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Author: Bo Frith

Pharmaceutical Whistleblowers

September 3, 2020

The pharmaceutical industry develops, produces, and markets drugs to treat disease. The economic impact of the American pharmaceutical industry is vast. In 2018, the United States spent $335 billion on prescription drugs.[1] On average, nearly half of all Americans have taken at least one prescription drug within any 30 day period.[2] Pharmaceutical whistleblowers perform a crucial service on behalf of public health and taxpayers when they report or oppose violations of safety laws and fraud.

The primary law used by pharmaceutical whistleblowers is the False Claims Act. The False Claims Act (FCA) prohibits false or fraudulent records, statements, and/or claims for the purpose of obtaining payment from the federal government. Pharmaceutical whistleblowers often fall under the protections of the FCA because of government involvement through Medicare and/or Medicaid.

Some of the most common ways in which pharmaceutical companies violate the FCA:

    • Kickbacks – the FCA prohibits pharmaceutical companies from paying physicians to recommend specific drugs. The prohibitions are not limited to outright bribes or rebate programs but also include price concessions on one drug in order to induce the purchase of a different drug.
    • Upcoding – the FCA prohibits healthcare providers from submitting bills for unnecessary services. When healthcare providers submit claims for goods or services beyond what is medical necessary, they are “upcoding.”
    • Off-label marketing – the FCA prohibits pharmaceutical companies from marketing drugs beyond the specific use approved by the Food and Drug Administration (FDA). The FDA does not approve a drug for treatment of sickness in general. Instead, a drug is approved for treatment of a specific condition for which the drug has been tested in patients. When a pharmaceutical company markets or promotes a drug beyond its approved use, the company is engaging in “off-label marketing.”

The FCA enables a whistleblower to step into the shoes of the government to sue on its behalf to recover fraudulently obtained funds. Under the False Claims Act, whistleblowers are entitled to 15% to 30% of the money recovered from the lawsuit. In many cases, recovery may be substantial:

    • $3 billion settlement against GlaxoSmithKline in 2012 for kickbacks and upcoding;[3]
    • $2.3 billion settlement against Pfizer in 2009 for kickbacks and off-label promotion;[4] and
    • $2.2 billion settlement against Johnson & Johnson in 2013 for kickbacks and off-label promotion.[5]

In the healthcare industry alone, the Department of Justice recovered over $1 billion under FCA whistleblower lawsuits every year since 2005.[6]

 

[1] NHE Fact Sheet. Centers for Medicare & Medicaid Services (Mar. 24, 2020). Available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NHE-Fact-Sheet#:~:text=Prescription%20drug%20spending%20increased%202.5,the%20households%20(28.4%20percent).

[2] Martin, Crescent et al. Prescription Drug Use in the United States. NCHS Data Brief No. 334. U.S. Dep’t of Health and Human Services (May 2019). Available at https://www.cdc.gov/nchs/data/databriefs/db334-h.pdf.

[3] Thomas, Katie and Schmidt, Michael. Glaxo Agrees to Pay $3 Billion in Fraud Settlement. New York Times (July 2, 2012). Available at https://www.nytimes.com/2012/07/03/business/glaxosmithkline-agrees-to-pay-3-billion-in-fraud-settlement.html.

[4] Gardiner, Harris. Pfizer Pays $2.3 Billion to Settle Marketing Case. New York Times (Sept. 2, 2009). Available at https://www.nytimes.com/2009/09/03/business/03health.html.

[5] Dennis, Brady. Johnson & Johnson Agrees to Pay $2.2 Billion in Drug-Marketing Settlement. Washington Post (Nov. 4, 2013). Available at https://www.washingtonpost.com/national/health-science/johnson-and-johnson-agrees-to-pay-22-billion-in-drug-marketing-settlement/2013/11/04/a7092342-456a-11e3-b6f8-3782ff6cb769_story.html.

[6] U.S. Dep’t of Justice, Fraud Statistics – Overview (2019), U.S. Dep’t of Justice. Available at https://www.justice.gov/opa/press-release/file/1233201/download.  

Whistleblowers for Nursing Home Fraud

August 12, 2020

 

Fraud occurs with surprising frequency in facilities with especially vulnerable patients. For this reason, nursing homes can be easy targets for Medicare and Medicaid fraud. These facilities are not under as much official scrutiny as hospitals. Nursing home residents are often unable to advocate for themselves. It is up to whistleblowers who have insight into this type of wrongdoing to expose it.

Common examples of fraud at nursing homes include:

  • billing for unnecessary tests and procedures;
  • paying kickbacks to doctors for referring patients to the nursing home; and
  • receiving kickbacks, rebates, or other benefits for prescribing drugs or using medical devices.

For-profit nursing home providers have frequently been defendants in whistleblower claims. Recently, nursing homes have settled cases with accusations of Medicare fraud and illegal kickbacks. The whistleblower statutes provide for a percentage of any recovery to go to the whistleblower, even when the government intervenes on the whistleblower’s behalf.

More than a dozen nursing home operators have settled whistleblower lawsuits with the Justice Department in cases with allegations of improper Medicare billing, forged documents, and other abuses. One nursing home provider in Tennessee is still in litigation with the government over accusations of putting residents into unnecessary therapy services and delaying the release of patients in order to reap higher Medicare benefits.[1] A nursing home in California settled a whistleblower lawsuit for $6.9 million for an illegal kickback scheme of tickets to sporting events and yacht excursions for hospital planners that provided patient referrals.[2] One of the largest nursing homes in country settled a whistleblower lawsuit for $145 million to resolve allegations that it engaged in a systematic scheme to maximize Medicare billing.[3]

It is clear healthcare fraud occurs in nursing homes through the United States. The settlements discussed above are just some of the many lawsuits detailing the extent of the fraud. It leads you to wonder if any nursing homes in Virginia could be guilty of the same fraudulent conduct?

 

 

 

[1] Moreno, Edward. Nursing Home Providers Accused of Misusing Federal Dollars Received Millions in COVID-19 Funds: Report. The Hill (Aug. 4, 2020). Available at https://thehill.com/policy/healthcare/510529-nursing-home-providers-accused-of-misusing-federal-dollars-received.

[2] Cenpizer, Debbie. Nursing Home Companies Accused of Misusing Federal Money Received Hundreds of Millions of Dollars in Pandemic Relief. Washington Post (Aug. 4 2020). Available at https://www.washingtonpost.com/business/2020/08/04/nursing-home-companies-accused-misusing-federal-money-received-hundreds-millions-dollars-pandemic-relief/.

[3] Life Care Centers of America Inc. Agrees to Pay $145 Million to Resolve False Claims Act Allegations Relating to the Provision of Medically Unnecessary Rehabilitation Therapy Services. Office of Public Affairs, U.S. Dept. of Justice (Updated Apr. 27, 2017). Available at https://www.justice.gov/opa/pr/life-care-centers-america-inc-agrees-pay-145-million-resolve-false-claims-act-allegations.

 

Defense Contractor Whistleblowers

July 30, 2020

The United States spends more on national defense than China, India, Russia, Saudi Arabia, France, Germany, the United Kingdom, Japan, South Korea, and Brazil – combined.[1] For Fiscal Year 2020, the Department of Defense has a discretionary spending budget of $712.6 billion.[2]

The federal government spends a significant portion of that amount on goods and services provided by defense contractors such as BAE Systems, Alliant Techsystems, Northrup Grumman, and Elbit Systems of America.

Many defense contractors are based in Virginia. Between 2000 and 2012 there were nearly 15,000 active defense contractors in Virginia.[3] During this period, the department of defense awarded Virginia defense contractors 159,193 contracts worth over $42.8 billion.[4]

Perhaps unsurprising given the massive dollar amounts, there is significant waste, fraud, and abuse occurring by defense contractors in Virginia. For example, a whistleblower lawsuit resulted in a former CEO of a defense contractor agreeing to pay $20 million for fraudulent procurement of small business contracts.[5] Another whistleblower suit resulted in a government contractor agreeing to pay $2.6 million for submitting falsified payment claims to the department of defense.[6]

The False Claims Act states that a whistleblower can file a lawsuit on behalf of the United States if they have original information about a company making false claims to defraud the government. Qui tam lawsuits filed by whistleblowers have recovered billions of taxpayer dollars from defense contractors who submitted false claims in order to cheat the government.

What to do if you believe a defense contractor has committed fraud?

If you have information that a government contractor has committed fraud, you may be entitled to a reward. Federal false claims cases often result in large multi-million dollar settlements and, in order to encourage people to come forward with information about fraud, the government offers whistleblower rewards up to 25 percent of the total amount recovered. Furthermore, there are powerful protections at the state and national level, as well as specific provisions for defense contract whistleblowers, that protect whistleblowing employees from retaliation by their employer.

 


 

[1] SIPRI Military Expenditure Database. Stockholm International Peace Research Institute. April 2020. Available at https://www.pgpf.org/chart-archive/0053_defense-comparison.

[2] National Defense Budget Estimates for FY 2021. Office of the Under Secretary of Defense. April 2020. Available at https://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2021/FY21_Green_Book.pdf

[3] Virginia Defense Sector Profile. Virginia Economic Development Partnership – International Trade. Mar. 24, 2014. Available at http://exportvirginia.org/wp-content/uploads/2012/06/Fast-Facts-Topics-Virginia-Defense.pdf.

[4] Id.

[5] Former CEO of Virginia-Based Defense Contractor Agrees to Pay $20 Million to Settle False Claims Act Allegations. US. Justice Dept. – Office of Public Affairs. Aug. 20, 2019. Available at https://www.justice.gov/opa/pr/former-ceo-virginia-based-defense-contractor-agrees-pay-20-million-settle-false-claims-act.

[6] Government Contractor Pays $2.6M to Settle False Claims Act Suit. US. Justice Dept. – News. Oct. 16, 2017. Available at https://www.justice.gov/usao-edva/pr/government-contractor-pays-26m-settle-false-claims-act-suit.

Whistleblower Protection for Sexual Orientation Discrimination

July 15, 2020

Due to recent developments nationally and at the state level, Virginia workers now enjoy protection from retaliation when bringing forward allegations of sexual orientation discrimination.

As we have written about previously, Virginia enacted a sweeping statute effective as of July 1, 2020 providing broad protections for Virginia workers from retaliation for protected whistleblowing activities. Specific to sexual orientation discrimination, the statute protects employees from retaliatory conduct by their employer when the employee alleges violations of state or federal law.

A recent decision by the U.S. Supreme Court makes it a violation of federal law to discriminate based on sexual orientation. In Bostock v. Clayton County, the Supreme Court ruled Title VIII of the Civil Rights Act of 1964 prohibits discrimination based on an individual’s sexual orientation and transgender status.[1] Justice Gorsuch wrote the majority opinion[2], which was a 6-3 ruling.

What does this all mean? It means that an employee who suffers from retaliatory conduct by his employer for reporting sexual orientation discrimination has a claim under the new Virginia whistleblower statute. The employee should be able to file suit in state court. The employee should not be required to file suit in the EEOC or federal court. Perhaps most importantly, under Virginia law summary judgment is rare – making it much more likely the case may proceed to trial and increasing the pressure on defendants to settle.

[1] Totenberg, Nina. Supreme Court Delivers Major Victory to LGBTQ Employees. National Public Radio. June 15, 2020. Available at https://www.npr.org/2020/06/15/863498848/supreme-court-delivers-major-victory-to-lgbtq-employees.

[2] Bostock v. Clayton County, 590 U.S. ___ (2020). Available at https://www.supremecourt.gov/opinions/19pdf/17-1618_hfci.pdf.

Insurance Fraud

June 19, 2020

We have written before on the various attempts at fraud perpetrated by insurance salesmen. We have also handled numerous cases of egregious insurance fraud. Fraud in the insurance industry is not going away.

Banner Life Insurance was recently hit with a $40.5 million settlement for fraudulently increasing the cost of insurance premiums. The case, filed in Maryland, detailed a scheme affecting roughly 10,000 policyholders where the insurance company significantly increase premiums on policies bought years, even decades, prior.

There are strict rules governing premium increases on insurance policies. After reports of skyrocketing premiums, Congress attempted to rein in rate increases.[1] The Affordable Care Act requires the federal government to work with the states to develop a process for reviewing unreasonable increases in premiums for certain categories of health insurance. As of 2012, insurers may not increase rates above a Virginia-specific percentage.[2]

Most interestingly in the Banner Life case, a whistleblower was the person who brought the fraudulent activities to light. It appears an employee with the defendant insurance company informed the plaintiff’s attorneys of the fraudulent scheme. It is highly likely the whistleblower received significant financial compensation in bringing the injustice to the public.

In addition to the protections afforded whistleblowers under the Virginia Fraud Against Taxpayers Act and the federal False Claims Act, the soon-to-be-enacted HB798 will provide additional protections for whistleblowers from retaliation as well as significant financial incentives to come forward.

[1] Abelson, Reed. Health Insurers Making Record Profits As Many Postpone Care. New York Times. May 13, 2011. Available at https://www.nytimes.com/2011/05/14/business/14health.html.

[2] Fighting Unreasonable Health Insurance Premium Increases. Centers for Medicare & Medicaid Services. Nov. 16, 2011. Available at https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/ratereview05192011a#_ftn1.

Virginia’s New Whistleblower Law: Timing Is Critical

June 1, 2020

Virginia’s new whistleblower protection law, HB 798, becomes effective July 1, 2020. It provides a host of broad protections for employees who suffer retaliatory conduct by their employer. A key aspect of this law is the issue of timing. Understanding this issue is critical to the success or failure of whistleblower claims.

Predictably, the business lobby expresses concern over the new law. Business groups claim the law allows almost any employee to conjure up, facing the prospect of performance related discipline or discharge, some purported misdeed about which the employee contends they have complained in order to avoid termination or to file suit.

The issue of timing is vitally important to whistleblower claims. While studies consistently show that the concerns of baseless lawsuits to be unfounded[1], courts throughout the country are suspect are whistleblower claims that occur at the same time or subsequent to termination.[2]

A few areas employees should be aware of before making a claim of retaliation under the new whistleblower law:

  • Was the employee’s whistleblowing conduct prior to the date of termination?
    • Courts are highly suspicious of the authenticity of an employee’s whistleblowing when it occurs at the same time as that of termination.
  • Did the employer have a clearly delineated whistleblower policy of which the employee was aware prior to the alleged retaliation?
    • If the employee was unclear as to which supervisor to inform of unethical conduct, it is harder for the employer to claim the employee failed to follow proper protocol in whistleblowing.
  • Did the employer investigate the employee’s whistleblowing allegation prior to termination?
    • If the employer failed to investigate the employee’s whistleblowing prior to termination, it is harder for the employer to argue they took the employee’s allegations seriously.
  • If the employer alleges performance issues for the employee, were those issues documented prior to the employee’s whistleblowing?
    • If the employer does not have documentation of the employee’s alleged performance issues prior to the employee’s whistleblowing conduct, it is more difficult for the employer to argue termination is related to job performance rather than retaliation for statutorily protected whistleblowing.

Any of the above issues can have a significant effect on a case, either positively or negatively. Potential whistleblowers should think carefully about these issues and secure documentation whenever possible.

[1] Dyck, Alexander, et al. Who Blows the Whistle on Corporate Fraud? The Journal of Finance, vol. 65, no. 6, 2010, pp. 2213–2253. JSTOR. Available at www.jstor.org/stable/23324409.

[2] See e.g., Berber v. Wells, 1:16-cv-24918-JEM. Unpublished. (Jan. 8, 2020, 11th Cir).

Non-Competes No Longer Enforceable for Lower Income Workers

June 1, 2020

A landmark new law passed by the Virginia legislature will render many non-competition provisions unenforceable. House Bill 330 states that non-competition provisions can no longer be enforced against “low wage” employees.

The statute defines “low wage” as less than the average weekly wage of the Commonwealth. This is a significant change and an amount much greater than other similar states. The average weekly wage of the Commonwealth changes from year to year. The Virginia Workers’ Compensation Commission sets the dollar amount. The amount of yearly income to qualify as a “low wage” employee is surprisingly high. For example, any employee who earned less than $59,000 in 2020 would qualify as “low wage.”

If an employer tries to enforce a non-compete provision against a low wage employee, the employee can then countersue. The law provides the possibility for an award of lost compensation, liquidated damages, expert witness fees, and even attorney’s fees.

The law also provides protection against non-solicitation provisions. While the new law is ostensibly titled as a non-competition statute, it nonetheless contains protections against non-solicitation provisions as well. A non-competition provision is a prohibition on an employee from competing in the same or similar line of work with his former employer after his employment ends. A non-solicitation provision is a prohibition on an employee soliciting the clients of his former employer after termination. Specifically, the new law states low wage employees cannot be found to be in violation of a non-solicitation provision if the employee does not initiate contact with his employer’s former client. In other words, there is no violation of a non-solicitation provision for a low wage employee if the client initiates first contact with the former employee.

A few caveats limit the applicability of the new law. First, the law applies only to employment agreements executed after July 1, 2020. Employment agreements in existence prior to that date are not affected. In other words, non-competition and non-solicitation provisions signed prior to July 1, 2020 are still in effect. Second, the law applies only to salaried employees. If the employee is solely or primarily compensated via commission or bonus, the law does not apply.

Despite these caveats, the new law banning non-competes for lower income employees is a significant step in the right direction. For too long, Virginia served as a haven for pro-business groups and employers. As we argued before on this website, being the #1 state for business suggests Virginia is near the bottom 50 states for employees. This new law is a small step in addressing this inequity.

Medicaid Fraud

May 19, 2020

Medicaid is a state and federally funded health care program that uses taxpayer dollars to cover the medical needs of low income individuals. When health care employees take advantage of this program by submitting false claims for financial profit, all taxpayers suffer. If you believe your employer is submitting false claims to Medicaid, you may be entitled to significant compensation.

There are a number of laws covering Medicaid whistleblowers. The Virginia Fraud Against Taxpayers Act (VAFTA) allows whistleblowers to file a lawsuit on behalf of the government and share in a percentage of the recovery. Any person who commits the following may be in violation of the VFATA:

  • presents a false claim for payment;
  • makes a false statement material to payment;
  • conspires with others to defraud;
  • fails to return money or property of the state;
  • delivers a receipt for a state program without knowledge of its accuracy;
  • conceals or decreases an obligation to a state program.

Employees are often concerned their employer will fire them or decrease their pay if they come forward with an allegations of fraud. Fortunately, there are a number of laws that protect employees. The VAFTA protects an employee from the retaliatory conduct of an employer. The employee is protected from being fired as well as any negative conduct, whether actual or threatened, due to the employee’s whistleblowing. Should prohibited retaliation occur, the employee may be entitled to reinstatement, back pay, special damages, and attorney’s fees. The new Virginia whistleblower statute offers further protection for these whistleblowers as well as the federal False Claims Act.

We already know a wide variety of Medicaid fraud is happening. Fraudulent referral systems for hospitals and surgeons. “Pill mill” doctors who fraudulently bill for prescription opioids. Marked-up billing for ambulance services.  Nursing home administrators seeking reimbursement for services they did not provide.

Health care professionals are in the unique position to gain inside knowledge of Medicaid fraud. The government provides cash incentives and powerful protections for whistleblowers who are willing to come forward. If you suspect your employer is participating in a scheme to profit from Medicaid, we encourage you to contact our office.

Medicare “Education”

May 15, 2020

“Hi, Mr. /Mrs. ___________ my name is Fred Smith and I’m excited to talk to you today to educate you about Medicare!” Many Virginia residents have heard this refrain over the phone or in person at some point over the past few years. Insurance companies have instructed their salesmen to use such statements as part of a script to sell insurance products. As discussed below, Virginia residents would be well advised to be cautious anytime insurance salesmen offer to “educate” them about Medicare.  

Insurance companies often target potential customers based on information gleaned from public/private databases. The insurance companies pay the database for individuals’ contact information including names, addresses, and phone numbers on soon-to-be Medicare eligible individuals who are about to turn 65 years of age.[1]

As you may imagine, soon-to-be Medicare recipients are the perfect target for insurance companies. These individuals are older, more likely to need insurance, and can be solicited in the comfy confines of their home. You may wonder why the government allows insurance companies to buy seniors’ personal information. The insurance industry claims the information is used only to “educate” potential customers about Medicare.[2] The reality is unfortunately quite different.

Many, if not most, insurance salesmen have no intention of educating seniors on Medicare. Once they get in the door on Medicare education, the salesmen aggressively push seniors to buy unnecessary products. The primary means of doing this is through high pressure sales tactics that prey on seniors’ fears. Insurance salesmen use lines such as “put the resident in the nursing home.” The often speak of themselves as “wild animals stalking their prey” and other lines that sound like they came from Alec Baldwin’s character in Glengarry Glen Ross. A textbook example of these egregious sales tactics is this story from Inside Edition.

In summary, Virginia residents should be wary whenever insurance salesmen claim to want to “educate” them on Medicare. If it sounds too good to be true, it usually is.

[1] Lazarus, David. Why Health Insurance Companies Will Solicit You Even After You Die. Los Angeles Times (Oct. 18, 2016) available at https://www.latimes.com/business/lazarus/la-fi-lazarus-medicare-mailings-20161018-snap-story.html.

[2] 42 C.F.R. 422.2268; 42 C.F.R.423.2268.

Whistleblowers Perform a Social Good

May 14, 2020

In recent years, whistleblower litigation has increased significantly. A wide range of new legislation includes whistleblowing provisions such as the Dodd-Frank Wall Street reform bill, False Claims Act for federal financial fraud, and Virginia’s new whistleblower law (HB 798) on employer retaliation. Contrary to the assertion of many in the business lobby, whistleblowers perform an essential social good that creates better outcomes for employees, consumers, and business.

Perhaps most obviously, whistleblowers are good for employees. An employee who is able to “blow the whistle” on a culture of sexual harassment or racism creates a better place to work and not just for the employee but for everyone working at the business.

Whistleblowers are good for consumers. Whistleblowers detect more corporate fraud than any other source, including management review, internal audit, or law enforcement.[1] Every year fraud costs taxpayers billions of dollars.[2] Whistleblowers have brought to light some of the biggest frauds in American history. For example, whistleblowers revealed the almost impossibly corrupt business practices of Theranos and (insert deep voice here) “Elizabeth Holmes.”[3]

Whistleblowers are good for business. A recent study in the Harvard Business Review demonstrates whistleblowers create fewer lawsuits and lead to settlements for smaller dollar amounts than instances where whistleblowers are not encouraged to come forward.[4] The research demonstrates whistleblowers provide an avenue for companies to address problems before they mushroom out of control.

Whistleblowers are a win-win. Rather than demean whistleblowers, we should all applaud the beneficial service they provide.

[1] 2020 Global Study on Occupational Fraud and Abuse. Association of Certified Fraud Examiners. Available at https://www.acfe.com/report-to-the-nations/2020/.

[2] See e.g., McFadden, Cynthia and Karamehmedovic, Almin. Medicare Fraud Costs Taxpayers More Than $60 Billion Each Year. ABC News (Mar. 17, 2010). Available at https://abcnews.go.com/Nightline/medicare-fraud-costs-taxpayers-60-billion-year/story?id=10126555.

[3] Jarvis, Rebecca. The Drop Out. Podcast available at https://abcaudio.com/podcasts/the-dropout/; The Inventor: Out for Blood in Silicon Valley. HBO Documentary Films 2019; Carreyou, John. Hot Startup Has Struggled With Its Blood-Test Technology. The Wall Street Journal (Oct. 16, 2015). Available at https://www.wsj.com/articles/theranos-has-struggled-with-blood-tests-1444881901?mod=article_inline.

[4] Stubben, Stephen and Welch, Kyle. Research: Whistleblowers Are A Sign of Healthy Companies. Harvard Business Review (Nov. 14, 2018). Available at https://hbr.org/2018/11/research-whistleblowers-are-a-sign-of-healthy-companies.