Why it matters: The major False Claims Act (FCA) news of late was the U.S. Supreme Court’s landmark decision on June 16, 2016 in the implied certification case Universal Health Services v. U.S. ex rel. Escobar (see our special alert here). In other recent news, Acting Associate Attorney General Bill Baer spoke at the ABA’s annual FCA conference about how the DOJ’s renewed emphasis on individual accountability (as set forth in the “Yates Memo,” covered in another special alert here) specifically informs how the DOJ presently handles FCA cases. In addition, there were two significant FCA announcements in the healthcare field: First, the DOJ announced a settlement with two pharmaceutical companies on charges they violated the FCA by making misleading statements about the effectiveness of their lung cancer drug; and second, the DOJ announced that it had intervened in a qui tam lawsuit against a California hospital group alleging improper and unnecessary admissions from the hospitals’ emergency rooms. We cover it all for you here.
Detailed discussion: Read on for a recap of the recent FCA activity:
Escobar and implied certification: By far the biggest FCA news in June 2016 was the Supreme Court’s June 16, 2016 decision in Universal Health Services v. U.S. ex rel. Escobar, which held that the implied false certification theory can be a basis for FCA liability in certain circumstances. See here to read our detailed coverage of the decision. In addition, Manatt invites you to download and access our on-demand webinar discussing the Escobar decision, entitled “The False Claims Act: Escobar Means More Than You Think.” In this quick-hitting synopsis of the case, Manatt litigation partners Kimo Peluso and Arun Bhoumik delve into the Escobar decision. This 20-minute presentation provides a brief overview of the FCA, the Supreme Court’s holdings in Escobar, its implications for the FCA’s materiality requirement in a broad range of cases and most importantly, the ramifications for defendants asking courts to dismiss FCA cases at the pleading stage. Click here to listen to the webinar recording and download the program materials—at your convenience.
The DOJ, the FCA, and individual accountability: On June 9, 2016, Acting Associate Attorney General Bill Baer spoke on individual accountability at the ABA’s 11th National Institute on Civil False Claims Act and Qui Tam Enforcement in Washington, D.C. Some of the highlights:
- With reference to the Yates Memo, Baer said “[m]y emphasis today is on those aspects of our approach to individual accountability that have a direct impact on civil matters, particularly those brought under the False Claims Act.”
- Baer said that holding individuals accountable for wrongdoing in civil cases is just as important as in criminal cases because, in additional to providing a “powerful” deterrent against future misconduct, “[c]ivil wrongs can have damaging consequences, from the significant waste of taxpayer funds, to the loss of jobs, homes and financial security, to consumer overcharges … [and] [i]t makes no sense to have a different system of justice for individuals who engage in white-collar fraud than we do for everyone else.”
- Baer referenced recent FCA settlements and the DOJ’s recent decision to intervene in a qui tam filed against a California hospital group and its CEO (we cover it below) and said that all actions were taken “by applying the Yates Memorandum.”
- Baer discussed “how this commitment to individual accountability is playing out in the context of our FCA enforcement efforts,” stating that, at the beginning of any FCA investigation, “our attorneys are instructed to focus on both the company and the individuals who may be responsible for the bad conduct. It does not matter whether the investigation is precipitated by a qui tam complaint or a referral from a law enforcement partner, or whether a relator actually names individuals as defendants in the qui tam action. Our inquiry into individual misconduct now proceeds in tandem with the underlying corporate investigation.”
- In a “departure from past practice,” Baer said that individuals will now not necessarily be released from FCA liability even if the DOJ settles with the company: “you should not assume we will be amenable to releasing individuals from False Claims Act liability when we settle with the organization. The presumption is flipped in the other direction. Admittedly, this is a departure from past practice, where a settlement would release not only the corporation, but also its individual directors, officers and agents. But it is a change we view as necessary to pursue company officials involved in the wrongdoing.”
- If a company facing FCA allegations wants cooperation credit in settlement negotiations with the DOJ, in addition to prompt voluntary self-disclosure the company is “expected to disclose all facts relating to the individuals involved in the wrongdoing, no matter where those individuals fall in the corporate hierarchy”; however, “there is nothing—I repeat, there is nothing—in the individual accountability policy that requires companies to waive attorney-client privilege.”
Recent DOJ FCA activity:
- On June 6, 2016, the DOJ announced that pharmaceutical companies Genentech Inc. and OSI Pharmaceuticals LLC agreed to pay $67 million to resolve FCA allegations relating to their lung cancer drug Tarceva. The DOJ said that the settlement resolved allegations, neither admitted nor denied by the pharmaceutical companies, that they made misleading statements to physicians and other healthcare providers about the effectiveness of the drug Tarceva to treat non-small cell lung cancer which led to the filing of false claims for reimbursement with federal and state Medicaid programs. Of the $67 million settlement amount, the federal government will receive $62.6 million and state Medicaid programs will receive $4.4 million. Qui tam whistleblower (former employee of Genentech) to receive $10 million.
- On May 25, 2016, the DOJ announced that it had intervened in an FCA qui tam lawsuit against Prime Healthcare Services Inc. (PHS) and its CEO alleging unnecessary inpatient admissions from emergency rooms. The qui tam lawsuit also named 14 PHS California hospitals in the suit and alleged that emergency rooms at PHS facilities improperly admitted patients to the hospitals and submitted false claims to Medicare.
See here to read our coverage of the Supreme Court’s 6/16/16 Escobar decision, entitled “False Claims Act: Supreme Court Decides Implied Certification Case” and here for our webinar entitled “The False Claims Act: Escobar Means More Than You Think.”
See here to read the DOJ’s 6/9/16 press release entitled “Acting Associate Attorney General Bill Baer Delivers Remarks on Individual Accountability at American Bar Association’s 11th National Institute on Civil False Claims Act and Qui Tam Enforcement.”
See here to read the DOJ’s 6/6/16 press release entitled “Pharmaceutical Companies to Pay $67 Million To Resolve False Claims Act Allegations Relating to Tarceva.”
See here to read the DOJ’s 5/25/16 press release entitled “United States Intervenes in False Claims Act Lawsuit Against Prime Healthcare Services Inc. and its CEO Alleging Unnecessary Inpatient Admissions from Emergency Rooms.”