False Claims Act

The United States filed a second false claims action against Novartis Pharmaceuticals Corp. alleging that they paid kickbacks to doctors to induce them to prescribe Novartis pharmaceutical products that were reimbursed by federal health care programs, the Justice Department announced last week.

The government alleges that from January 2001 through November 2011, Novartis systematically violated the Anti-Kickback Statute, which prohibits payment of remuneration to induce referrals of items or services covered by Medicare, Medicaid, and other federally funded programs.  Novartis allegedly violated its own internal policies concerning speaker programs, which require that the programs have an educational purpose and that slides about the company’s drugs be presented.  Novartis allegedly violated the Anti-Kickback Statute by paying doctors to speak about certain drugs, including its hypertension drugs Lotrel and Valturna and its diabetes drug Starlix, at events that were often little or nothing more than social occasions for the doctors.  The payments and lavish dinners given to the doctors were, in reality, kickbacks to the speakers and attendees to induce them to write prescriptions for Novartis drugs.  In many instances Novartis made payments to doctors for purported speaker programs that either did not occur at all or that had few or no attendees, and thousands of programs were held all over the country at which few or no slides were shown and the doctors who participated spent little or no time discussing the drug at issue.

The government claims that Novartis was well aware that its speaker programs created opportunities to provide kickbacks to doctors.  In September 2010, Novartis entered into a settlement with the U.S. Department of Justice to settle False Claims Act lawsuits based in part on violations of the Anti-Kickback Statute due to illegal remuneration paid to doctors through such mechanisms as speaker programs, and signed a corporate integrity agreement with the U.S. Department of Health and Human Services Office of Inspector General agreeing to implement a rigorous compliance program.  Nonetheless, even after entering into the corporate integrity agreement, Novartis’s compliance program allegedly failed to prevent kickbacks from being paid in conjunction with Novartis’s speaker programs.

As a consequence of its alleged violations of the Anti-Kickback Statute, Novartis has caused the submission of numerous false claims for drugs to federal health care programs, including Medicare, Medicaid, TRICARE and the Department of Veterans Affairs health care program, resulting in millions of dollars in reimbursements. Novartis’s unlawful conduct caused those false claims to be made to and paid by the federal health care programs.  

The lawsuit was originally brought by former Novartis sales representative Oswald Bilotta under the whistleblower provision of the False Claims Act.  The False Claims Act allows private citizens with knowledge of fraud to sue on behalf of the government and share in the recovery.  The U.S. seeks treble damages and penalties under the False Claims Act as well as damages under the common law.

The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who take action under the False Claims Act to report fraud committed against the federal and state governments.  We have years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud.  Read more about our expertise in False Claims Act cases and how you can take action.

On April 16, the owner and another senior executive of Chicago’s Sacred Heart Hospital and four physicians affiliated with the facility were arrested in connection with a Medicare and Medicaid kickback and fraud scheme, the U.S. Department of Justice reported.

Edward J. Novak, Sacred Heart’s owner and chief executive officer, and Roy M. Payawal, Sacred Heart’s executive vice president and chief financial officer, allegedly engaged in a number of kickback and Medicare and Medicaid fraud schemes.  They allegedly paid kickbacks to physicians to refer Medicaid and Medicare patients to the hospital, with the kickbacks disguised as rent check payments, physician ghost contracts for duties without any real responsibilities, or payments for teaching nonexistent medical students, among other things.  Sacred Heart also allegedly billed Medicare for unnecessary emergency room care and unnecessary tracheotomy procedures.

“The arrests should send a chilling message both to health care executives and physicians: If you pay or accept kickbacks, big trouble follows,” former federal prosecutor Michael A. Hirst, said to the Report on Medicare Compliance journal.  Michael Hirst works for the Hirst Law Group in Davis, Calif., a firm affiliated with The Chanler Group.

The investigation is ongoing.

The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who take action under the False Claims Act to report fraud committed against the federal and state governments.  We have years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud.  Read more about our expertise in False Claims Act cases and how you can take action.

A federal jury found for whistleblowers in reaching a verdict that State Farm Fire and Casualty Co. knowingly provided fraudulent claims to the federal government under the flood insurance program for Hurricane Katrina regarding damage to at least one home, the San Francisco Chronicle reported on Tuesday.  In reaching its special verdict, the jury found that State Farm caused damages to the government in the amount of $250,000.  Under the False Claims Act, the relators, known as whistleblowers, may file a motion with the court to triple the amount of damages found by the jury to $750,000.  Additional damages, as well as the share of proceeds to be awarded to the whistleblowers, is yet to be determined.

State Farm allegedly paid policy limits of $250,000 for flood damage to Thomas and Pamela McIntosh’s home in Biloxi, Miss. even though the damage was caused by wind.  Wind damage would have been covered under State Farm’s policy, while flood damage was covered by a National Flood Insurance Program (NFIP) policy issued by State Farm.  Under the NFIP, State Farm would be reimbursed by the government for claims covered by the flood damage policy.  By charging the NFIP for losses, State Farm minimized its own payments for wind damage while shifting payment for hundreds of thousands of dollars to the government.  The jury found that the house suffered $0 worth of flood damage, and that State Farm overcharged the NFIP the full $250,000.

According to the Sun Herald, this verdict may open the case to potentially thousands of post-Katrina flood claims adjusted by State Farm and paid by the NFIP.  The whistleblowers alleged that State Farm trainers told adjustors that Hurricane Katrina was a “water storm” and that all major damage to homes was caused by flooding, all while delaying their own assessments of wind damage claims.  State Farm also allegedly pushed the NFIP to relax their rules and requirements for adjusting flood claims. 

The suit was originally filed by Kerri and Cori Rigsby under the qui tam, or whistleblower, provisions of the False Claims Act.  The False Claims Act allows private citizens with knowledge of fraud committed against the government to sue on the government’s behalf and claim a share of the recovery.  The Rigsbys were employees of a contractor hired by State Farm to help adjust the deluge of claims that followed Hurricane Katrina. 

The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who take action under the False Claims Act to report fraud committed against the federal and state governments.  We have years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud.  Read more about our expertise in False Claims Act cases and how you can take action.

A former hospice physician recently secured a $750,000 settlement from the City of San Francisco after he filed complaints alleging that his layoff was the result of retaliation for whistleblower complaints that San Francisco’s Laguna Honda Hospital and Rehabilitation Center (“Laguna Honda Hospital”) had misused patient funds and knowingly entered into a conflict of interest.

Dr. Derek Kerr, a hospice physician for over 20 years at Laguna Honda Hospital, filed complaints against the hospital in late 2010, alleging that it misused patient gift funds and knowingly entered into a conflict of interest when it established a relationship with a non-profit that had connections to management at the hospital.  The day after he filed the complaints, Kerr received a layoff notice.

Kerr reported the layoff to the San Francisco Ethics Commission as whistleblower retaliation, which is prohibited under California Government Code section 53298, California Health and Safety Code section 1432, and California Labor Code section 1102.5.  He later filed a complaint in the San Francisco County Superior Court and eventually negotiated a $750,000 settlement with the city, and an agreement that a plaque be installed at the hospital commemorating his work there.  He will also be lauded by the very officials who were allegedly responsible for his layoff.

The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who have been subject to retaliation for taking action under the False Claims Act to report fraud committed against the federal and state governments.  We have years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud.  Read more about our expertise in False Claims Act cases and how you can take action.

The University of California has agreed to pay a $1.2 million settlement to resolve allegations of falsification of medical records and poor supervision of patients, the Los Angeles Times reported yesterday.

The suit was brought by whistleblower Dr. Dennis O’Connor, a former professor of anesthesiology at the UC Irvine School of Medicine.  He alleged that anesthesia was administered to patients by nurse anesthetists and residents without the required supervision by an anesthesiologist.  The university medical center also allegedly filled out patient care reports before procedures began, making it appear as though an anesthesiologist was present when one was not.

Dr. O’Connor will receive $120,000 of the settlement; the rest will go to the federal government.

The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who take action under the False Claims Act to report fraud committed against the federal and state governments.  We have years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud.  Read more about our expertise in False Claims Act cases and how you can take action.