Outcome: Confidential Settlement
Case Overview
A whistleblower filed a lawsuit under the California Insurance Frauds Prevention Act (IFPA) against a medical food product manufacturer. The case was brought on behalf of the state of California and focuses on the manufacturer’s alleged fraudulent activities aimed at defrauding insurance companies.
Key Details
The manufacturer allegedly misled health care providers (HCPs) into believing that their brand-name medical foods were unique compared to generic versions, which are both equivalent and cheaper. The manufacturer instructed its sales representatives to falsely claim that no other product contains the same active ingredients in the same amounts as their brand-name medical foods. This practice led HCPs to prescribe the more expensive brand-name medical foods over the equivalent generics, thereby causing insurers to pay higher claims, in violation of the California Insurance Frauds Prevention Act. The whistleblower also claimed they and other sales representatives were encouraged through an incentive pay system to mislead HCPs into prescribing the more expensive brand-name medical foods.
The California Insurance Frauds Prevention Act (IFPA), § 1871.7 of the California Insurance Code, allows individuals to file private qui tam suits against entities committing insurance fraud in California. The Act aims to combat fraud against insurers, particularly health insurance fraud, by imposing fines and damages on fraudsters. Individuals act on behalf of themselves, fellow policyholders, and the State of California.
The parties eventually went to mediation and agreed upon a settlement. The lawsuit highlights the role of whistleblowers in combating insurance fraud under the California Insurance Frauds Prevention Act.