Enforcement Trends: False Claims Act Recoveries Increase as Labs Remain in Firing Line

The dollars paid by healthcare providers in federal False Claims Act settlements and judgments increased for the second year in row in 2019. After a surprising decline in 2017, total recoveries rebounded in 2018 from $2.184 billion to $2.513 billion. This year, the increase was more modest at $2.6 billion. Even so, 2019 marked the 10^th straight year that FCA recoveries topped $2 billion. And, as usual, the health care industry was the primary source of recoveries, accounting for more than $5 of every $6 collected in 2019.

2019 By the Numbers

Here are the key numbers from the year in 2019 FCA recoveries, as reported by the DOJ on Jan. 9:

• $3 billion: Total FCA recoveries in FY 2019;
• $2.6 billion: Total recoveries against health care providers in FY 2019 (not including state Medicaid);
• $47 billion: Total FCA recoveries against health care providers between 2010-2019;
• $3.7 billion: Average annual FCA recoveries for three-year period 2016-2018;
• $22.7 billion: Total FCA recoveries from healthcare providers between 2009-2018;
• $1.96 billion: Average annual FCA recoveries from health care providers between 2010-2019;
• 633: Total qui tam (whistleblower) lawsuits filed in FY 2019, an average of 12 cases per week;
• $2.1 billion: Total recoveries in qui tam lawsuits in FY 2019.

Notes: $ in millions
Source: U.S. Justice Department

Top 5 FCA Healthcare Recoveries

The biggest FCA recovery against a lab in 2019 was the $63.5 million settlement paid by Inform Diagnostics (the pathology lab company formerly known as Miraca Life Sciences Inc.) for allegedly paying kickbacks to referring physicians in the form of subsidies for electronic health records (EHR) systems and free or discounted technology consulting services. But drug companies were the real cash cow for federal FCA enforcement, accounting for the year’s three largest recoveries, including:

1. Reckitt Benckiser Group plc paid $500 million as part of a larger $1.4 billion settlement resolving FCA and other civil and criminal claims for falsely marketing the opioid addiction treatment drug Suboxone;
2. Insys Therapeutics paid $195 million to settle claims of offering sham speaker events, lavish meals and entertainment and even jobs to induce physicians and nurse practitioners to prescribe Subsys for their patients;
3. Avanir Pharmaceuticals paid $95+ million to resolve allegations that it paid kickbacks and engaged in false and misleading marketing to bribe providers in long term care facilities to prescribe the drug Neudexta for dementia patients, which is not an FDA approved use of the drug.

In addition, the DOJ report notes that seven drug manufacturers—Actelion Pharmaceuticals US Inc.; Amgen Inc.; Astellas Pharma US Inc.; Alexion Pharmaceuticals, Inc.; Jazz Pharmacueticals Inc.; Lundbeck LLC; and US Worldmeds LLC—paid a combined total of over $624 million to settle claims of illegally paying patient copays for their own drugs via purportedly independent foundations that the companies in fact treated as mere conduits.

FCA Recoveries against Healthcare Providers Since 2010
(in billions of dollars)

Source: U.S. Department of Justice

Takeaway

The DOJ’s reporting of FY 2019 FCA fraud recoveries show that large scale enforcement efforts are continuing—and that while drug companies are paying out the largest share of dollars, lab testing remains a major target for enforcement agencies.