Earlier this summer, Ethan P. Davis, Principal Deputy Assistant Attorney General for the Civil Division of the U.S. Department of Justice (DOJ) delivered remarks addressing DOJ’s top priorities for enforcement actions related to COVID-19 and indicating that DOJ plans to “vigorously pursue fraud and other illegal activity.”[1] As discussed below, Davis’s remarks not only highlighted principles that will guide enforcement efforts of the Civil Fraud Section under the False Claims Act (FCA) and of the Consumer Protection Branch (CPB) under the Food, Drug, and Cosmetic Act (FDCA) and the Controlled Substances Act (CSA) in response to the COVID-19 public health emergency (PHE), they also provide an indication of how DOJ might approach enforcement over the next few years.

DOJ’S KEY CONSIDERATIONS & ENFORCEMENT STRATEGY FOR COVID-19

Davis highlighted two key principles that would drive DOJ’s COVID-related enforcement efforts: the energetic use of “every enforcement tool available to prevent wrongdoers from exploiting the COVID-19 crisis” and a respect of the private sector’s critical role in ending the pandemic and restarting the economy.[2] Under that framework, DOJ plans to pursue fraud and other illegal activity under the FCA, which Davis characterizes as “one of the most effective weapons in [DOJ’s] arsenal.”[3]

However, as DOJ pursues FCA cases, it will also seek to affirmatively dismiss qui tam claims that  DOJ finds meritless or that interfere with agency policy and programs.[4] DOJ also plans to collect certain information from qui tam relators regarding third-party litigation funders during relator interviews.[5] DOJ’s emphasis on qui tam cases—cases brought under the FCA by relators or whistleblowers—for COVID-related enforcement highlights the impact such matters have on DOJ’s enforcement agenda.[6]

  1. DOJ will consider dismissing cases that involve regulatory overreach and are not otherwise in the interest of the United States.

Although Davis emphasized that the majority of qui tam cases would be allowed to proceed, in order to “weed out” cases that lack merit or that DOJ believes should not proceed, DOJ will consider dismissing cases that “involve regulatory overreach or are otherwise not in the interest of the United States.”[7] This is consistent with the principles reflected in the 2018 Granston Memo that instructed DOJ attorneys to consider “whether the government’s interests are served” when considering whether cases should proceed and listed considerations for seeking alternative grounds for dismissal of FCA cases.[8] Davis gave examples throughout his speech of actions DOJ might consider dismissing:

  • Cases based on immaterial or inadvertent mistakes, such as technical mistakes with paperwork
  • Cases based on honest misunderstandings of rules, terms, and conditions
  • Cases based on alleged deviations from non-binding guidance documents
  • Cases against entities that reasonably attempted to comply with guidance and “in good faith took advantage of the regulatory flexibilities granted by federal agencies in the time of crisis.”[9]

DOJ litigators have been advised to inform relators of the possibility of dismissal.[10] Additionally, qui tam suits based on behaviors temporarily permitted during the COVID-19 pandemic, particularly in circumstances in which agencies exercised discretion to waive or not enforce certain requirements, might
“fail as a matter of law for lack of materiality and knowledge.”[11]

  1. DOJ will now include a series of questions during relator interviews to identify third-party litigation funders.

During each relator interview, DOJ has instructed line attorneys to ask a series of questions to identify whether the relator or their counsel has a third-party litigation funding agreement,[12] which is an agreement in which a third party—such as a commercial lender or a hedge fund—finances the cost of litigation in return for a portion of recoveries.[13] Under the new policy detailed in Davis’s speech, if a third-party funder is disclosed, DOJ will ask for the following:

  • the identity of the third-party litigation funder,
  • information regarding whether information of the allegations has been shared with the third party,
  • whether the relator or their counsel has a written agreement with the third party, and
  • whether the agreement between the relator or their counsel and the third party includes terms that entitles the third-party funder to exercise direct or indirect control over the relator’s litigation or settlement decisions.

Relators must inform DOJ of changes as the case proceeds through the course of litigation.[14] While Davis characterizes these changes as a “purely information-gathering exercise for the purpose of studying the issues,” the questions are in furtherance of DOJ’s ongoing efforts to uncover the potential negative impacts third-party litigation financing may have in qui tam actions. [15] The questions Davis referenced in his remarks reflect DOJ’s concerns with third-party litigation funding as expressed by Deputy Associate Attorney General Stephen Cox in a January 2020 speech.[16] Davis emphasized that DOJ particularly sought to evaluate the extent to which third-party litigation funders were behind qui tam cases DOJ investigates, litigates, and monitors; the extent of information sharing with third-party funders; and the amount of control third-party funders exercised over the litigation and settlement decisions.[17] While the Litigation Funding Transparency Act of 2019 has remained inactive since its introduction in February 2019 by Senator Grassley[18] and the 2018 proposal by the U.S. Court’s Advisory Committee on Civil Rights’ Multidistrict Litigation Subcommittee to require disclosure of third-party litigation funding remains under consideration,[19] DOJ’s plans to include this line of questioning potentially signals DOJ’s intention to take more concrete and significant steps to address third-party litigation funding in the future.


Continue Reading False Claims Act Enforcement During the COVID-19 Pandemic and Beyond

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.


Continue Reading DOJ False Claims Act Recoveries FY 2019: Total Collections Rise – Almost 90 Percent Relate to Health Care

On July 8, 2019, Anthony Camillo, owner of Allegiance Medical Laboratory and AMS Medical Laboratory, was sentenced to 30 months in prison by a federal judge in the Eastern District of Missouri. He was ordered to pay $3.4 million in restitution for violations of the anti-kickback statute, associated conspiracy charges, and illegal kickbacks related to

On April 30, 2019, Assistant Attorney General Brian Benczkowski announced that the Department of Justice (“DOJ”) had published an updated version of the Criminal Division’s 2017 guidance publication “Evaluation of Corporate Compliance Programs.”  In making the announcement, Assistant Attorney General Benczkowski said the update was designed to “better harmonize the prior Fraud Section publication with

On May 7, 2019, the Department of Justice (“DOJ”) released new guidance for trial attorneys in the DOJ’s civil division regarding how entities under False Claims Act investigation can receive credit for cooperation.  The release of this new guidance follows public comments delivered in March by Michael Granston, director of DOJ’s civil fraud section, noting

While the opioid crisis has inspired a wave of new legislation by Congress, the U.S. Department of Justice (“DOJ”) has continued to increase its own response to the prevalent rate of opioid-related drug crimes with a number of new initiatives.  On October 17th, Deputy Attorney General Rod Rosenstein recently delivered remarks at the

The SUPPORT for Patients and Communities Act (“the Act” or “the SUPPORT Act”), signed into law by President Trump on October 24, 2018, is intended to combat the growing opioid crisis in the United States. The Act aims at preventing opioid addiction and misuse and enhancing access to care for those who have

Recently, Judge Robert T. Conrad, Jr. of the United States District Court for the Western District of North Carolina (Charlotte Division), rejected efforts by The Charlotte- Mecklenberg Hospital Authority, doing business as the Carolinas Health Care System (“CHS”), to dismiss, at the pleadings stage, a complaint filed by the United States’ Antitrust Division of the

A recent settlement demonstrates the importance of compliant structuring of lending arrangements in the health care industry. The failure to consider health care fraud and abuse risks in connection with lending arrangements can lead to extremely costly consequences.

On April 27, 2017, the Department of Justice (“DOJ”) announced that it reached an $18 Million settlement with a hospital operated by Indiana University Health and a federally qualified health center (“FQHC”) operated by HealthNet. United States et al. ex rel. Robinson v. Indiana University Health, Inc. et al., Case No. 1:13-cv-2009-TWP-MJD (S.D. Ind.).  As alleged by Judith Robinson, the qui tam relator (“Relator”), from May 1, 2013 through Aug. 30, 2016, Indiana University Health provided HealthNet with an interest free line of credit, which consistently exceeded $10 million.  It was further alleged that HealthNet was not expected to repay a substantial portion of the loan and that the transaction was intended to induce HealthNet to refer its OB/GYN patients to Indiana University.

While neither Indiana University Health nor HealthNet have made any admissions of wrongdoing, each will pay approximately $5.1 million to the United States and $3.9 million to the State of Indiana. According to the DOJ and the Relator, the alleged conduct violated the Federal Anti-Kickback Statute and the Federal False Claims Act.

For more details on the underlying arrangement and practical takeaways . . .


Continue Reading Avoiding Fraud and Abuse in Health Care Lending Arrangements

As discussed previously in this blog, efforts to curb fraud, waste and abuse are generally “bi-partisan.” Given the significant monetary recoveries the Government enjoys through enforcement of the federal False Claims Act (“FCA”), we have predicted that efforts in this arena will continue under a Trump administration. However, this is dependent, in part, on