Government Scrutiny and Qui Tams

AUGUST 18, 2017
Jeffrey S. Baird, Esq.
The US Department of Justice (“DOJ”) and the Office of Inspector General (“OIG”) have become much more aggressive in bringing civil and criminal investigations against pharmacies and their owners. Many investigations are a result of qui tam (whistleblower) lawsuits. This is when a disgruntled ex-employee, disgruntled current employee, or any other person with “original facts,” files a federal lawsuit against the pharmacy and its owners. The lawsuit will be in the name of the current/ex employee ("relator") and in the name of the U.S.

Qui Tam Lawsuits

The qui tam lawsuit will be based on the federal False Claims Act (“FCA”). It is the position of the DOJ that if the pharmacy commits an act that violates any law (civil or criminal), and if the pharmacy eventually submits a claim to a government health care program (in which the claim directly or indirectly is related to the act), then the claim is a "false claim."

Under the FCA, the pharmacy (and its individual owners) can be liable for actual damages, treble damages, and between $10,781 to $21,563 per claim.

When the qui tam lawsuit is initially filed, it will go "under seal," meaning that nobody (except for the DOJ) will know about it. An Assistant US Attorney (“AUSA”) in the jurisdiction in which the qui tam is filed, who specializes in civil health care fraud cases, will review the lawsuit and will ask investigative agents (FBI, OIG) to investigate the allegations set out in the qui tam suit. The agents may talk to current employees and/or ex-employees. The agents may talk to patients, marketers, and referring physicians. The agents may talk to others who may have information regarding the allegations set out in the qui tam.

The investigation may take 6 months, or it may take several years. If the civil AUSA believes that the pharmacy’s actions are particularly serious, then he/she may ask a criminal AUSA to launch a criminal investigation. In fact, most criminal health care fraud investigations arise out of qui tam lawsuits. Often, a pharmacy will have to resolve 2 cases brought by the DOJ:  a civil case and a criminal case.

Once the investigation is completed, then the DOJ will “unseal” the lawsuit, meaning that the defendant pharmacy will find out about it. If the civil AUSA believes that the qui tam has merit, then the DOJ will take the lawsuit over and the relator’s attorney will “sit on the sidelines.” If the DOJ does not “intervene” (i.e., take the lawsuit over), then the relator’s attorney can proceed without the DOJ’s assistance.

Because of the potential massive liability under the FCA, most qui tam lawsuits are settled (i.e., the pharmacy pays a lot of money). In addition to paying money to the DOJ (of which 15% to 20% will go to the relator), the pharmacy will usually be required to enter into a Corporate Integrity Agreement (“CIA”) with the OIG. A CIA normally has a 5-year term.  Under the CIA, the pharmacy must fulfill a number of obligations to the OIG.

Sifting Through Data

Change in Billing Pattern - Assume that a pharmacy exhibits a history of billing. For example, the pharmacy bills about the same amount each year, with reasonable annual increases. Now assume that the dollar amount of claims submissions rapidly increases as a result, for example, of purchasing leads and/or engaging in a telehealth arrangement. Government program payors (“Payors”) will take notice of this sudden increase and will (i) place the pharmacy on prepay review, (ii) conduct post-payment audits, or (iii) ask a ZPIC to conduct an audit. These steps may lead to a government investigation.

Billing Pattern Falls Outside the Norm - The Payors have data indicating what a normal billing pattern is for a particular product in a particular geographical location. If a pharmacy’s billing pattern falls outside this “norm,” then the pharmacy will be scrutinized.

Government Interviews Witnesses

Interview of Physicians – Governmental agents, including agents of government contractors, will call or personally visit physicians whose names are on the prescription. The agents will attempt to determine if the prescription is “physician/patient driven” or if it is “pharmacy driven.”

Interview of Patients - Agents will call or personally visit patients to determine (i) if they received the product for which the government was billed and (ii) if they really wanted the product (or if the process was “pharmacy driven”). Agents may intimidate elderly patients. Afraid that they “will lose their Medicare benefits,” the patients will often say whatever the agents “lead them on to say.”

Interview of Current and Ex Employees - Agents will call or personally visit current and ex employees. As with patients, agents may intimidate the current/ex employees. The current/ex employees, out of fear that “they may have done something wrong,” may be inclined to say whatever the agents “lead them on to say.”

Importance of Compliance Program

The pharmacy can take a number of steps to reduce the risk of coming under governmental scrutiny, the most important of which is to implement a robust compliance program. The pharmacy needs to have a committed compliance officer. For large pharmacies, being a compliance officer can be a full-time position. For smaller pharmacies, the compliance officer will likely "wear multiple hats." 

The compliance officer is normally not an attorney. The compliance officer does not have to be an expert on all of the federal and state antifraud laws. However, the compliance officer needs to know enough about avoiding fraud that he/she has a "Pavlovian reaction" when the pharmacy is about to embark on a program, or enter into an arrangement, that is questionable. At that juncture, the compliance officer can pick up the phone and call a health care attorney to determine if the pharmacy is about to start down the proverbial "slippery slope."

Another important reason for a vibrant compliance program is to provide to employees a safe process by which they can voice concerns about the pharmacy's practices. Most employees do not, at the outset, plan on becoming a qui tam relator. Normally, an employee becomes a qui tam relator only after the employee brings a concern to management … and management does not treat the employee's concern seriously. Out of frustration and anger, the employee will contact an attorney. If the employees know that they can safely (and if they desire, confidentially) go to a compliance officer with a concern, then the risk of an employee talking to a qui tam attorney decreases. 
______________________________________________________________________________
Jeffrey S. Baird, Esq. is Chairman of the Health Care Group at Brown & Fortunato, P.C., a law firm based in Amarillo, Texas.  He represents pharmacies, home medical equipment companies, and other health care providers throughout the United States.  Mr. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization.  He can be reached at (806) 345-6320 or jbaird@bf-law.com.

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