatedly, the DOJ continued to enforce the federal law prohibiting beneficiary inducement.  For example, in its January 2020 press release, the DOJ highlighted settlements with seven drug manufacturers that paid a combined total of over $624 million to resolve claims that they unlawfully paid patient copayments through “independent foundations” that, according to the government, were “mere conduits.”   Two of those companies, Astellas Pharma and Amgen Inc., agreed to pay a combined total of nearly $125 million in April 2019.10  According to the press release issued at the time of that settlement, “the companies’ payments to the foundations were not ‘donations,’ but rather were kickbacks that undermined the structure of the Medicare program and illegally subsidized the high cost of the companies’ drugs at the expense of the American taxpayers.”

Individual Accountability
.  When the DOJ issued the “Yates Memo,” which outlined the DOJ’s increased focus on individual accountability for corporate wrongdoing, FCA and healthcare lawyers across the country were abuzz with talk of increased criminal and civil enforcement actions against individuals.11  The DOJ’s January 2020 press release highlights the DOJ’s continued focus on individual accountability, stating that it “continued its commitment to use the [FCA] and other civil remedies to deter and redress fraud by individuals as well as corporations.”  By way of example, the DOJ discussed settlements with the individual owners of multiple Osteo Relief Institutes for a total settlement of over $7 million.12  The allegations in that investigation were that the defendants knowingly billed Medicare for medically unnecessary viscosupplementation injections and  knee braces.

Continuing the Trend
.  Along with its press release, the DOJ also published its updated detailed FCA statistics.13  Those statistics show that 2019 was the 10th year in a row that healthcare-related FCA matters resulted in over $2 billion in judgments and settlements.  Of the total 2019 recovery, a little over $1.9 billion (approximately 73 percent) came from qui tam (whistleblower) suits.  In addition to the recoveries, the DOJ also reported that a total of 449 new qui tam suits were filed in 2019, and also reported that relator share awards for 2019 totaled over $244 million.  Of that, approximately $176 million (72 percent) were from cases where the government intervened or otherwise pursued the matter.

OIG Also Had a Very Busy Year

The DOJ’s announcement followed the OIG’s Fall 2019 Semiannual Report to Congress.14  In that report, the OIG announced that its “expected investigative recoveries” for fiscal year 2019 totaled over $5 billion, and included over 800 criminal actions, nearly 700 civil actions, and over 2,600 exclusions.  The OIG highlighted for Congress its legal and investigative activities related to Medicare and Medicaid, including matters against pharmaceutical companies, pharmacies, ambulance providers, laboratories, home health agencies, physicians and physician groups, durable medical equipment (DME) companies, hospitals, and nursing facilities. 

A Year of “Takedowns.” 
The OIG also highlighted its various Medicare Fraud Strike Force “takedowns,” including “Operation Brace Yourself,” which, according to the OIG, “dismantled a healthcare fraud scheme involving over $1.2 billion in losses.”15  Operation Brace Yourself involved charges against 24 individuals who were allegedly involved with fraudulent telemedicine companies and DME companies that paid kickbacks to ordering physicians.16  Two other takedowns that were highlighted by the OIG in its report were the Appalachian Regional Opioid Strike Force Takedown in April 2019, which resulted in charges against 60 individuals, including 31 doctors, seven pharmacists, and eight nurse practitioners,17 as well as “Operation Double Helix,” which resulted in criminal charges against 35 defendants associated with telemedicine companies and cancer genetic testing laboratories (CGx), and an alleged loss of over $2 billion.18

Other takedowns listed in the OIG’s report included other opioid-related takedowns in Texas, Appalachia, and the Northeast resulting in criminal charges against a combined 160 defendants; a compounding pharmacy takedown in September 2019 which resulted in criminal charges against 33 defendants; and takedowns in Los Angeles, Georgia, Florida, and the Midwest, leading to charges against a total of 170 defendants.  According to the OIG, in the semiannual reporting period alone (April through September 2019), Medicare Fraud Strike Force takedowns resulted in charges against a total of 482 defendants.

Conclusion

These two reports, along with the nearly daily press releases coming from various United States Attorneys Offices throughout the country announcing significant criminal and civil healthcare fraud and abuse enforcement actions, demonstrate the federal government’s continued focus on the healthcare industry in relation to its enforcement activities.  Combined with the fact that, other than defense-related spending, healthcare remains the top federal government expenditure and most likely will for many years to come, healthcare attorneys must continue to keep abreast of developments in the area of healthcare fraud and abuse, while businesses and individuals in the healthcare industry must continue to remain vigilant and concerned.  

  1. See, e.g., William Barr’s Troubling History with Whistleblowers, The Hill, Jan. 13, 2019, available at https://thehill.com/blogs/congress-blog/politics/425096-william-barrs-troubling-history-with-whistleblowers
  2. https://www.justice.gov/opa/pr/justice-department-recovers-over-3-billion-false-claims-act-cases-fiscal-year-2019.
  3.  https://www.justice.gov/opa/pr/opioid-manufacturer-insys-therapeutics-agrees-enter-225-million-global-resolution-criminal?utm_medium=email&utm_source=govdelivery
  4.  https://www.justice.gov/opa/pr/justice-department-recovers-over-3-billion-false-claims-act-cases-fiscal-year-2019.
  5.  https://www.justice.gov/opa/pr/justice-department-obtains-14-billion-reckitt-benckiser-group-largest-recovery-case?utm_medium=email&utm_source=govdelivery
  6. Id.
  7. Id.
  8.  https://www.justice.gov/opa/pr/pharmaceutical-company-targeting-elderly-victims-admits-paying-kickbacks-resolves-related?utm_medium=email&utm_source=govdelivery.
  9. Id.
  10.  https://www.justice.gov/opa/pr/two-pharmaceutical-companies-agree-pay-total-nearly-125-million-resolve-allegations-they-paid?utm_medium=email&utm_source=govdelivery.
  11. The “Yates Memo” was issued in September 2015 by then Deputy Attorney General Sally Q. Yates, and was officially titled “Individual Accountability for Corporate Wrongdoing.”  According to the DOJ, the Yates Memo represented a shift towards holding individuals accountable for fraud in situations where, prior to the Yates Memo, a corporation would resolve a fraud investigation without any individuals being held accountable.  After the Yates Memo was released, portions of the Memo were incorporated into official DOJ policy.  A copy of the Yates Memo can be found at https://www.justice.gov/archives/dag/file/769036/download.  
  12.  https://www.justice.gov/opa/pr/former-osteo-relief-institutes-and-their-owners-pay-over-71-million-resolve-allegations?utm_medium=email&utm_source=govdelivery.
  13. https://www.justice.gov/opa/press-release/file/1233201/download.
  14. https://oig.hhs.gov/reports-and-publications/archives/semiannual/2019/2019-fall-sar.pdf.
  15. Id. at 8.
  16. https://www.justice.gov/opa/pr/federal-indictments-and-law-enforcement-actions-one-largest-health-care-fraud-schemes.
  17.  https://www.justice.gov/opa/pr/appalachian-regional-prescription-opioid-arpo-strike-force-takedown-results-charges-against.
  18.  https://www.justice.gov/opa/pr/federal-law-enforcement-action-involving-fraudulent-genetic-testing-results-charges-against

Scott Grubman

Partner with the law firm of Chilivis Grubman Dalbey & Warner in Atlanta, where he represents businesses and individuals in connection with government investigations, False Claims Act litigation, and white-collar criminal defense.  Prior to joining private practice, Mr. Grubman served as a Trial Attorney for the United States Department of Justice in Washington, D.C., and then as an Assistant U.S. Attorney for the U.S. Attorney’s Office in Savannah.  As an AUSA, Mr. Grubman investigated and litigated healthcare fraud matters on behalf of the United States.  In addition to his practice, Mr. Grubman serves as an Adjunct Professor of Law at both Emory University Law School and Georgia State University College of Law, where he teaches several courses related to white collar crime and healthcare fraud and abuse.  He may be reached at sgrubman@cglawfirm.com.