On February 1, 2022, the U.S. Department of Justice (DOJ) released its enforcement statistics for fiscal year 2021 (here). The DOJ obtained over $5.6 billion in False Claims Act (FCA) recoveries in the fiscal year ending September 30, 2021. This is the second-highest annual FCA recovery since 2014 when the DOJ secured $6.2 billion. Health care and life sciences matters once again accounted for the majority of FCA recoveries in 2021, including $2.8 billion from the DOJ’s October 2020 settlement with Purdue Pharma LP (Purdue), the manufacturer of OxyContin.
What You Need to Know:
- In fiscal year 2021, the DOJ targeted the opioid epidemic (including a $2.8 billion settlement with Purdue Pharma LP, the manufacturer of OxyContin), Medicare Advantage program (Medicare Part C) fraud and abuse, kickbacks, and alleged unnecessary medical services.
- Despite the challenges posed by the ongoing COVID pandemic, the DOJ’s FY 2021 statistics demonstrate that enforcement activity has not wavered, especially with regard to the health care and life sciences industries.
- All participants in the health care delivery system need to remain diligent to ensure they have comprehensive compliance policies and procedures in place and regular training of their employees to ensure compliant behavior and business arrangements.
The FCA is a federal statute enacted in 1863 in response to defense contractor fraud during the American Civil War.[1] At that time, the FCA provided that any person knowingly submitting false claims to the government was liable for double the government’s damages plus a penalty of $2,000 for each false claim. After several amendments, the FCA now provides that violators are potentially liable for treble damages plus an inflation-linked penalty. The FCA also allows private citizen whistleblowers to file lawsuits alleging false claims on behalf of the government. These whistleblower, or qui tam actions, make up a significant percentage of FCA cases—including 598 of the 801 new actions in fiscal year 2021. If the government prevails in a qui tam action, the whistleblower typically receives 15 to 30 percent of the recovery.
Of the more than $5.6 billion in FY 2021 settlements and judgments reported by the DOJ, more than $5 billion related to matters involving the health care industry. According to the DOJ announcement, this includes “drug and medical device manufacturers, managed care providers, hospitals, pharmacies, hospice organizations, laboratories and physicians.” The $2.8 billion Purdue bankruptcy resolution also resolved allegations that Purdue paid kickbacks to doctors, specialty pharmacies and an electronic health records developer to drive prescriptions. Separately, individual Sackler family members (shareholders and board members of Purdue) agreed to pay $225 million to resolve civil FCA allegations that they approved a new marketing program to drive OxyContin prescriptions by high-volume prescribers.
In addition to the opioid epidemic settlement, in fiscal year 2021 the DOJ targeted the Medicare Advantage program (Medicare Part C), kickbacks, and alleged unnecessary medical services. Under Medicare Part C, private health insurers receive a capitated (per enrollee) payment to provide all Medicare-covered services to plan enrollees, as opposed to fee-for-service. Payments to plans are then adjusted based on enrollees’ risk profiles. In fiscal year 2021, the DOJ pursued plans and health care providers that “manipulated this risk adjustment by submitting unsupported diagnosis codes to make patients appear sicker.” The DOJ also resolved kickbacks involving willful solicitation or payment of illegal remuneration to induce the purchase of goods or services reimbursed by federal health care programs and pursued improper payments by drug manufacturers. The DOJ settled many matters in which providers billed federal health care programs for allegedly medically unnecessary services or services not rendered as billed.
Despite the challenges posed by the ongoing COVID pandemic, the DOJ’s FY 2021 statistics demonstrate that enforcement activity has not wavered, especially with regard to the health care and life sciences industries. As Acting Assistant Attorney General Boynton reminded the public: “The False Claims Act is one of the most important tools available to the department both to deter and to hold accountable those who seek to misuse public funds.” These substantial DOJ recoveries should serve as a strong warning for all health care industry participants.
Thus, all individuals and entities who work in the health care delivery system—regardless of size or reputation—must remain vigilant in ensuring they have comprehensive compliance policies and procedures in place and regular training of their employees to ensure compliant behavior and business arrangements. Proactive steps, including engaging legal advisors, is prudent in light of the level of law enforcement interest and scrutiny. Saul Ewing Arnstein & Lehr’s lawyers regularly assist health care providers and facilities to comply with state and federal health care statutes and regulations, and in responding to government inquiries and investigations.
