In recent weeks, two federal courts have rejected attempts by healthcare entities to curtail False Claims Act (FCA) suits filed against them by former employees.
On Feb. 25, 2015, the Court of Appeals for the Sixth Circuit ruled in United States ex rel. Whipple v. Chattanooga-Hamilton County Hospital Authority (No. 13-6645) that a government audit and investigation into the alleged submission of false claims to a federal health care program did not constitute a “public disclosure” of those allegations. Acting on an anonymous tip received in 2006, the Office of the Inspector General (OIG) and a federal Medicare contractor had conducted an administrative investigation into claims for inpatient admissions at defendant Erlanger Medical Center. Following an audit by the federal contractor, Erlanger refunded $477,000 in overpayments, and the case was closed in 2009. In 2011, Robert Whipple, a former Erlanger employee, filed a qui tam complaint alleging improper billing by Erlanger for inpatient stays. A Tennessee district court dismissed the complaint, finding that the prior government investigation triggered the public disclosure bar of the FCA.
Whipple appealed, and the Sixth Circuit overturned the lower court’s decision, finding that knowledge of the fraud gained by public officials during the audit did not equate to “public disclosure” of the allegations. This ruling was in line with most other Courts of Appeals that had considered the issue, though the Seventh Circuit had reached the opposite conclusion in one case. The Sixth Circuit also noted that the involvement of the Medicare audit contractor did not constitute public disclosure, as the contractor was operating on behalf of the government. Similarly, the engagement of an outside financial analyst by Erlanger during the audit did not constitute public disclosure, as the analyst was operating akin to an employee during this time.
On Feb. 27, 2015, a Pennsylvania federal district court held in United States ex rel. Galmines v. Novartis Pharmaceutical Corp. (No. 2:06-cv-03213) that a whistleblower’s complaint may include allegations that occurred after his or her employment with the defendant ended. In his qui tam complaint, relator Donald Galmines alleged that defendant Novartis engaged in off-label marketing of its drug Elidel and provided kickbacks to physicians who prescribed high volumes of the drug. Galmines left Novartis in May 2006, and his initial complaint alleged fraud that occurred during his employment. In order to expand the scope of discovery, Galmines later attempted to amend his complaint to add allegations of false claims through 2009. Novartis opposed this action, arguing that these allegations post-dated his employment and thus Galmines had no personal knowledge of the allegations. The district court permitted Galmines to amend his complaint, finding that the allegations from 2009 were an extension of the scheme of which Galmines had direct and independent knowledge. The court argued that the start and end dates of a fraud were not necessarily “critical elements” of the claim and that the relator need not know every material detail in order to proceed. The Galmines court noted that other district courts had recently reached opposite conclusions, though the court distinguished its opinion based on the circumstances present in those cases.