The Department of Justice (DOJ) reported that it recovered more than $3 billion in FCA settlements and judgments in its fiscal year ending September 30, 2019. Approximately $2.6 billion of these settlements and judgments related to matters involving the healthcare industry, including drug and medical device manufacturers, managed care providers, hospitals, pharmacies, hospice organizations, laboratories and physicians. This marks the tenth consecutive year the DOJ’s civil healthcare fraud settlements and judgments has exceeded the $2 billion mark. The $2.6 billion reflect only federal losses and does not include the recovery of millions of additional dollars for state Medicaid programs.

Drug Manufacturers

Pharmaceutical manufacturers lead the way with the largest recoveries by the DOJ. Two of these recoveries involved manufacturers of opioids. Insys Therapeutics paid $195 million to settle civil allegations that it paid kickbacks to induce physicians and nurse practitioners to prescribe Subsys for their patients. The kickbacks allegedly took the form of sham speaker events, jobs for the prescribers’ relatives and friends and lavish meals and entertainment. Reckitt Benckiser Group PLC paid a total of $1.4 billion to resolve criminal and civil liability related to the marketing of the opioid addiction treatment drug Suboxone. As part of this resolution, RB Group paid $500 million to the United States to resolve civil allegations that it directly, or through subsidiaries, promoted Suboxone to physicians who were writing prescriptions for uses that were unsafe, ineffective and medically unnecessary. RB Group promoted Suboxone Film using false and misleading claims that it was less susceptible to diversion, abuse and accidental pediatric exposure than other buprenorphine products and took steps to delay the entry of generic competition in order to improperly control pricing of Suboxone.

The DOJ pursued other cases involving drug manufacturers unrelated to opioid abuse. Avanir Pharmaceuticals paid over $95 million to resolve allegations that it paid kickbacks and engaged in false and misleading marketing to encourage healthcare providers in long term care facilities to prescribe the drug Neudexta for behaviors commonly associated with dementia patients, which is not an approved use of the drug.

The DOJ investigated cases involving drug manufacturers that allegedly funded co-payments for Medicare patients. Specifically, seven drug manufacturers, Actelion Pharmaceuticals US Inc., Amgen Inc, Astellas Pharma US Inc., Alexion Pharmaceuticals, Inc., Jazz Pharmaceuticals Inc., Lundbeck LLC and US Worldmeds LLC, paid over $624 million to resolve claims that they illegally paid patient copays for their own drugs through purportedly independent foundations that the companies in fact treated as mere conduits.

Other Healthcare Providers

The DOJ obtained recoveries from a variety of other healthcare providers.

  • Inform Diagnostics paid $63.5 million to resolve allegations that it paid kickbacks to referring physicians in the form of subsidies for electronic health records systems and free or discounted technology consulting services.
  • Greenway Health LLC, an EHR software vendor, paid over $57 million to resolve allegations that it misrepresented the capabilities of its EHR product “Prime Suite” and provided unlawful remuneration to users to encourage them to recommend Prime Suite to prospective new customers.
  • Encompass Health Corporation, the nation’s largest operator of inpatient rehab facilities, paid $48 million to resolve allegations that some of its IRFs provided inaccurate information to Medicare to maintain their status as an IRF and to earn a higher rate of reimbursement and that some admissions to the IRFs were not medically necessary.

Pursuit of Individuals and Corporations

Efforts continued to deter and address fraud committed by individuals and their associated corporations. The DOJ negotiated separate settlements with the individual owners of seven Osteo Relief Institutes for a total recovery of more than $7.1 million. The settlements resolved allegations that the defendants knowingly billed Medicare for medically unnecessary viscosupplementation injections and medically unnecessary knee braces.

The DOJ negotiated an $18 million settlement with Vanguard Healthcare LLC to resolve allegations of substandard nursing home services. As a part of this action, the Department pursued Vanguard’s majority owner and CEO and the former director of operations who collectively paid $250,000 to resolve allegations that five Vanguard-owned skilled nursing facilities submitted false claims to Medicare and Medicaid for nursing home services that were grossly substandard or worthless. The DOJ’s action against Vanguard also alleged that the facilities failed to administer medications as prescribed, failed to provide standard infection control or wound care, failed to take prophylactic measures to prevent pressure ulcers and failed to meet basic nutrition and hygiene needs of their residents.

Compounding pharmacies also drew attention in FY 2019. The DOJ obtained a $21 million settlement from a compounding pharmacy, Diabetic Care Rx LLC, and a private equity firm, Riordan, Lewis & Haden Inc., to resolve a lawsuit alleging that they submitted false claims to Tricare through their involvement in a kickback scheme to generate prescription referrals for expensive pain creams, scar creams and vitamins, regardless of patient need. At the same time, the DOJ secured over $300,000 in additional settlements with Diabetic Care Rx’s CEO and former VP of Operations.

The statistics on healthcare settlements and recoveries make it clear that the federal government continues to focus on fraud and abuse in the healthcare industry, with the Civil False Claims Act serving as one of its most significant enforcement tools. The DOJ reported that 633 qui tam suits were filed in FY 2019, averaging more than 12 new cases every week. Based on the consistently aggressive enforcement practices, healthcare providers and suppliers should audit their corporate compliance plans to identify gaps and weaknesses that should be addressed so these compliance plans are truly effective in preventing and detecting possible fraud and abuse issues.

Please click here to access a copy of the DOJ's report on recoveries and settlements in FY 2019.