Whistleblowers play the central role in ensuring corporate compliance with their ethical and financial obligations to the government and the American public. As false and fraudulent claims in the pharmaceutical industry continue to eat deeper into Medicare and Medicaid funds and threaten to derail health care funding in the U.S., the crucial role of whistleblowers in exposing health care fraud and abuse is receiving renewed attention from Washington. Recent studies indicate that 90% of health care fraud cases are uncovered and prosecuted by whistleblowers, leading to a recovery of over $ 3 billion from false claims lawsuits in the last three years.

Sen.  Grassley, who has long recognized the role of employees in uncovering enormous health care fraud in the pharmaceutical sector, commenced a laudable effort on June the 28th to verify the compliance of 16 major pharmaceutical companies with laws protecting their direct employees and indirect employees (employees of agents and contractors) and other whistleblowers from retaliation for exposing fraud on the government and taxpayers.  Sen. Grassley’s letters to the 16 pharmaceutical companies request updated data on their compliance with the law requiring a written FCA policy and employee training and education on the FCA, including the whistleblower provisions and anti-retaliation protections of the FCA, as well as State civil or criminal laws on exposing health care fraud and protecting the whistleblower.

Sen. Grassley’s efforts are meant to make it easier for individuals with knowledge or evidence of fraud to come forward without risking their career in the process, as well as to ensure that corporate policies have been updated to reflect changes in the law, and truly further the goals of the FCA by educating employees on the FCA and encouraging them to expose health care fraud. According to the senator, “drugmakers have a public responsibility to safeguard the tax dollars that pay for their products,” and to promote “a culture where those who speak up about possible fraud are rewarded rather than retaliated against.”

The 16 pharmaceutical companies targeted by the Senator are:

• Abb0tt Laboratories
• AstraZeneca Pharmaceuticals LP
• Amgen Inc.
• Boehringer Ingelheim Corporation
• Bristol-Myers Squibb Company
• Eisai Corporation of North America
• Eli Lilly and Company
• Forest Laboratories, Inc.
• GlaxoSmithKline
• Johnson & Johnson
• Hoffmann-La Roche, Inc.
• Merck & Co., Inc.
• Novartis P Corporation
• Pfizer, Inc.
• Sanofi-Aventis, and
• Takeda Pharmaceuticals North America, Inc.

They are expected to respond by the 20th of July with specific information on:

• Changes or updates to corporate policy on educating employees about the FCA
• Employee education on the whistleblower anti-retaliation provisions of the FCA, including avenues for filing false claim lawsuits
• Corporate process for handling employee complaints about possible FCA violations
• Performance of the corporate FCA compliance program in encouraging employees to come forward with allegations of possible FCA violations
• Corporate policies to ensure fair treatment of employee complaints of possible FCA violations
• Any complaints of unfair treatment or retaliation made by whistleblowers
• Any modification of FCA compliance policy in light of the extension of whistleblower protections to contractors and agents.

If you are seeing fraud on the government, contact us by calling 800-377-1812 for strictly confidential advice from experienced counsel, with no fee obligation.

Relevant Links:

Bloomberg News July 1, 2010 report
Press release from Senator Grassley’s office on the letters

Under its contract with the General Services Administration (“GSA”), Learning Tree sells information technology training courses to the federal government in multi-course packages known as “vouchers” or “passports.” To prevent the United States from paying for training services that are not actually rendered, the contract specifically requires that Learning Tree invoice the government only after services are provided.

The settlement resolves allegations that Learning Tree knowingly invoiced federal agencies in advance for multi-course training packages before employees of the purchasing agencies had attended the full number of courses available under each. The government further alleged that upon expiration of the training packages, Learning Tree retained federal funds that the company received in connection with unused courses without providing a refund or credit. As a result, Learning Tree received federal funds for training courses that were not, in fact, provided.

“Government contractors must deal fairly and honestly with the United States,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “When federal funds are being misused, we will take action to protect the taxpayers.”

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Guidant pleaded guilty to withholding information from the FDA regarding catastrophic failures in three of its devices: the Ventak Prizm 2 DR (Model 1861) and the Contak Renewal (Models H135 and H155). Specifically, Guidant admitted to: (1) making a materially false statement in a required submission to the FDA with regard to the Ventak Prizm 2DR device; and (2) failing to notify the FDA of a “correction” to the Contak Renewal devices, which the company made to reduce a risk to health caused by the devices. As a result of these offenses, the agreement calls for Guidant to pay a combined criminal penalty in excess of $296 million.

“The guilty plea today should serve as a reminder and deterrent to those who would break the laws requiring honesty and cooperation with government regulators whose mission is to protect the health and safety of the public,” said Frank J. Magill, Acting U.S. Attorney in this case for the District of Minnesota . “The health care laws are as important as ever. When medical device and pharmaceutical companies fail to live up to their legal obligations, serious criminal consequences will follow.”

Today’s entry of a guilty plea by Guidant LLC and the proposed resolution would represent the largest criminal penalty ever imposed on a device manufacturer for violating the Food Drug and Cosmetic Act,” said Commissioner of Food and Drugs Margaret A. Hamburg, M.D. “The FDA will continue to commit enforcement resources to seeking this type of criminal resolution and stiff sanctions when device manufacturers fail to adhere to the statutory and regulatory requirements that exist to ensure the safety and efficacy of their products.”

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“Health care decisions must be based solely upon what is best for the individual patient and not on which pharmaceutical company is paying the doctor the biggest kickback,” said Rod J. Rosenstein, U.S. Attorney for the District of Maryland.

The lawsuit was initiated by a whistleblower, Debra Parks, through the qui tam provisions of the False Claims Act, which allows private citizens to expose fraudulent behavior with government money and share in any recovery. Of the $42.5 million recovered in the case, Ms. Parks will receive $5.33 million.

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The judges have been formally charged with “engaging in a scheme to defraud the public of their honest services, and with conspiring to defraud the Internal Revenue Service, in connection with a multi-million dollar honest services fraud scheme involving the placement of juveniles in juvenile detention facilities.”

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Eli Lilly has agreed to the resolution in order to resolve allegations that it promoted its drug, Zyprexa, for uses not approved by the Food and Drug Administration. The Food, Drug, and Cosmetic Act (FDCA) mandates that companies specify the planned uses of a product in its “new drug” application to the FDA. The FDA then determines whether or not the drug is safe and effective for its intended use. After its approval, a drug may not be marketed or promoted for non-specified, or off-label, uses.

Zyprexa, originally approved in 1996 as a treatment for manifestations of psychotic disorders and in 2000 for the short-term treatment of schizophrenia, was promoted by Eli Lilly for unapproved uses included the treatment for dementia, including Alzheimer’s dementia, in elderly people. The information contained in the agreements the Eli Lilly has signed allege that the company knowingly promoted Zyprexa for off-label uses, and trained its sales force to disregard the law. It also claims that Eli Lilly marketed Zyprexa to primary care physicians, despite Zyprexa having virtually no approved use in the primary care market. Through false marketing, Eli Lilly caused false claims for payment to be submitted to Medicaid, TRICARE, and the Federal Employee Health Benefits Program, none of which provide coverage for off-label uses.

“Off-label promotion of pharmaceutical drugs is a serious crime because it undermines the FDA’s role in protecting the American public by determining that a drug is safe and effective for a particular use before it is marketed,” said Gregory G. Katsas, Assistant Attorney General for the Civil Division. “This settlement demonstrates the Department’s ongoing diligence in prosecuting cases involving violations of the Food, Drug, and Cosmetic Act, and recovering taxpayer dollars used to pay for drugs sold as a result of off-label marketing campaigns.”

“The illegal scheme used by Eli Lilly significantly impacted the integrity of TRICARE, the Department of Defense’s healthcare system,” said Ed Bradley, Special Agent-in-Charge, Defense Criminal Investigative Service. “This illegal activity increases patients’ costs, threatens their safety and negatively affects the delivery of healthcare services to the over nine million military members, retirees and their families who rely on this system. Today’s charges and settlement demonstrate the ongoing commitment of the Defense Criminal Investigative Service and its partners in law enforcement to investigate and prosecute those that abuse the government’s healthcare programs at the expense of the taxpayers and patients.”

The global resolution includes the following agreements:

A plea agreement signed by Eli Lilly admitting guilt to the criminal charge of misbranding. Specifically, Eli Lilly admits that between Sept. 1999 and March 31, 2001, the company promoted Zyprexa in elderly populations as treatment for dementia, including Alzheimer’s dementia. Eli Lilly has agreed to pay a $515 million criminal fine and to forfeit an additional $100 million in assets.

A civil settlement between Eli Lilly, the United States and various States, in which Eli Lilly will pay up to $800 million to the federal government and the states to resolve False Claims Act claims and related state claims by Medicaid and other federal programs and agencies including TRICARE, the Federal Employees Health Benefits Program, Department of Veterans Affairs, Bureau of Prisons and the Public Health Service Entities. The federal government will receive $438,171,544 from the civil settlement. The state Medicaid programs and the District of Columbia will share up to $361,828,456 of the civil settlement, depending on the number of states that participate in the settlement.

The qui tam relators will receive $78,870,877 from the federal share of the settlement amount.

A Corporate Integrity Agreement (CIA) between Eli Lilly and the Office of Inspector General of the Department of Health and Human Services. The five-year CIA requires, among other things, that a Board of Directors committee annually review the company’s compliance program and certify its effectiveness; that certain managers annually certify that their departments or functional areas are compliant; that Eli Lilly send doctors a letter notifying them about the global settlement; and that the company post on its website information about payments to doctors, such as honoraria, travel or lodging. Eli Lilly is subject to exclusion from Federal health care programs, including Medicare and Medicaid, for a material breach of the CIA and subject to monetary penalties for less significant breaches.

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The investigation resulted from Yale’s violations of the principle that federal grant recipients are only allowed to charge “allocable” costs, or those that relate to the specific objectives of the project, to each grant.  Allegations involving two types of mischarges arose from this violation.  The first, that some researchers at Yale improperly transferred charges to a federal grant account to which the charges were not allocable.  These fraudulent transfers were allegedly committed in order to spend remaining grant funds before their expiration date.  Federal regulations demand that unspent funds be restored to the government.

The second allegation involved some Yale researchers submitting time and effort reports for summer salary paid for by grants whose objectives were unrelated to the research.  It was found that these researchers were motivated to commit the wrongful salary charges because their academic-year salary is not paid during the summer, so the only salary received is that which they charge to federal grants.

Because of the settlement, in which Yale University cooperated fully, no lawsuit will be filed regarding the more than 6,000 grants contained in the agreement.  By entering into the settlement, the press release states, Yale did not admit liability and the agreement indicates that the parties settled the matter to avoid delay, uncertainty, and expense of litigation.  Yale has taken measures to enhance the management of its federal grants, upgrading its accounting and reporting systems in the last two years, and creating the Office of Research Administration, which oversees mandatory training programs for staff and faculty.

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Under the agreement, FORBA will pay the United States and participating states $24 million, plus interest, to resolve allegations that it caused bills to be submitted to state Medicaid programs for medically unnecessary dental services performed on children insured by Medicaid, which is funded jointly by the federal and state governments. These services included performing pulpotomies (baby root canals), placing crowns, administering anesthesia (including nitrous oxide), performing extractions, and providing fillings and/or sealants.

FORBA has further agreed to put in place various remedial measures designed to prevent similar unlawful conduct from occurring in the future. The government’s investigation of individual dentists is ongoing, and FORBA is cooperating with that investigation by providing information about dentists who may have violated professional standards.

“We will not tolerate Medicaid providers who prey on vulnerable children and seek unjust enrichment at taxpayers’ expense,” said Daniel R. Levinson, Inspector General of the U.S. Department of Health and Human Services. “This settlement reaffirms our commitment to protect the health and well-being of Medicaid beneficiaries and to ensure the integrity of this essential health care program.”

The government’s investigation was initiated by three lawsuits filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private citizens to sue on behalf of the United States and share in any recovery. As part of today’s resolution, the three whistleblowers will receive payments totaling more than $2.4 million from the federal share of the settlement.

If you are seeing fraud on the government, contact us by calling 800-377-1812 for strictly confidential advice from experienced counsel, with no fee obligation.

The case was initiated by whistleblower Harrold Wright under the whistleblower provisions of the False Claims Act, which allow private citizens to file actions on behalf of the United States and share in any recovery. Because Mr. Wright is deceased, his heirs will receive $12,303,787.88, plus interest, as part of this settlement.

Each month, companies are required to report to the Minerals Management Service the value of the natural gas produced from their federal and Indian leases and pay a percentage of the reported value as royalties. This settlement resolves claims by the United States that the Chevron, Texaco and Unocal companies systematically under reported the value of natural gas they took from federal and Indian leases from March 1988 to November 2008 and so paid less in royalties then they owed.

Specifically, the companies were alleged to have 1) improperly deducted the cost of boosting gas up to pipeline pressures, 2) used affiliate transactions to fraudulently reduce the reported value of gas taken from federal and Indian leases, and 3) improperly reported processed gas as unprocessed gas to reduce royalty payments.

“This settlement successfully ends long-standing litigation and ensures that taxpayers receive their fair share of royalty revenues from energy production on federal and American Indian lands,” said Interior Secretary Ken Salazar. “Most of the $45 million settlement will be disbursed to appropriate federal, state and American Indian accounts that were affected by Chevron companies’ underpayment of natural gas royalties and improper deductions.”

The suit brought by Mr. Wright alleges that a number of companies systematically underpaid royalties due for their production of natural gas from federal and Indian lands. The Justice Department previously settled with Burlington Resources Inc. for $105.3 million, Shell Oil Company for $56 million and Dominion Exploration and Production Company for $2 million.

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The suit alleged that Schering deliberately inflated the average wholesale price it reported to California for Albuterol, a treatment for asthma and other breathing problems, as well as other drugs. As a result, California’s Medi-Cal program overpaid millions of dollars in pharmacy reimbursements.

Schlering was recently acquired by Merck & Co. of New Jersey. Merck didn’t admit wrongdoing and said its pricing practices complied with regulations and contracts. The settlement amount was reserved and significantly funded by Schering-Plough prior to its merger with Merck in November, Merck said.
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