WASHINGTON — The Justice Department announced this week that another $1.04 billion has been recovered this year for the U.S. Treasury thanks to whistleblower legislation sponsored in 1986 by Senator Chuck Grassley. The total amount recovered through these provisions is now more than $21 billion.
The amendments Grassley championed along with Rep. Howard Berman of California strengthened the Civil War-era False Claims Act which was originally signed into law by President Abraham Lincoln. The Grassley-Berman "qui tam" amendments empowered whistleblowers to file suit on behalf of the United States against those who fraudulently claim federal funds, including Medicare, Medicaid, contract payments, disaster assistance and other benefits, subsidies, grants and loans.
Last year, Grassley along with Senator Dick Durbin introduced legislation to update the False Claims Act. Grassley said the update is needed to respond to recent federal court decisions that threaten to limit the scope and applicability intended by Congress in the 1986 update.
Grassley said that amendments to the False Claims Act have empowered whistleblowers to help fight fraud against the government. Fraudulent claims by defense contractors during the 1980s prompted the initiative. Today the "qui tam" amendments also recoup billions that would otherwise be lost to health care fraud.
The Justice Department said today that during the last fiscal year, the federal Treasury reclaimed $1.34 billion in settlements and judgments overall under the False Claims Act. Of that $1.34 billion, $1.12 billion was the result of health care cases alone.
"This law has remained one of the most powerful tools we have in rooting out waste, fraud and abuse in the federal government," Grassley said. "And, as we look to the next Congress, we'll be looking to make further improvements to this historic law so whistleblowers and federal taxpayers will be able to count on the law for years to come."
Here is a copy of the press release from the Justice Department.
FOR IMMEDIATE RELEASE
Monday, November 10, 2008
WWW.USDOJ.GOV
CIV
(202) 514-2007
TDD (202) 514-1888
More Than $1 Billion Recovered by Justice Department in Fraud and False Claims in Fiscal Year 2008
More Than $21 Billion Recovered Since 1986
WASHINGTON – The United States secured $1.34 billion in settlements and judgments in the fiscal year ending Sept. 30, 2008, pursuing allegations of fraud against the federal government, the Justice Department announced today. This brings total recoveries since 1986, when Congress substantially strengthened the civil False Claims Act, to more than $21 billion.
"Now, more than ever, it is crucial that taxpayer dollars aren't lost to fraud," said Gregory G. Katsas, Assistant Attorney General for the Department's Civil Division. "The billion dollars collected this year is only part of the story. By rooting out fraud and vigorously pursuing it, the Department, with the help of concerned citizens who report fraud in hotline calls and in qui tam complaints, undoubtedly saves the country many times that amount in aborted schemes and misconduct."
Assistant Attorney General Katsas also paid tribute to Senator Charles Grassley of Iowa and Representative Howard L. Berman of California who sponsored the 1986 amendments to the False Claims Act, the government's primary weapon to fight government fraud. "Without this important legislation strengthening the Act and, in particular, the qui tam provisions which encourage private citizens to uncover government fraud, such recoveries would not have been possible."
Almost 78 percent of this year's recoveries are associated with suits initiated by private citizens (known as "relators") under the False Claims Act's qui tam provisions. These provisions authorize relators to file suit on behalf of the United States against those who have falsely or fraudulently claimed federal funds. Such cases run the gamut of federally funded programs from Medicare and Medicaid to defense procurement contracts, disaster assistance loans and agricultural subsidies. Persons who knowingly make false claims for federal funds are liable for three times the government's loss plus a civil penalty of $5,500 to $11,000 for each claim.
Relators recover 15 to 25 percent of the proceeds of a successful suit if the United States intervenes in the qui tam action, and up to 30 percent if the government declines and the relator pursues the action alone. In fiscal year 2008, relators were awarded $198 million. (This figure does not include relator shares awarded after Sept. 30, 2008.)
As in the last several years, health care accounted for the lion's share of fraud settlements and judgments–$1.12 billion. This number includes both qui tam claims and those initiated by the United States. The Department of Health and Human Services reaped the biggest recoveries, largely attributable to its Medicare program and the federal/state Medicaid program which funds health care for the needy. Recoveries were also made by the Office of Personnel Management which administers the Federal Employees Health Benefits Program, the Department of Defense for its TRICARE insurance program, the Department of Veterans Affairs and others.
The largest health care recoveries came from pharmaceutical companies and related entities. Settlements with Cephalon Inc., Merck & Co. and CVS Caremark Corp. accounted for more than $640 million. In addition to federal recoveries, these pharmaceutical fraud cases returned $430 million to state Medicaid programs.
The Civil Division's investigation of the pharmaceutical industry is part of a Department-wide effort. Typical allegations include "off-label" marketing, which is the illegal promotion of drugs or devices that are billed to Medicare and other federal health care programs, for uses that were neither found safe and effective by the Food and Drug Administration nor supported by the medical literature; paying kickbacks to physicians, wholesalers and pharmacies to induce drug or device purchases; establishing inflated drug prices knowing that federal health care programs use these prices to reimburse providers, then marketing the "spread" between the federal reimbursement and the provider's lower cost to induce drug purchases; and knowingly failing to report the company's true "best price" for a drug to reduce rebates owed to the Medicaid program.
The Department also collected $133 million in defense procurement fraud. Defense contract recoveries included a $53 million settlement with Pratt & Whitney, a division of United Technologies Corporation, and PCC Airfoils LLC, a subsidiary of Precision Castparts Corporation. The settlement resolved allegations that Pratt & Whitney and PCC Airfoils knowingly submitted false claims to the Air Force for defective turbine blades sold to the government to retrofit the F100-PW-220 engines in F-16 and F-15 aircraft. This case was pursued as part of a National Procurement Fraud initiative, launched in October 2006, to promote the early detection, identification, prevention and prosecution of procurement fraud.
FACT SHEET: SIGNIFICANT RECOVERIES IN FISCAL YEAR 2008
Among the Department's most significant settlements and judgments in fiscal year 2008 were:
In the first, which accounted for $221.9 million of the $361.5 settlement, a former Merck employee alleged that the company violated the Medicaid Rebate Statute by providing deep discounts to hospitals that used its drugs Zocor and Vioxx in place of competitors' brands, without reporting those discounts and other cost information to reflect its "best price," as required by the statute to ensure that Medicaid obtains the benefit of the same price concessions other purchasers enjoy. This suit also alleged that Merck paid kickbacks to physicians, disguised as fees for training, consultation, and market research, to induce them to prescribe its drugs, also contrary to law. The United States paid the relator $46.6 million as his share of the settlement under the False Claims Act's qui tam provisions. In addition to the federal recovery, Merck paid $162 million to state Medicaid programs.
In the second lawsuit, which accounted for the remaining $139.6 million of the settlement, a physician alleged that Merck provided deep discounts to hospitals to induce them to administer its antacid, Pepcid, as a means to boost sales through continued use after the patient's discharge. The suit went on to allege, similar to the first suit, that Merck knowingly failed to report these discounts as required by the Medicaid Rebate Statute, which resulted in illegal and inflated claims to federal and state Medicaid programs. In addition to paying the United States $139.5 million in federal claims, Merck paid $114 million to settle state Medicaid claims. The relator received $24 million as his federal share of the settlement and an additional sum for the state recoveries. Merck also entered into a Corporate Integrity Agreement with the Inspector General of the Department of Health and Human Services (HHS) to ensure compliance with federal health insurance programs in the future.
For the original press release, see:
http://www.usdoj.gov/opa/pr/2008/February/08_civ_094.html
http://www.usdoj.gov/usao/pae/News/Pr/2008/feb/steinkrelease.pdf
For the original press release, see:
http://www.usdoj.gov/opa/pr/2008/September/08-civ-860.html
In the second action, the widow of an SIUH cancer patient filed suit alleging that between 1996 and 2004, SIUH submitted false claims to Medicare and TRICARE using incorrect codes for cancer treatments not covered by the programs. SIUH paid the United States $25 million, including a relator share award of $3.75 million. In the third matter, the United States alleged that SIUH deliberately inflated the number of residents it employed to fraudulently increase Medicare reimbursement between 1996 and 2003. SIUH paid the United States $35.7 million in settlement of this matter. Lastly, SIUH paid the United States $1.47 million to settle allegations that it billed Medicare and Medicaid for treating psychiatric patients in unlicensed beds from 2003-2005. In conjunction with the settlement, SIUH also entered into a Corporate Integrity Agreement with the Inspector General of HHS to ensure future compliance.
For the original press release, see:
http://www.usdoj.gov/usao/nye/pr/2008/2008sep15.html
For the original press release, see:
http://www.usdoj.gov/usao/gan/press/2007/12-21-07.pdf