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Health care whistleblower suits under False Claims Act on the rise

Daily Record and the Kansas City Daily News-Press, Nov 23, 2005 by Correy E. Stephenson

(This article originally ran in Lawyers Weekly USA, Boston, MA, another Dolan Media publication.)

Qui tam - it may not sound like a billion-dollar industry, but it is.

The Latin phrase for the federal False Claims Act provision allowing whistleblowers to bring suit on behalf of the U.S. government - and receive a percentage of the recovery - has become a powerful litigation tool.

Since 1986, when the False Claims Act was revamped, the U.S. government has recovered $15 billion under the Act.

In the early 1990s, health care cases began to dominate the qui tam landscape, and they have remained the major source of this litigation ever since.

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In fiscal year 2005, ending Sept. 30, the United States recovered $1.4 billion under the False Claims Act. Of that total, $1.1 billion is associated with health care fraud, according to recent Department of Justice statistics.

This month alone, the U.S. government settled with Tennessee- based King Pharmaceuticals for Medicaid rebate underpayments and overcharging for drug products to the tune of $124 million, plus interest; and reached a $704 million settlement with Swiss biotechnology firm Serono for charges that the company used illegal schemes to promote, market and sell its drug Serostim, a treatment for AIDS.

However, the Act remains controversial, in large part because whistleblowers - who weren't personally harmed by the companies they sued - were awarded $166 million in 2005 alone.

The government has a strong interest in preserving health care programs and the billions of dollars that are paid out every year from the parties who will abuse the program or take advantage of it, and sees the qui tam law as a very important incentive for private parties to help police the system, said Boston compliance attorney William Mandell. But at the same time, it certainly makes the challenge of being a health care provider and doing business with the federal government that much more complex.

While whistleblowers may need an incentive to come forward, some have questionable motives, said Paul Cirel, a qui tam defense attorney in Boston.

To be a legitimate qui tam relator, you have to have some unique knowledge, he explained. And that's a pretty fine line for somebody to walk: having unique inside knowledge of conduct that they weren't involved in.

What Is Qui Tam?

Qui tam - a shortened version of the Latin phrase qui tam pro domino rege quam pro se ipso in hac parte sequitur or he who brings an action for the king as well as for himself - has taken on a variety of formats since its inception more than a century ago.

Signed into law in 1863 by President Abraham Lincoln, the original False Claims Act was intended to prosecute those who committed fraud on the Union Army - selling sawdust instead of gunpowder, for example.

Under the Act, private citizens, or relators, are authorized to file suit on behalf of the U.S. government for fraud.

The Act languished until its revival in 1986. As a reaction to scandalous reports of defense spending, the Act was amended to encourage relators to come forward by increasing the potential damages.

Defendants found guilty under the Act are liable for treble damages, as well as a civil penalty of $5,500 to $11,000 for each false claim.

A whistleblower's share of that total amount ranges from 15 to 30 percent, depending on whether the government decides to intervene in the case.

The Act has proved so profitable for the federal government that some state and local governments have passed their own versions.

According to Taxpayers Against Fraud in Washington D.C., an organization dedicated to promoting the False Claims Act, 13 states have their own version of the Act - Arkansas, California, Delaware, Florida, Hawaii, Illinois, Indiana, Massachusetts, New Hampshire, New Mexico, Nevada, Virginia and Utah - as well as the District of Columbia and the cities of New York and Chicago.

In addition, Louisiana, Tennessee and Texas have Medicaid-only recovery statutes.

But the format of a qui tam case remains the same: a company employee comes forward with knowledge of fraud or illegal activity. With counsel, he or she approaches the government and files the case, which remains under seal for at least 60 days while the U.S. Attorney's office decides whether or not to join the case.

If the government decides to intervene, it pursues the case with the help of the relator, who is paid 15 to 25 percent of whatever the government recovers. The percentage varies depending on the information and involvement of the relator.

However, if the government declines to intervene, the whistleblower can still go forward with the case, increasing recovery to a possible 30 percent.

Blowing The Whistle

Joel M. Androphy, a qui tam plaintiffs' attorney in Houston and the author of the upcoming book The Federal False Claims Act and Qui Tam Litigation, said the majority of his clients have already reported their concerns to their employer before they hire a lawyer.

Health care whistleblower suits under False Claims Act on the rise

Daily Record and the Kansas City Daily News-Press, Nov 23, 2005 by Correy E. Stephenson

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