DoJ Set to Recover More Than $3 Billion from Healthcare Fraud in 2021

DOJ_Cheriss May/NurPhoto via Getty Images

Cheriss May/NurPhoto via Getty Images

The U.S. Department of Justice (DoJ) is set to recover more than $3 billion this year from pharmaceutical and medical device manufacturers as well as healthcare providers, labs and pharmacies found guilty of healthcare fraud under the False Claims Act (FCA). That figure is based upon settlements that were agreed to but not finalized before the end of 2020, and are the direct result of the DoJ’s investigation into the opioid epidemic.

Even if no other recoveries are made, 2021 will be significantly higher than the $1.8 billion in federal losses recouped in 2020, according to DoJ Fraud Statistics Overview.

The 2020 figure is down 44% from the 2019 total of $2.6 billion and was, in fact, the first time it dropped below $2 billion since 2009. That said, the $1.8 billion recovered in 2020 accounted for more than 80% of the $2.2 billion recovered in total from all business sectors last year.

Because these numbers reflect only the recovery of federal losses, when state recoveries are taken into account the actual figures were higher. As the DoJ pointed out, often, additional tens of millions of dollars were recovered for state Medicaid programs.

For 2021, the DoJ expects to receive a previously-negotiated $2.8 billion settlement from Purdue Pharma, a $225 million settlement from Sackler family members and a $600 million settlement from Indivior based upon its misleading marketing of the Suboxone® opioid addiction therapy.

The DoJ also has continuing actions against Teva Pharmaceuticals USA, Inc. and Teva Neurosciences, Inc. regarding their alleged conspiracy to subsidize Medicare co-pays for Copaxone®, a multiple sclerosis therapy.

“These ongoing matters will likely increase the net recovery from healthcare industries, again signifying the government’s close watch on the industry,” attorneys from Hall Render Killian Heath & Lyman PC (Hall Render), wrote in a blog.

For 2020, the largest settlements came, not surprisingly, from pharmaceutical developers. Novartis, for example, made a $591 million settlement to resolve claims that it paid kickbacks to physicians in exchange for prescriptions.

Pharma also came under scrutiny for activities to protect high drug prices by funding the co-payments of Medicare patients. For example, Novartis and Gilead Sciences paid more than $148 million to the DoJ “to resolve claims they paid patient copays for their drugs through purportedly independent foundations that were, in fact, mere conduits for these payments,” according to the DoJ. Four supposedly independent foundations also were investigated and paid a total of $13 million in 2020 for their involvement in kickback schemes.

Note that recouped funds are just the tip of the proverbial iceberg for companies embroiled in wrong-doing. Purdue Pharma is a case in point, making headlines last October when it was hit with the largest penalties ever levied against a pharmaceutical company: a criminal fine of $3.544 billion, $2 billion in criminal forfeiture, three counts of felony, and a civil settlement of $2.8 billion. The company declared bankruptcy. Additionally, the Sackler family is paying $225 million in damages to resolve its civil False Claims Act liability.

“Although the largest recoveries often garner the most media attention, health care providers should understand that the government will pursue enforcement actions against any provider type, regardless of size, if the government believes the allegations warrant such an investigation,” Hall Render wrote.

Senior leaders, business owners, and physicians have been held personally accountable.

On an individual level, several physicians have been charged to settle kickback allegations. Settlements were negotiated in the low millions of dollars.

Research institutions have been at fault, too.

The Scripps Research Institute agreed to pay $10 million to settle claims it improperly charged NIH-funded research grants for time spent by researchers on non-grant-related activities, such as developing, preparing, and writing new grant applications, teaching, and engaging in other administrative activities.

Only about one third of the recoveries in the healthcare sector were attributable to whistleblowers – called qui tam cases who helped identify alleged fraud and abuse. Yet, when looking at new cases, whistleblowers brought 456 cases of healthcare fraud to the attention of the DoJ last year. (For all industries, the total was 672.) 

Healthcare industry whistleblowers themselves received nearly $263 million of the $309 million awarded for such actions. Only 117 healthcare cases were identified through other means, such as self-disclosure or government-initiated litigation.

“Whistleblowers with insider information are critical to identifying and pursuing new and evolving fraud schemes that might otherwise remain undetected,” DoJ Acting Assistant Attorney General Jeffrey Bossert Clark said in a statement. “These individuals often make substantial sacrifices to bring these schemes to light, and our efforts to protect taxpayer funds continue to benefit from their actions.”

To minimize the risk of facing DoJ recovery actions, Hall Render advises pharmaceutical companies to protect themselves with well-designed, updated compliance programs. “Proactive compliance programs are an excellent defense and can help identify potential issues early – before they develop into big issues and potentially implicate the FCA.”

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