Recent notable False Claims Act (FCA) cases involving participants in the health care industry include the following:

Manufacturers

  • On March 29, 2011, the Supreme Court unanimously reversed the Ninth Circuit's ruling in County of Santa Clara, et al. v. Astra U.S.A. Inc., et al. The Court held that when a statutory scheme is implemented by means of a contract, a person that benefits from the contract cannot sue to enforce it as a third-party beneficiary unless Congress affirmatively conferred a private right of action. Therefore, certain public-health entities (Section 340B hospitals and clinics) lacked standing to bring an action to enforce ceiling-price contracts between drug manufacturers and the Secretary of HHS.
  • In settlements announced on March 10, 2011, AstraZeneca Pharmaceuticals agreed to pay $68.5 million to 37 states and the District of Columbia to resolve allegations that it marketed Seroquel for uses not approved by the FDA (including use in pediatric and geriatric populations), that it failed to adequately disclose potential side effects, and that it withheld some negative studies concerning safety and efficacy. Several other states have ongoing actions related to the same allegations.
  • On February 1, 2011, a Texas jury returned a $170 million verdict against Actavis Mid-Atlantic LLC, finding that the company had reported inflated prices to Texas Medicaid. The relator in the case was Ven-A-Care of the Florida Keys. This was the first drug-pricing case to go to trial in Texas.  

Providers

  • On February 18, 2011, the Seventh Circuit reversed a lower court's dismissal of an FCA suit alleging that Advanced Healthcare Associates submitted claims for services not rendered. The lower court had dismissed on the basis that there had been public disclosure of industrywide fraud in the chiropractic arena and that the relator, Kelly Baltazar, was not an original source of that disclosure. In reversing the dismissal, the Seventh Circuit noted that "[o]ther courts of appeals have concluded that reports documenting a significant rate of false claims by an industry as a whole … do not prevent a qui tam suit against any particular member of the industry."
  • In a settlement announced on January 4, 2011, seven additional hospitals agreed to pay more than $6.3 million to settle allegations that they performed kyphoplasty as an inpatient rather than an outpatient procedure in order to increase their Medicare billings. The relators in these cases were Craig Patrick, a former reimbursement manager for Kyphon, and Charles Bates, formerly a Kyphon regional sales manager. The relators will receive a total of approximately $1.1 million as their share of the settlement proceeds. These cases have been the subject of discussions and correspondence between the American Hospital Association (AHA) and DOJ, since the "fraud" is based on the location of the procedure rather than the need to perform it. The AHA's position is that physicians should have discretion in determining the appropriate procedure location. Even if some of the procedures could have been performed on an outpatient basis, performing them on an inpatient basis should be characterized as a mistake and/or overpayment and not as a deliberate fraud.