The Wall Street Journal recently ran a small feature on the False Claims Act. The article answers some basic questions about the FCA, but more importantly than that, it provides much needed exposure to an important tool for recovering taxpayer’s money — money that would otherwise be lost to fraud.
As the article notes, the number of FCA cases have more than doubled in the last 5 years. In a related piece, a defense attorney related that not only are FCA cases on the rise, but relators and their law firms are more zealous than ever to prosecute FCA cases themselves. Even when the government chooses to not intervene, relators are becoming more willing to take on the company. In the past, relators were more likely to drop the case if the company could persuade the government to not get involved.
Whistleblowers need the exposure and empowerment provided by articles like this and we hope to see more if its kind in the future. The article follows below.
The Short Answer: What Is the False Claims Act?
By: Peter Loftus
As the U.S. government seeks to smoke out fraud that costs taxpayers, it relies heavily on citizens who file suit against alleged offenders under the False Claims Act, or “Lincoln Law,” especially in health care. The act gives a cut of federal and state recoveries to successful whistleblowers, some of whom, as The Wall Street Journal reports, have filed multiple suits and received millions of dollars.
What is the False Claims Act?
Also called the Lincoln Law because Congress enacted it during the Civil War to combat suppliers’ fraud on the Union Army, the False Claims Act encourages people with knowledge of suspected false claims to sue on the government’s behalf. If the Justice Department joins one of these “qui tam” lawsuits, the plaintiff can receive 15% to 25% of recoveries. If the department doesn’t join, the plaintiff can pursue the case and keep up to 30% of any recovery. Some of the largest settlements have involved allegations that drug makers overcharged or illegally promoted medicines in ways that led to improper billings to Medicaid or Medicare.
Who files qui tam lawsuits?
Many are filed by current or former employees of the companies they sue. Suits can involve any industry, but most are in the health-care industry. In 2010, a former employee at GlaxoSmithKline PLC received about $96 million of the federal share of $750 million that the drug maker agreed to pay the government to settle allegations it sold substandard drugs. The company denied the allegations but pleaded guilty to a related criminal charge. (Glaxo declines to comment beyond what it said in 2010, when it said it regretted that a now-closed plant didn’t meet quality standards.) A smaller percentage of qui tam suits are filed by outsiders, such as doctors or pharmacists who interact with the companies.
Why are False Claims Act lawsuits on the rise?
People filed 500 False Claims Act lawsuits in 2013 alleging health-care fraud, more than double the number in 2008. Some legal experts attribute this to increased public awareness of health-care fraud and of the potential of large rewards for reporting—especially following the publicity surrounding a series of large health-care fraud settlements such as a $2.3 billion Pfizer Inc. settlement in 2009. That yielded a $102 million reward to whistleblowers who accused it of improperly marketing drugs for uses that weren’t supposed to be covered by government health programs. Pfizer denied most of the civil allegations but pleaded guilty to a criminal charge. A Pfizer spokesman says its comments at the time of the settlement still stand, when it said it regretted certain actions taken in the past.
Why don’t many qui tam suits go to trial?
Companies frequently settle their cases with the government. Trials carry the risk of treble damages and potential exclusion from selling drugs to federal health programs. When companies settle, they generally don’t admit wrongdoing in connection with the civil allegations. But several bigger False Claim Act settlements have been attached to company agreements to plead guilty to criminal charges that arose from conduct related to the civil allegations.
How does the Affordable Care Act affect the False Claims Act?
The Affordable Care Act, often called Obamacare, made certain amendments to the False Claims Act, including provisions that make it harder for defendants to get a lawsuit dismissed on the grounds that the plaintiff relied on publicly available information. Obamacare also instituted stricter requirements for health-care organizations to return overpayments from federal health programs to avoid False Claims Act liability.