Merck tips scales in DoJ $1B healthcare fraud recovery efforts in 2008

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The U.S. Department of Justice (DoJ) secured $1.34 billion in settlements and judgments in its 2008 fiscal year, which ended Sept. 30, through the pursuit of healthcare fraud cases. This brings total recoveries since 1986, when Congress substantially strengthened the civil False Claims Act, to more than $21 billion, according to the DoJ.

"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."

Almost 78 percent of this year's recoveries are associated with suits initiated by private citizens or relators under the False Claims Act's qui tam (whistleblower) provisions. 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.

As in the last several years, healthcare accounted for the lion's share of fraud settlements and judgments—$1.12 billion, including both qui tam claims and those initiated by the United States. The Department of Health and Human Services (HHS) reaped the biggest recoveries, largely attributable to its Medicare program and the federal/state Medicaid program which funds healthcare for the needy.

Among the Department's significant settlements and judgments in fiscal year 2008 were:

  • $361.5 million from Merck to resolve allegations that the pharmaceutical manufacturer knowingly failed to pay proper rebates to Medicaid and other government healthcare programs, and paid kickbacks to healthcare providers to induce them to prescribe the company's products. The settlement resulted from two lawsuits brought under the qui tam provisions of the False Claims Act.
  • $258 million from Cephalon to resolve claims that the company marketed three drugs for uses not approved by the FDA; and
  • $225 million from Amerigroup to settle both federal and state allegations that Amerigroup, together with its Illinois subsidiary, systematically avoided enrolling pregnant women and other high-cost patients in the company's managed care program in Illinois.