Through a January 9, 2020, press release, the Department of Justice (“DOJ”) reported more than $3 billion in total recoveries from settlements and judgments from fraud-related civil matters brought under the False Claims Act (“FCA”) for fiscal year (“FY”) 2019. An increase over the $2.9 billion recovered in FY 2018, FY 2019 reflected the ninth highest amount of recoveries in the past 30 years. The accompanying statistics released by DOJ reflect several themes related to FCA enforcement concerning the health care and life sciences industry.
The Health Care and Life Sciences Industry Accounted for Approximately 87 Percent of FY 2019 Recoveries
Consistent with previous years, fraud actions involving the health care and life sciences industries continue to drive DOJ’s FCA recoveries. Health care-related fraud recoveries alone have now exceeded $2 billion for 10 consecutive years. In FY 2019, health care-related matters generated approximately $2.6 billion in recoveries, or 85 percent of recoveries from all sectors combined, which does not include recoveries from state-based Medicaid actions with which DOJ may have assisted. The $71 million increase in recoveries from health care-related matters between FY 2018 and FY 2019 marks the third consecutive year of increasing health care-related recoveries. Notably, recoveries from health care-related cases brought directly by DOJ increased from $568 million to $695 million between FY 2018 and FY 2019, the second highest amount recovered in 30 years.
DOJ’s press release emphasized that pharmaceutical and medical device companies, managed care entities, hospitals, pharmacies, hospice organizations, laboratories, and physicians all continue to be enforcement targets. Most of the health care-related recoveries addressed in the release involved pharmaceutical manufacturer settlements, particularly amongst manufacturers of opioids. Among other pharmaceutical actions discussed by DOJ, seven pharmaceuticals companies paid a total of $624 million in FY 2019 to settle allegations that the companies each used purportedly independent foundations to cover Medicare beneficiaries’ co-pays for the company’s specific drug.
DOJ also highlighted actions yielding substantial recoveries in other areas, including the use of alleged subsidies and free or discounted services to induce referrals, claimed misrepresentation of product capabilities to induce recommendations to other customers, and purported false information to Medicare to earn higher reimbursement rates.
Qui Tam Actions Continue to Drive FCA Actions, Particularly in Health Care
The statistics reflect that cases filed by qui tam relators remain a principal driver of DOJ’s FCA enforcement effort. Across all sectors, qui tam actions made up 81 percent of new FCA matters in FY 2019. Of the 505 new health care-related matters brought in FY 2019, 449 were initiated by relators, which yielded $1.9 billion—or 73 percent—of the $2.6 billion total health care-related recoveries.
Government intervention continues to generate the majority of qui tam recoveries and remains the greatest risk to health care and life science entities. Approximately 86 percent of the $1.9 billion recovered from health care qui tam actions during FY 2019 stemmed from government intervention. Moreover, government intervention generated $1.6 billion—or 63 percent—of the $2.6 billion recovered in qui tam and non-qui tam health care-related matters combined.
However, allowing relators to pursue matters post-declination creates additional FCA risk. Approximately $272 million was recovered from health care-related FCA cases in FY 2019 pursued by relators post-declination, which is the third-highest annual recovery from such cases in 30 years. While this number fluctuates significantly each year, the amount of post-declination health care-related recovery increased by more than $174 million between FY 2018 and FY 2019. Notably, 92 percent of post-declination recoveries stemmed from health care-related matters.
DOJ data also reflects that there are strong financial incentives for relators to pursue these cases. Across all sectors since 1987, almost $7.3 billion—including $5.6 billion from the health care industry—has been paid to relators. In FY 2019 alone, the government paid more than $271 million in relator share awards across all sectors, with $244 million connected to health care-related cases. The relator share awards for post-declination cases also increased significantly between FY 2018 and FY 2019, from about $37 million to $74 million for all sectors and from $27 million to $68 million for health care-related matters. This data highlights the plain financial incentive that will continue to encourage the filing and pursuit of actions, particularly against those in the health care industry.
DOJ Continues to Prioritize Individual Accountability
The press release also emphasized DOJ’s continuing efforts to hold individuals—not only corporations—accountable in FCA cases. Significantly, when listing examples of recoveries resulting from individual enforcement in FY 2019, each of the three examples included individuals from the health care industry.
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The FY 2019 FCA recovery statistics emphasize the significant incentives propelling the government and qui tam relators to devote time and resources to pursuing such cases against corporations and individuals within the health care and life sciences industries. Health care entities should remain mindful and focus on identifying potential violations, developing and maintaining programs designed to deter improper conduct, and promoting compliance across all organizational levels to ensure the existence of strong compliance functions to prevent claims and to serve as a strong defense if matters are pursued.