The False Claims Act is one of the most powerful anti-fraud laws in the United States today. It protects whistleblowers and incentivizes them to report false claims and other fraudulent activity by allowing them to collect sizable payouts. The money for these whistleblower rewards comes directly from the amount recouped in a successful qui tam settlement. The larger the settlement, the larger the whistleblower payout.
Understanding the False Claims Act and Whistleblowers
According to the False Claims Act, those who commit fraud may be held liable for up to treble damages for every individual false claim made to the federal government. There are also individual penalties that may be assessed per claim, the amount of which is linked to current inflation rates. Because of this accounting method, False Claims Act settlements can quickly add up, especially in cases of ongoing or extensive fraud.
Whistleblowers are also eligible to receive anywhere from 10 to 30 percent of the overall payout. In some of the following cases, whistleblowers may have been able to receive settlements in amounts reaching up to $600 million. The more valuable the information is, the more promptly it was provided, and the more cooperation a whistleblower can provide in a Department of Justice investigation can all increase the percentage that a whistleblower may be awarded in the event of a successful False Claims Act qui tam lawsuit.
Top 10 Largest US Fraud Settlements under the False Claims Act
1. GlaxoSmithKline – $3 billion
Currently, the largest healthcare fraud settlement in US history was paid by the global pharmaceutical giant GlaxoSmithKline. In a 2012 judgement, GlaxoSmithKline agreed to pay $3 billion to resolve a series of joint fraud allegations, as well as a matter of criminal liability. The criminal allegations made up $1 billion of the settlement and were threefold: two counts that the company had trafficked misbranded drugs (Paxil and Wellbutrin) across state lines, and one count of failing to report accurate information concerning the drug Avandia’s safety to the FDA.
The False Claims Act portion of the settlement, which is governed under civil anti-fraud law, demanded that the company pay an additional $2 billion to resolve further liability involving the drugs Paxil, Wellbutrin, and Avadia, as well as separate pricing fraud concerns. Some of the fraud counts involved in the settlement included promoting the use of these drugs for non-confirmed, non-covered use, as well as offering kickbacks to physicians who prescribed them for these additional purposes.
For instance, the drug Paxil was not approved by the FDA for pediatric use. However, GlaxoSmithKline allegedly sponsored dinner programs, expensive lunches, spa treatments, conferences for doctors, and other methods to promote the use of the drug in adolescents and children to treat depression. They also conducted, published, and distributed a medical journal that was later labeled “misleading,” promoting the effective use of the drug for children and teens suffering from depression, and suppressed subsequent studies that contradicted this claim. Meanwhile, Paxil carries a warning that its use may increase the risk of suicidal thinking and behavior, especially in children and adolescents. GlaxoSmithKline’s fraudulent promotion in search of increased profits may have done substantial harm to children, families, and individuals in need of mental health care.
2. Pfizer – $2.3 billion
In another case of pharmaceutical fraud, the company Pfizer was ordered to pay a hefty judgement in order to resolve allegations of kickbacks as well as improper payments regarding their Medicare responsibilities. According to the Justice Department, throughout the period of 2012 to 2016, Pfizer created a separate non-profit entity called the Patient Access Network Foundation, or PANF. This organization, which claimed 501(c)(3) tax filing status, was used as a puppet charity in order to take care of the copay obligations of patients who received certain life-saving prescription drugs manufactured by Pfizer, including Sutent and Inlyta.
Instead of simply giving these drugs to covered Medicare patients for free, as was the law, Pfizer directed some of these patients toward PANF in order to generate Medicare copayments. They also raised the wholesale cost of another drug they manufactured, Tikosyn, in order to raise Medicare copay costs for it to be filled. This generated the need for more financial assistance for Medicare recipients who required the drug and unknowingly turned to PANF for aid. This perpetual cycle lined Pfizer’s pockets while siphoning off Medicare funds back into this shadow organization, all while creating increased hardships for patients who required care.
3. Johnson & Johnson – $2.2 billion
In 2013, Johnson & Johnson became embroiled in scandal when it was ordered to pay more than $2.2 billion for civil and criminal charges. The company allegedly offered kickbacks and falsely promoted its drugs Risperdal, Invega, and Natrecor. In disturbing detail, the company allegedly targeted nursing homes, pediatricians, and those who care for people with intellectual disabilities and diseases in order to promote the use of the powerful antipsychotic drug Risperdal. This drug, which was only been approved for use in cases of schizophrenia, was pushed as a safe and effective option for elderly patients suffering from dementia who exhibited symptoms of anxiety, depression, agitation, hostility, or confusion.
Furthermore, when an in-house study showed that the use of Risperdal was associated with an increased risk of strokes and other unforeseen adverse consequences in older patients, Johnson & Johnson knowingly combined the warning study with others in order to suppress or conceal those findings. The company was shown to have created an “ElderCare sales force” in order to aggressively market the use of the drug in geriatric patients, despite it not being FDA approved for the purposes that were being pushed, and despite studies that showed it endangered those patients’ lives and mental stability.
Johnson & Johnson also directed its marketing team to promote the drug to pediatricians, child psychiatrists, and mental health treatment centers that focused on children and suggest that they use the drug to treat children who are diagnosed with OCD, ADHD, ODD, and autism. The company promised speaker fees to doctors who promoted the drug’s use in children with developmental disorders, and then withheld those payments until those doctors also prescribed the drug to their patients. Risperdal has numerous risks associated with its use in children, which the FDA continuously warned Johnson & Johnson about. The company continued to prioritize expanding the drug’s market share at the expense of the most vulnerable, instead of focusing on its approved uses.
Of the overall settlement, $1.391 billion was directly associated with the lawsuit involving the False Claims Act, kickbacks, and false promotion associated with Risperdal and Invega.
4. HCA – $1.7 billion
The Healthcare Company, formerly known as Columbia HCA, was ordered to pay just over $840 million to resolve both criminal and civil charges. This for-profit hospital chain allegedly:
- Routinely billed for services never provided to patients
- Billed for testing that was not medically necessary
- Upcoded its charges in order to increase reimbursement amounts for Medicare and Medicaid patients
- Billed for non-reimbursable costs including its expansion into home health businesses
- Billed for marketing costs and expenses under the guise of “community education”
The settlement reached in 2000 included $731,400,000 to resolve allegations brought under the False Claims Act but did not resolve every allegation made against the hospital chain. Some outstanding allegations included that HCA continually and unlawfully charged the federal government for upkeep costs associated with running its business, as well as paying kickbacks in exchange for the referral of Medicare and Medicaid patients. These were later resolved in a 2003 settlement for an additional $631 million, as well as a separate payment of $250 million tied to overpayment and false reporting claims.
5. Abbott Labs – $1.5 billion
A common theme emerges of pharmaceutical companies targeting the nation’s elderly in this 2012 settlement involving Abbott Labs. The civil and criminal suit involved a False Claims Act component of $800 million for the state and federal governments after Abbott Labs promoted the use of its drug, Depakote, in elderly nursing home patients suffering from dementia and schizophrenia, even after clinical data proved it was ineffective.
Multiple in-house studies found that the drug failed to show statistically significant results when used in treatment for schizophrenia. When confronted with these findings, the company suppressed them for up to two years while continuing to market the drug for use in treating schizophrenia. This off-label marketing led to the submission of false claims to federally funded programs including Medicare, Medicaid, TRICARE, the Federal Employees Health Benefits Program, the Department of Veterans Affairs, and the Department of Labor’s Office of Workers’ Compensation Programs.
Abbott Labs was also accused of offering kickbacks to physicians in order to incentivize them to prescribe Depakote, especially in cases of older patients or at long-term care facilities. The whistleblowers in this case received a payment of $84 million for their information.
6. Eli Lilly and Company – $1.415 billion
A settlement with Eli Lilly and Company involved one of the largest corporate criminal fines in history. The pharmaceutical company allegedly promoted an antipsychotic drug it manufactured, Zyprexa, for unapproved uses. The company utilized its marketing and sales force to promote the use of this drug in long-term care and assisted living facilities for patients who were diagnosed with Alzheimer’s, dementia, depression, anxiety, and behavioral outbursts.
Elderly patients were systematically targeted by the marketing and sales teams under the direction of the company. They sought to convince doctors, even primary care physicians, to prescribe the drug to patients suffering from a variety of unapproved concerns, including a diagnostic focus on symptoms as simple as nausea, sleep issues, or irritability. The drug was never approved in primary care settings, or for older patients suffering from Alzheimer’s or dementia.
The company also poured millions into continuing education programs for the medical community that was designed to promote the prescription and use of Zyprexa for off-label purposes, as well as several other of the company’s drugs. At the time of its resolution, the criminal fine of $515 million was the largest ever in a healthcare case. The civil side of the qui tam suit was resolved for a payment of $800 million.
7. Tenet Healthcare – $900 million
Tenet Healthcare, one of the nation’s largest hospital chains, was ordered to pay a $900 million settlement under the False Claims Act for allegedly engaging in providing kickbacks, upcoding their fees, and providing excessive “outlier” payments, which are intended to be used only in extraordinary cases of care. Many instances of upcoding and outlier charges resulted not only in an increased financial burden to patients but also in diagnoses that did not correspond to the patients’ actual needs or medical states. This settlement amount was mitigated by the company’s ability to pay, meaning that the actual amount appropriated by the hospital chain was likely much larger than the final amount decided upon in the qui tam case.
8. TAP Pharmaceutical Products Inc. – $875 million
In 2001, the company known as TAP, short for Taketa-Abbott Pharmaceutical, agreed to pay a settlement of $875 million in order to put to rest allegations of civil and criminal liability. Their case involved fraudulent pricing and marketing of the drug Lupron. Of the total settlement, $559,483,560 was a direct result of the qui tam case brought under the False Claims Act.
TAP Pharmaceutical Products Inc’s alleged scheme was to provide doctors and physicians with free samples of their product, knowing that it cost Medicare and Medicaid $500 per dose. By the time the con was finally discovered, Lupron alone accounted for a full 10 percent of Medicare Part-A’s prescription drug spending.
9. Merck – $650 million
Merck & Company settled in 2008 over a claim that they failed to provide appropriate rebates to Medicaid over the prescriptions of their drugs Zocor, Vioxx, and Pepcid. Under the Medicaid Rebate Statute, Medicaid patients are required to receive the same kinds of rebates or discounts that are provided to a company’s so-called “best” customers. An exception to the Medicaid Rebate Statute allows companies to avoid reporting discounts that are deemed “nominal” in amount. Merck & Company allegedly reported significant discounts that they gave to hospitals for their products as “nominal” in order to upcharge Medicaid customers and draw down funds from the federal government.
The company was also thought to offer kickbacks to hospitals and physicians who prescribed their products, especially Pepcid, as well as substantially lowering costs for hospitals that prescribed their brand of stomach acid reducer exclusively. The pricing scheme was created in order to turn discharged patients into future customers, ensuring that they would continue to purchase Merck’s drug over the counter in perpetuity, creating spillover business and reducing competition. Part of the investigation of the case was led by Jim Letten, the U.S. Attorney for the Eastern District of Louisiana, who noted that “particularly in the wake of Hurricane Katrina, it is critical that precious government resources not be lost to fraud and abuse.”
10.) JPMorgan Chase – $614 million
Pharmaceutical companies, hospitals, and other healthcare industries are not the only ones governed by the False Claims Act. This law can also be applied to cases involving government contracts, loans, grants, and other misuse of taxpayer funds. Common offenders besides healthcare companies include defense contractors, banks and financial institutions, universities, and even small businesses that have received loans or grants from government programs.
In a 2014 case involving JPMorgan Chase, the banking giant was ordered to pay $614 million for a scam involving the approval of fraudulent loans backed by the Department of Housing and Urban Development (HUD), Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA). As part of the settlement, JPMorgan Chase admitted to over a decade of wrongdoing involving the approval of thousands of FHA and VA-backed loans for applicants who were not qualified under the programs’ guidelines. When these unqualified loans failed, both the FHA and VA were forced to suffer substantial financial losses by backing JPMorgan Chase’s decisions.
JPMorgan Chase passed on these costs to the taxpayer while reducing funds available for veterans and those who qualify for financial assistance in owning their own homes. The settlement was made possible in part by President Obama’s Financial Fraud Enforcement Task Force (FFETF), a broad coalition of enforcement efforts to fight fraud related to the financial and housing crisis of 2008.
False Claims Act Settlement Takeaways
While a substantial number of cases and settlements involve pharmaceutical companies offering kickbacks for the use of prescription drugs, any company that contracts with the federal government or receives state or federal funding may be held accountable for fraud under qui tam law. Whistleblowers who can help crack a case under the False Claims Act may be entitled to substantial financial payouts, as well as ongoing protections against employer retaliation.
If you have information about a company’s wrongdoing, or if you suspect your employer is offering kickbacks, upcoding insurance claims, misrepresenting information to the government, or wrongfully accepting funds, speak to a qualified whistleblower lawyer right away.
The law firm of Tycko & Zavareei LLP offers a team of dedicated False Claims Act lawyers ready to help explain your options. We have years of experienced leadership in the field of qui tam law and are ready to help protect whistleblowers, taxpayers, and the truth.