Why it matters: Increasingly, the False Claims Act (FCA) is being viewed by the DOJ as a powerful weapon in its arsenal to combat international fraud and corruption. In a recent speech given in Rome, Italy, Attorney General Loretta Lynch singled out the FCA and its whistleblower provisions as an important tool in the DOJ’s efforts to “root out fraud and misappropriation in public funds and government contracts” in the global arena. Read on for a recap of the recent FCA healthcare resolutions—and one unique unsealed FCA complaint—that caught our eye since our last newsletter.

Detailed discussion: On October 20, 2016, U.S. Attorney General Loretta Lynch spoke in Rome, Italy about the DOJ’s global enforcement efforts to combat international fraud and corruption. In her talk, she included the FCA, “powered by a unique whistleblower provision,” as an important tool in such efforts, stating that “[s]ince its inception in 1986, the FCA has allowed for the recovery of more than $53 billion in industries ranging from healthcare to defense.”

Below, we recap a few of the recent such FCA healthcare resolutions that caught our eye, but first we wanted to highlight an interesting FCA complaint that was recently unsealed—and is pending dismissal—in the Eastern District of Texas.

On October 17, 2016, the complaint in the case of USA ex rel. Lower Drug Prices for Consumers v. Allergan plc et al., originally filed in the Eastern District of Texas on January 13, 2016, was unsealed. The complaint contained unique allegations that Allergan plc (Allergan) and two of its subsidiaries had violated the FCA by charging federal and state health programs an artificially high and “false price” for the drug Bystolic because the drug’s patent was invalid and therefore the drug was not worth the amount being charged. The complaint was filed under the qui tam whistleblower provisions of the FCA by an organization named Lower Drug Prices for Consumers (LDPFC), which is backed by the hedge fund Foxhill Capital Partners LLC. The DOJ filed a Notice of Election to Decline Intervention on September 21, 2016.

In the complaint, LDPFC said that it had simultaneously filed a request with the Patent Trial and Appeal Board (PTAB) to institute an inter partes review (IPR) of the drug’s patent to underscore its claim that the patent was invalid. On December 7, 2016, the LDPFC filed a motion to dismiss without prejudice, indicating that the PTAB had first denied its request for IPR institution on July 1, 2016, and then denied its request for reconsideration on October 19, 2016. As the PTAB’s decision is statutorily “final and not appealable,” LDPFC filed the motion to dismiss but without prejudice to refile in case it found other evidence to support its claim. We’ll keep an eye out for any further developments in this interesting use of the FCA’s whistleblower provisions.

Recent healthcare resolutions/actions

  • On December 7, 2016, the U.S. Attorney’s Office for the Southern District of Florida announced that South Miami Hospital, a not-for-profit regional hospital located in South Miami, Florida, agreed to pay approximately $12 million to settle allegations that it violated the FCA by submitting false claims to federal healthcare programs for medically unnecessary electrophysiology studies and other procedures allegedly performed by John R. Dylewski, M.D., at South Miami Hospital. Two qui tam whistleblower doctors to split a $2.7 million award.
  • On November 11, 2016, the DOJ announced that medical device manufacturer Biocompatibles Inc., a subsidiary of BTG plc (Biocompatibles), pleaded guilty to misbranding its embolic device LC Bead and will pay more than $36 million to resolve criminal liability for misbranding under the Food, Drug and Cosmetic Act and civil liability under the FCA. The DOJ said that, under the plea agreement entered into with Biocompatibles, the company pleaded guilty to a misdemeanor misbranding charge and will pay an $8.75 million criminal fine plus an additional $2.25 million in forfeiture. In addition, the DOJ said that Biocompatibles will pay $25 million to resolve civil allegations under the FCA that the company caused false claims to be submitted to government healthcare programs for procedures in which the misbranded LC Bead device was improperly “loaded with chemotherapy drugs and used as a drug-delivery device.” In reaching the settlement of the FCA portion of the case, Biocompatibles neither admitted nor denied the allegations. Qui tam whistleblower to receive a $5.1 million award.
  • On October 24, 2016, the DOJ announced that Life Care Centers of America Inc. (Life Care) and its owner, Forrest L. Preston, agreed to pay $145 million to resolve civil allegations that Life Care violated the FCA by knowingly causing skilled nursing facilities (SNFs) to submit false claims to government healthcare programs for rehabilitation therapy services that were not “reasonable, necessary or skilled.” In reaching the settlement, Life Care neither admitted nor denied the allegations. The DOJ said that the Cleveland, Tennessee-based company owns and operates more than 220 SNFs across the country. Two qui tam whistleblowers to split a $29 million award.
  • On October 17, 2016, the DOJ announced that Omnicare, Inc. (Ominicare), described as the “nation’s largest nursing home pharmacy,” agreed to pay approximately $28 million to resolve civil allegations under the FCA that it solicited and received kickbacks from pharmaceutical manufacturer Abbott Laboratories in exchange for promoting the prescription drug Depakote for nursing home patients. According to the DOJ, Omnicare (now owned by CVS Health Corporation) disguised the kickbacks it received from Abbott as, among other things, “grants” and “educational funding,” even though “their true purpose was to induce Omnicare to recommend Depakote.” In reaching the settlement, Omnicare neither admitted nor denied the allegations. The DOJ said that the settlement with Omnicare resolved its part in a kickback scheme that included a $1.5 billion “global civil and criminal resolution” with Abbott in May 2012 and a $9.25 million settlement with PharMerica in October 2015. The Omnicare settlement, together with the previous Abbott and PharMerica settlements, resolved the allegations in two qui tam lawsuits filed by former Abbott employees, in which the DOJ intervened in May 2014. One of the qui tam whistleblowers will receive a $3 million award from the Omnicare resolution.