Whistleblower Lawyer Blog

Whistleblower Reveals Alleged Drug Price Schemes to Defraud Medicaid

When drug companies hide the true prices charged for prescription drugs, the pharma companies can violate laws protecting state Medicaid programs from being defrauded by "overpaying" for drugs. The experienced Medicaid fraud prosecutors of the Texas Attorney General's Office have announced such allegations against three pharmaceutical manufacturers for tens of millions of dollars in Medicaid fraud in Texas.

For pharmaceutical products to be eligible for Medicaid reimbursement, the law generally requires that manufacturers accurately report "generally and currently available market prices" to the Medicaid program, according to the Attorney General's release.

The Attorney General alleges that these drug companies sold hundreds of Medicaid-covered drugs at large discounts to companies such as Wal-Mart, CVS Pharmacy and Walgreens, but failed to disclose the accurate pricing information to the Medicaid program. Consequently, the state was deceived about current market prices for the drugs.

When Wal-Mart, CVS, and Walgreens sought Medicaid reimbursement for these prescription drugs, the false pricing reports caused Medicaid to overpay by millions of dollars for these drugs. Ven-a-Care, an industry whistleblower, disclosed the scheme.

The pharma companies named by the Attorney General are:
• Mylan Laboratories Inc. of Pennsylvania (with national subsidiaries Mylan Pharmaceuticals Inc. and UDL Laboratories Inc.)
• Sandoz Inc. of New Jersey (with subsidiaries Geneva Pharmaceuticals Inc., Novartis Pharmaceuticals Inc., Eon Labs and Apothecon Inc.)
• Teva Pharmaceuticals Inc. of Pennsylvania (with subsidiaries Lemmon Pharmaceuticals Inc., Copley Pharmaceuticals Inc. Ivax Pharmaceuticals Inc., Sicor Pharmaceuticals Inc., Teva Novopharm Inc. and Teva Pharmaceutical Industries, Ltd.).

We applaud the Texas Attorney General's Office once again for leading the fight against health care fraud.

False Claims Act Case Continues Over Health Care Fraud Allegations

As other whistleblower attorneys who were former federal prosecutors know, Medicare fraud may sometimes lead not only to a qui tam whistleblower lawsuit, but also to prison time for the guilty party. A former home health care company owner now faces almost three years in prison after being convicted of defrauding Medicare of more than $1 million.

U. S. District Judge Nancy Edmunds in Detroit sentenced Amjad Khan, a certified public accountant and the former CEO of American Home Health Care Inc., to 33 months in prison. A False Claims Act case remains pending against the defendant.

The health care fraud case concerned fraudulent claims for nonreimbursable expenses between 1995 and 1999.

We agree with U.S. Attorney Stephen Murphy's comment about the case: “Health care fraud is a silent tax forcing honest citizens and corporations to pay more for health insurance premiums and medical services than they should."

Medicare Fraud and Medicaid Fraud Alleged by Nurses at Nursing Homes

Two nurses disturbed by nursing home abuse and neglect of nursing home residents--who apparently were subjected to gross nursing home malpractice--are the "whistleblowers" in a nursing home False Claims Act qui tam lawsuit in Missouri, which the U.S. Attorney's Office in St. Louis has recently announced it has joined. The whistleblower suit alleges that the nursing home operator defrauded Medicare and Medicaid by providing care that was essentially "worthless" to the nursing home patients, according to news reports.

In this "quality of care" whistleblower case, the nurses alleged that many nursing home residents suffered from dehydration, weight loss, and preventable bed sores that eventually led to amputations; that nursing home staffing was cut to unacceptable levels to save money; and that other nurses misused patients' medicines, which were not locked securely, according to reports.

The U.S. Attorney's Office in St. Louis saw enough merit in the allegations after investigating that it is pursuing its own case.

The case reportedly has been filed against Cathedral Rock Corp., an operator of nursing homes; Kent Harrington, president and CEO; and five nursing home facilities: Spring Place Care Center and McLaran Care Center in St. Louis, Oak Forest Skilled Care in Ballwin, Cathedral Gardens Care Center in north St. Louis County and Blanchette Place Care Center in St. Charles.

Nursing home abuse and neglect presents one of the most appalling types of cases imaginable. Our firm has seen similar abuses in bringing cases in which we have represented distraught family members of an elderly relative who, for example, has been allowed to develop bedsores so badly that amputations of limbs have been necessary.

We applaud nurses and other health care professionals for their courage and decency in speaking out to stop such abuses, and we hope that these Missouri nurses receive a substantial share of the money recovered by the government in this whistleblower case--they deserve it. We also commend the members of the Office of U.S. Attorney Catherine Hanaway in St. Louis for pursuing this case.

The Food, Drug and Cosmetic Act prohibits pharmaceutical companies from marketing or promoting a drug for uses that the FDA has not approved. This practice is known in the industry as “off label marketing”. Increasingly, pharmaceutical companies have purposely engaged in off label marketing in order to increase profits at the price of public safety. Practitioners in this area see this every day. Whether the public and even the medical profession is aware of the extent of this practice is unknown. Nonetheless, it appears that the False Claims Act remains one of the best tools available to address this deplorable practice.

As an example of the problem, we noted in an article published in the Corporate Crime Reporter on May 8, 2007, that Medicis Pharmaceutical Corporation of Scottsdale, Arizona had agreed to pay $9.8 million to settle allegations filed under the False Claims Act against the company. Medicis promoted the use of a topical skin preparation called Loprox for use on children under the age of 10. The Justice Department and the whistleblowers involved, former Medicis employees, alleged that Medicis sales personnel had purposely targeted pediatricians urging these doctors to use Loprox as a treatment for diaper rash. This product had never been medically approved by the FDA for the treatment of diaper dermatitis or other skin disorders in children under 10. Nonetheless, Medicis sales personnel were aggressively marketing the product for these uses. While the story in the Corporate Crime Reporter did not detail how much profit had been generated from this off label marketing campaign, there was some accountability for this improper use of the product via the fine imposed. Unfortunately, and quite literally, we see these stories every day which is indicative of the fact that Big Pharma is pursuing profits over public safety.

Continue reading "OFF LABEL MARKETING: BIG PHARMA’S PRESCRIPTION FOR PROFITS" »

While there are many specific retaliation provisions unique to claims filed under the False Claims Act, with the Equal Opportunity Commission and/or arising out of Sarbanes-Oxley provisions, all of which protect informant employees from being retaliated against by their employer, a little known fact is that there is a general statute (42 U.S.C. § 1985) which makes it unlawful for two or more persons to conspire to “deter” a witness from testifying in Federal Court. This statute also makes it unlawful to “retaliate” against a witness for having so testified. The “deterrence” provision makes it unlawful for two or more persons to conspire to deter by force, intimidation or threat, any witness in any court in the United States from testifying to any matter pending therein freely, fully and truthfully. The “retaliation” provision makes it unlawful to injure a witness on account of his having testified in a court in the United States. Conspiracy to retaliate consists of two or more people acting in concert to retaliate against a witness for having testified in a judicial proceeding and injury as a result of the conspiracy, and an nexus between the act of testifying and the conspiracy.
The typical case where this statute might apply is one where a company employee testifies against the employer in a federal proceeding and then is terminated as a result of the testimony. Even a threat to take retaliatory actions against a witness should they provide truthful testimony is actionable under this statute. Thus, if a company employee is testifying before a federal body and is “advised, counseled or warned” that should they testify unfavorably to the company they may be subject to reprisal, this would be an actionable case under this statute.

In the United States Supreme Court of Haddle v. Garrison, 525 U.S. 121, 119 S. Ct. 489, 148 L. Ed. 2d 502 (1998), (a case arising in Georgia which involved this firm) the Supreme Court held that third party interference even with an “at will” employment relationship states a claim for relief under § 1985. The Court reasoned that because “the gist of the wrong at which § 1985 is directed is not deprivation of property, but intimidation or retaliation against witnesses in federal court proceedings,” the loss of at will employment can injure a plaintiff for purposes of the statute. Thus, even in an “at will” state such as Georgia, if an employee is intimidated by an employer in such a way as to interfere with their ability to provide testimony against the employer in a federal court context, then such a case is actionable notwithstanding the restrictions of a state “at will” employment doctrine.

In addition to recovering compensatory damages in a case where an employer is seeking to prevent an employee from testifying against its interest in a federal proceeding, the whistleblower employee may also obtain attorneys fees and costs under 42 U.S.C. § 1988. The decision to award attorneys fees is left to the sound discretion of the Trial Court but generally should be awarded to a prevailing plaintiff. Also, plaintiffs who establish a valid claim under 42 U.S.C. § 1985 are presumptively entitled to an award of punitive damages as well. Thus, in the context of a case where an employer is seeking to intimidate an employee from testifying against its corporate interest, in a federal proceeding, the whistleblower employee does have statutory rights to combat either the deterrence or retaliation for doing the right thing.

Even though the Internal Revenue Service has had a Rewards Program for many years, until recently, there was very little encouragement for tax whistleblowers or informants to come forward concerning their knowledge of the under-reporting of taxes. While it is well known that income tax evasion costs taxpayers approximately $300 billion a year, the Internal Revenue Service in the past has failed to aggressively address this problem. While enforcement actions against criminals are designed to help deter tax fraud, the $300 billion annual figure is proof, in and of itself, that such deterrence has not been effective in collecting back taxes. Moreover, the old “Form 211" IRS Rewards Program was singularly unsuccessful.

According to government statistics, between the fiscal years 2001 and 2005, only $27.3 million was paid by the Internal Revenue Service to informants as rewards for tips and information. The average individual reward under the old IRS Rewards Program was a mere $24,000.00. This is in stark contrast to results achieved under the Federal False Claims Act where awards for whistleblowers can and typically are in excess of 6 or 7 figures. The new IRS Whistleblower Rewards Program provides enhanced inducement for whistleblowers to come forward when they have knowledge of under-reported income. The new program is greatly improved because it provides that the whistleblower will receive anywhere between fifteen to thirty percent (15 - 30%) of any collected back taxes, plus interest and penalties on the back taxes owed. Moreover, to encourage the whistleblower to have confidence in the system, the whistleblower even has the right to appeal to a U.S. Tax Court any decision by the IRS that their rewards should be reduced below 30%, if the Internal Revenue Service is successful in collecting back taxes based on information provided by the whistleblower.

Our firm has already seen very encouraging signs that the new program is working as intended. We have received numerous inquiries from informants, on a nationwide basis, coming forward with significant information about the evasion of back taxes owed. We have also been encouraged by the response of the Internal Revenue Service to these claims when we have presented them. Thus, it appears that the new IRS Rewards Program is actually encouraging whistleblowers and informants to come forward and provide the Internal Revenue Service with information concerning their knowledge of income tax evasion. While the program is less than seven months old and is just getting started with very little back taxes actually collected, the most encouraging news is that the IRS has opened numerous files and is now embarked on numerous investigations which otherwise would not be taking place at all had the whistleblowers not come forward under the new program. This is certainly a change in the right direction.