Become Familiar With the False Claim Act

March 24, 2020
Kennedy E. McGuire

,
Joseph L. Fink III, BSPharm, JD, DSC (Hon), FAPHA

Pharmacy Times, March 2020, Volume 88, Issue 3

Understanding the Law Can Help Pharmacists Avoid Committing Fraud and Act as Whistleblowers if They Are Informed of a Violation

The False Claims Act (FCA) originated from the misappropriation of money that occurred during the Civil War. In 1863, Senator Henry Wilson of Massachusetts (R) introduced a bill aimed at addressing fraud against the US government. The bill acknowledged that there were no appropriate measures in place to prevent contractors that were working with the government from committing fraud and that it was time to impose punishment upon those participating in fraudulent activity. After passing

the Senate, the bill was amended in the House of Representatives. The Senate then passed the new version of the bill, and President Abraham Lincoln signed off on the FCA.1

QUI TAM PROVISION

One particularly noteworthy provision of the FCA is referred to as qui tam, from the Latin phrase “qui tam pro domino rege quam pro se ipso in hac parte sequitur,” meaning roughly “he who sues for the king as well as for himself.”2 The qui tam provision allows any individual to act as a whistleblower and to sue a contractor that is defrauding the government on behalf of the federal government, as outlined in 31 U.S. Code §3730(b). The purpose of the qui tam provision was to incentivize the identification and reporting of fraud. In order to achieve this purpose, the government rewards the qui tam plaintiff by allowing him or her to recover a portion of the settlement from the defendant. There have been instances where pharmacy employees or those of health plans or manufacturers have served in this role, becoming known as a “qui tam relator.”

HEALTH CARE INDUSTRY

Although the original version of the FCA was enacted in 1863, changes have been made to the legislation throughout the course of history. In 1943, amendments made to the FCA resulted in the decrease of its use. Efforts were made in 1985 to modify the law again and enhance its value in the current era. These changes, which were enacted during 1986, created a broader umbrella under which the FCA would be relevant. Prior to 1986, a violation required a “specific intent to defraud the government,”3 but the new definition no longer included intent as a factor.

Instead, based on the revised version of the FCA enacted in 1986, a violation occurs when “defendants act recklessly or in deliberate ignorance of the truth or falsity of the information.”3 In addition to the changed definition of violation, the modified FCA had an increased penalty in civil cases.

The amendments to the FCA in 1986 also strengthened its coverage of the health care industry. Prior to the changes, there were not many violations of

the FCA characterized by fraudulent Medicaid or Medicare claims. However, the amended version of the FCA explicitly states that the act applies to claims for Medicaid, Medicare, and similar program reimbursements. Within the health care industry, the government has focused on how the FCA applies regarding enforcing a national standard for quality of care, coding inpatient hospital stays, and classification a service as inpatient or outpatient.3

PHARMACEUTICAL FRAUD

Ultimately, the government is dedicated to using the FCA to fight fraudulent activities in the healthcare industry, and the pharmaceutical sector is no exception. Under the FCA, pharmacy practice related activities have led to allegations that are rooted in the act. One example involved allegations against a prominent national pharmacy chain that it had been submitting false claims and inflating the price of prescription medications for patients using government-supported health care programs such as Medicaid. According to the allegations, the chain committed fraud against 39 states, as well as the federal government, as a result of Medicaid being

operated as a federal state collaboration. The lawsuit was filed in 2012 and settled for $60 million in January 2019.4

The national chain’s settlement is just one example that illustrates the severe consequences of fraud in the pharmaceutical industry. Because of the gravity of the implications, it is important for pharmacists to be vigilant and to understand the FCA. By understanding what constitutes fraud under the act, pharmacists can avoid committing fraud and can hold their peers accountable by acting as whistleblowers in the event that they are made aware of a violation.

Kennedy McGuire has a bachelor in health science degree in clinical leadership and is a management candidate at the University of Kentucky College of Pharmacy in Lexington.

Joseph L. Fink III, BSPharm, JD, DSc (Hon), FAPhA, is a professor of pharmacy law and policy and the Kentucky Pharmacists Association Endowed Professor of Leadership at the University of Kentucky College of Pharmacy in Lexington.

REFERENCES

  • Helmer JB Jr. False Claims Act: incentivizing integrity for 150 years for rogues, privateers, parasites and patriots. U. Cin. L. Rev. 2012;81:1261.
  • Androphy J... Bringing rogues to justice: the qui tam provisions of the False Claims Act. Berg & Androphy website. bafirm.com/publication/bringing-rogues-to-justice-the-qui-tam-provisions-of-the-false-claims-act/. Accessed February 5, 2020.
  • Salcido R. The government’s increasing use of the False Claims Act against the health care industry. J Leg Med. 2003;24(4):457—494.
  • Cision. Walgreens to pay feds and states $60 million in largest-ever settlement by a pharmacy chain for overcharging for drugs. PRWeb website. search.ebscohost.com.ezproxy.uky.edu/login.aspx?direct=true&db=bwh&AN=201901222025PR.NEWS.USPR.UN31594&site=ehost-live&scope=site. Published January 23, 2029. Accessed February 5, 2020.