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HHS Report Details Numerous False Claims Act Triumphs

The Department of Health and Human Services’ (HHS) Office of the Inspector General released its Semi-Annual Report to Congress on Wednesday, detailing activity from April through September of 2008. Among the highlights of the report were a number of False Claims Act victories for the government that directly benefited HHS, and the Medicare and Medicaid systems in particular. In addition to the $425 million Cephalon settlement detailed in a November 14 post to this blog, the report listed a number of others cases that resulted in significant monetary awards.

Merck and Company, Inc., entered into two separate settlements in False Claims Act cases totaling almost $650 million. In one $399 million settlement centered around the drugs Zocor, Mevacor, and Vioxx, the government contended that Merck failed to report, as required under the Medicaid drug rebate program, that it sold drugs to hospitals at extremely deep discounts, causing Merck to underpay rebates it owned to the government. That settlement also resolved allegations that Merck overcharged Federally Qualified Health Centers that bought Merck products under the 340B Drug Pricing Program and that in a four-year stretch, Merck used federally funded programs that allegedly paid physicians to purchase Merck products, disguising the payments as “training,” “consultation,” and “market research.” In the other settlement, Merck agreed to pay $250 million to resolve similar discount drug pricing allegations involving the drug Pepcid. The two cases both began as qui tam lawsuits brought by private relators, and their shares of the settlements came to $46.6 million and $24 million, respectively.

Walgreen Co., settled with the United States, Puerto Rico, and 42 states for over $35 million based on qui tam allegations that Walgreens substituted slightly different types of generic prescription drugs for the less expensive prescribed forms solely to increase its Medicaid reimbursement rate and for no medical purpose. Drugs involved in the settlement were the generic forms of Zantac (ranitidine), Prozac (fluoxetine), and Eldepryl (selegiline). The pharmacist acting as the qui tam relator in the case received approximately $5 million as part of the settlement.

Hospitals in Georgia and Maine entered into settlements based upon False Claims Act and qui tam allegations. In Georgia, a group of medical providers including Memorial Health, Inc., Memorial Health University Medical Center, Inc., Provident Eye Physicians, Inc., and Georgia Eye Institute, Inc., paid $5.08 million to settle allegations that it violated the Physician Self-Referral law by making excessive payments to its ophthalmologists. The doctor who brought the qui tam lawsuit was paid $889,000 in the settlement. In Maine, Henrietta Goodall Hospital resolved allegations that it overbilled Medicare for various drugs with a $1.15 million settlement.

Other cases detailed in the HHS report: in Puerto Rico, the U.S. won a default judgment against Flash Ambulance, Inc., and Luis N. Romero-Mejias for over $6 million for fraudulently billing Medicare for nonemergency ambulance trips; in New Jersey, Besler & Company, its principal, and related entities paid $2.875 million (including $460,000 to the quit tam relators) stemming from allegations in two qui tam suits that Besler, a consulting firm, advised hospitals to exaggerate their cost-to-charge ratios, causing them to falsely bill Medicare; in Illinois, Heartland Dental Care, Inc., and Richard E. Workman paid $1.65 million to settle state and federal False Claims Act allegations that dentists falsely reported procedures as a way to fraudulently bill Medicaid for non-covered services and violated the Controlled Substances Act by calling in Medicaid prescriptions under other dentists’ Drug Enforcement Administration registration numbers. The relator who exposed the dental billing scheme received over $400,000 in the settlement.

In total, the Report described over $1.1 billion in settlements and judgments as a result of False Claims Act cases arising out of Medicare or Medicaid fraud. And that was just over the six months covered by the Report! The Report demonstrates, yet again, the enormous amount of fraud and abuse committed by providers and pharmaceutical companies, and the incomparable value of False Claims Act qui tam cases — and the private whistleblowers who bring them — in protecting the public.

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