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Life Care Seeks Sixth Circuit Review of Sampling Decision

We recently wrote about a federal district court decision allowing the government to use statistical sampling to prove liability in a False Claims Act case pending against Life Care Centers of America, Inc.  The government’s case stems from two whistleblower suits accusing Life Care of providing uncovered, unskilled, and medically unnecessary services. Life Care has more than 200 locations in about 30 states and much of its revenue comes from Medicare patients.


Life Care has asked the federal district court judge who issued the decision to certify his decision for an interlocutory appeal to the United States Court of Appeals for the Sixth Circuit before the case is tried in the district court.  In that decision, Judge Mattice ruled that 400 specific admissions involving roughly 1,700 claims could be extrapolated to roughly 55,000 admissions involving almost 155,000 claims. In essence, Life Care is hoping to require the government to separately prove the falsity of each of the 155,000 claims, an almost insurmountable burden.  In its motion, Life Care argues that the issue is novel and thus the Sixth Circuit should consider whether extrapolation can satisfy the government’s burden of proof under the FCA and whether constitutional due process rights would be violated if Life Care could not mount a claim-by-claim defense.


The Department of Justice opposed the motion for an interlocutory appeal, arguing among other things that the district court was following decades of precedent establishing the use of statistical sampling in a variety of types of litigation and thus there is no basis justifying Sixth Circuit review of the district court decision’s decision before trial.  “Although the court stated in its order that the use of sampling and extrapolation may have been one of first impression as applied specifically to the FCA, the court nonetheless emphasized that the use of sampling and extrapolation in litigation is hardly novel, and, in fact, is well established,” the government said.


We do not expect the federal district court judge to certify his well-reasoned and thorough decision for interlocutory appeal. Instead, Life Care will have to proceed through discovery, try to challenge the validity and reliability of the statistical sample and supporting expert testimony in the district court, and hope that it can make inroads to limit or exclude the extrapolation.  If done right, the extrapolation should withstand attack and not only help prove liability but also lay the foundation for a massive damages award if the judge or the jury finds Life Care liable of violating the False Claims Act.

False Claims Act Case Against Lance Armstrong Going Strong

The whistleblower who filed a qui tam False Claims Act suit and the United States who joined that suit in 2013 scored another victory in court this week. The district court sided with them and against Armstrong, ruling that the UCI in Switzerland must produce documents in the case alleging that Armstrong’s doping activities amounted to fraud under his sponsorship contract with the US Postal Service.


Many have long claimed that the UCI helped shield Armstrong from detection so the documents could be highly relevant. Still to come in the case is much more discovery with the judge yet to rule on how many depositions the parties will be allowed to take. It is also possible that the UCI documents will pave the way for requests for documents from other foreign entities.


As we have previously written, if Armstrong is ultimately found liable under the FCA he could be liable for treble damages and penalties. The ultimate damages figure will depend on the proof at trial as well as the theory of damages the court adopts, but the liability could reach $100 million or higher.

Use of Statistical Sampling in False Claims Act Cases Endorsed by Court

Yesterday the federal district court handling the False Claims Act case U.S. ex rel. Martin v. Life Care Centers of America, issued two important decisions that endorsed the government’s proposed use of statistical sampling to prove Life Care’s liability under the FCA. The court denied Life Care’s summary judgment motion and upheld the government’s ability to use statistical sampling in a complex FCA case involving the provision of unnecessary therapy at 82 different skilled nursing facilities run by Life Care throughout the country.  The court also denied Life Care’s motion to exclude the testimony of the government’s expert statistician.  After conducting an extensive survey of the law in this area, the court concluded:

“The Court has reviewed the language and the legislative history of the FCA as well as the relevant case law and concludes that the use of statistical sampling, to the extent described infra, is a legally viable mechanism which the Government may employ in attempting to prove the FCA claims in this action. The purpose of the FCA as well as the development and expansion of government programs as to which it may be employed support the use of statistical sampling in complex FCA actions where a claim-by-claim review is impracticable. While Defendant may disagree with this conclusion, it is not without tools at its disposal to attack the weight to be accorded to any extrapolated evidence.” See Order Denying Motion for Summary Judgment above, at pp. 36-37.

The court went on to explain that it would be up to the jury to decide how much weight to give to the statistical evidence and expert testimony in deciding whether Life Care violated the FCA.  Id. at pp. 38-39.   These decisions will be critical not only in the government’s efforts to prevail against Life Care in two whistleblower cases, but in many other FCA cases being litigated across the country.  The court correctly recognized that statistical sampling, which has been used and accepted in many other types of cases, is an acceptable, indeed necessary, tool in certain FCA cases.  Of particular interest is that the court accepted sampling as a way to prove liability not just damages or penalties (i.e. number and amount of false claims).  The court’s reasoning may also strengthen the hand of the government and whistleblowers in settlement negotiations with FCA defendants although many defendants may prefer to litigate the issue.

Medicaid Fraud Highlighted in HHS-OIG Reports on Dental Services for Children

Sometime ago we wrote about the use of the False Claims Act to address the problem of fraud by dentist or oral surgeons who serve children covered by Medicaid. This week the Office of the Inspector General of the Department of Health and Human Services issued its third report on this problem; this report focused on fraud in the Louisiana Medicaid program, while prior reports focused on problems in New York and New York City.  This week’s report chronicles past FCA settlements and  Congressional hearings as well as the OIG’s earlier reports, and promises that further reports addressing the issue on a nationwide scale are forthcoming. See report at pp. 1-3 ; Law 360 article.


The federal-state Medicaid program is designed to assist low income persons obtain medical care, and among the benefits is dental coverage for children under the age of 18. According to the OIG, Medicaid is the primary source of dental coverage for children in low-income families and provides access to dental care for approximately 37 million children.  “Medicaid dental services must include diagnostic and preventive services, as well as needed treatment and follow up care. Diagnostic services may include x-rays of the mouth; preventive services may include cleanings, topical fluoride applications, and dental sealants. Dental treatment covers a wide range of services such as fillings; tooth extractions; and pulpotomies, which are often referred to as ‘baby root canals’.” Report at p. 1.  Among the OIG’s concerns are providers who are billing for dental procedures that are medically unnecessary or were in fact never even provided.   These concerns in turn implicate the quality of care these children are receiving or indeed the possibility of patient harm among a particularly vulnerable population. Id.


It appears from the OIG Reports that the government has so far been relying primarily on claims data and statistics to identify fraudulent providers. This approach has its limitations, however,  as reflected by the fact that the OIG readily acknowledges that it “ did not include pediatric dental specialists because the wide variation in their billing behavior made it difficult to analyze them as one peer group. Some pediatric dental specialists provide services that make them similar to general dentists, while others provide more complex services.” Report p. 4.  Moreover, at p. 6 the Report notes that the claims data simply identifies providers who may warrant further scrutiny, but it does not show they committed fraud. No doubt the taxpayers would benefit from whistleblowers who work in the dental sector of health care coming forward with real time information and cooperation to assist the government’s attempt to crackdown on fraud in this part of the Medicaid program.

American Bar Association, Section of Public Contract Law, Recent Cases Interpreting the False Claims Act, and Consequences for Conducting Internal Investigations

American Bar Association, Section of Public Contract Law, Recent Cases Interpreting the False Claims Act, and Consequences for Conducting Internal Investigations,
Friday, August 8, 2014, from 9 a.m. to noon at the Hyatt Regency, Boston, Massachusetts

Attorney Robert M. Thomas, Jr., Thomas & Associates

Attorney Robert M. Thomas, Jr., Thomas & Associates

Robert M. Thomas will join several other esteemed speakers from government, the private sector, as well as the whistleblower perspective, in a session covering recent developments in the case law of the False Claims Act.


In the past few years, as the result of an increasing amount of litigation, courts have issued a number of decisions interpreting the provisions of the False Claims Act.


On some important issues involving the Act’s substantive liability provisions and procedural defenses, courts are diverging in their approaches, increasing the level of uncertainty for government contractors, and suggesting that some of these issues will find their way to the Supreme Court.

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Our Notable Results

[learn_more caption=”United States et al. ex rel. Westmoreland v. Amgen, Inc., et al., Civil Action No. 06-10972-WGY (D. Mass.) (agreement in principle for settlement pending)” state=”close”]

In this whistleblower case filed against Amgen, Inc,, the world’s largest biotechnology company, and others in federal district court in Boston in 2006, Kassie Westmoreland, a former Amgen sales representative and product manager, alleged that the defendants violated the False Claims Act and the federal Medicare and Medicaid AntiKickback Act in their marketing and promotion of Amgen’s anti anemia drug Aranesp, including by encouraging doctors to bill Medicare and Medicaid for the “overfill’ or free drug contained in single-dose vials of Aranesp.

The case was unsealed in 2009, and several states intervened in the case; the Untied States indicated it was not intervening at that time but was continuing its civil and criminal investigation of the company. After over two years of litigation resulting in four published federal court opinions, the case was scheduled to go to trial in the United States District Court in Boston on October 17, 2011.

On October 24, 2011 Amgen announced that it had set aside $780 million and had reached an agreement in principle to settle criminal and civil investigations that had been under way for several years by the United States and the states and would resolve pending whistleblower lawsuits.


[learn_more caption=”United State ex rel. SF United Partners, et al. v. WellCare Health Plans, Inc., et al., Case No. 3:07cv1688 (SRU) (D. Conn.) (criminal and civil settlement 2011 and 2009)” state=”close”]


This whistleblower case was brought against WellCare, a leading health management organization that provides or arranges for the provision of managed care services under government-sponsored healthcare programs. It operates a variety of Medicaid and Medicare plans, including prescription drug plans, pursuant to contracts with the federal and state governments.

The whistleblower complaint alleged that WellCare knowingly violated the law, its contracts, several provisions of the Federal and comparable State False Claims Acts, and the Medicare and Medicaid AntiKickback Act by, among other things: overstating its expenses in delivering health care and underreporting its profit margin and Medical Loss Ratio; manipulating its Incurred But Not Reported (IBNR) (an actuarial estimate of claims which have not yet been reported or paid, but are likely to be incurred within a certain time frame), upcoding services, claims, and disease states by manipulating the Risk Adjusted Payment System (RAPS), which is used by CMS to calculate the per member per month (PMPM) premium paid to health plans such as WellCare; offering and paying illegal remuneration and kickbacks to participating physicians; operating a sham Special Investigations Unit (SIU) that failed to perform its oversight responsibilities with respect to claims submitted to Medicare and Medicaid by providers and third party administrators, and claims associated with its Medicare Part D Prescription Drug Plan; and engaging in sales and marketing abuses.

In April 2011 the United States, nine states, WellCare, and several whistleblowers reached an agreement to resolve WellCare’s civil liabilities under the False Claims Act for $137.5 million.

As part of that settlement, WellCare also entered into a Corporate Integrity Agreement with the HHS Office of the Inspector General. WellCare had previously resolved its criminal liabilities by agreeing to pay $80 million as part of a Deferred Prosecution Agreement with the United States in May 2009, and at that time also resolved its potential liabilities to the SEC by entering into a consent judgment and agreeing to pay a civil penalty of $10 million.


[learn_more caption=”United States, et al. v. Elan Corporation, PLC, and Eisai Inc., Civil Action No.  04-11594-RWZ (D. Mass.) (criminal and civil settlement 2010)” state=”close”]

This whistleblower case filed in 2004 involved allegations of improper “off-label” marketing and billing of the anti-seizure drug Zonegran, first by Irish pharmaceutical manufacturer Elan Corp., then later by Japanese pharmaceutical company Eisai, Inc., which bought the rights to the drug from Elan in 2004.

In a settlement announced by the Department of Justice and several state Attorneys General in December 2010, Elan Corp. agreed to plead guilty to introducing misbranded drugs into interstate commerce, in violation of the federal Food Drug and Cosmetic Act, and pay criminal fines and forfeitures of just over $100 million.  Elan also paid $102,890,517 plus interest, in civil damages for violations of the False Claims Act resulting from improper billings to federal and state health insurance programs such as Medicare and Medicaid.  The Elan criminal and civil settlements combined exceeded $203 million.  Elan also entered into a Corporate Integrity Agreement with the HHS OIG.

In addition, Eisai Inc. separately agreed to pay $11 million in civil damages under the False Claims Act to the federal and state governments for the period of time the off-label marketing continued after it acquired the rights to the drug.

The whistleblower’s complaint alleged that the defendant companies marketed Zonegran, which was approved only for reducing seizures, for weight loss and mood stabilization as well.  The drug was not and is not approved for either of those uses.  The increase in drug prescriptions resulting from this off-label marketing not only caused improper billings to the federal and state governments, but it also undercut the authority of the U.S. Food and Drug Administration, which determines the safety and efficacy of drug products and approves (and limits) their uses.


[learn_more caption=”United States ex rel Gobble, et al. v. Forest Laboratories, Civil Action No. 03-10395-NMG (D. Mass.) (criminal and civil settlement 2010)” state=”close”]

In this case, the whistleblower alleged that Forest Pharmaceuticals, Inc., a subsidiary of New York City-based Forest Laboratories, Inc., and Forest Laboratories violated federal and state False Claims Acts by engaging in off label marketing of the anti-depressant drugs Celexa and Lexapro, and kickbacks to physicians, that resulted in illegal billings to federal health care programs.

After a lengthy federal investigation, Forest reached an agreement with the Department of Justice and several state Attorneys General to resolve its criminal and civil liabilities. Under the agreement, Forest Pharmaceuticals, Inc pled guilty, paid a criminal fine of $150 million, and forfeited an additional $14 million in assets.for charges relating to obstruction of justice, , the illegal promotion of Celexa, an anti-depressant drug for use in treating children and adolescents, and the distribution of Levothroid, an unapproved new drug used to treat hypothyroidism. The companies also agreed to pay over $149 million to resolve allegations under the False Claims Act, including a civil complaint filed by the United States in February 2009 as part of its intervention in the whistleblower’s case. that Forest caused false claims to be submitted to federal health care programs for the drugs Celexa,  Lexapro, and Levothroid, .

In total, Forest agreed to pay more than $313 million to resolve its criminal and civil liability arising from these matters. It also entered into a Corporate Integrity Agreement with the HHS OIG.

The whistleblower also alleged that Forest had illegally retaliated against him by firing him after he raised questions about Forest’s illegal behavior. The court ruled that his claim could proceed. See  United States ex rel. Gobble et al. v. Forest Labs, et al., 729 F.Supp.2d 446 (D. Mass. 2010).

Mr. Thomas and Ms. Durrell were co-counsel in this case with attorneys Marlan Wilbanks and Ty Bridges of Wilbanks & Bridges, LLP.


[learn_more caption=”United States, et al. Collins v. Pfizer Inc., Civil Action No. 04-11780-DPW (D. Mass.) (criminal and civil settlement 2009)” state=”close”]

Pfizer Inc. paid approximately $2.3 billion dollars to settle claims that, among other things, the company misbranded one of its pain killer drugs, promoted the off label use of numerous drugs, and paid kickbacks to doctors to induce or reward the prescription of Pfizer drugs.  As part of the settlement, Pfizer subsidiary Pharmacia & Upjohn Company, Inc. (“Pharmacia”) entered a guilty plea to a federal criminal indictment charging that the company “misbranded” the painkiller Bextra (valdecoxib) by promoting the drug for variety of conditions and at dosages other than those for which its use was approved by the Food and Drug Administration.  Bextra was withdrawn from the market in 2005 after concerns about its safety profile, especially for cardiovascular risks, in long term users of the drug.

Mr. Thomas and Ms. Durrell represented one of the whistleblowers whose claims were settled as part of this record breaking agreement. Their client’s case alleged  nationwide misconduct in which Pfizer paid illegal remuneration for speaker programs, mentorships, preceptorships, so-called “journal clubs”, and gifts (including entertainment, cash, travel and meals) to health care professionals to induce them to promote and prescribe several drugs, including Lipitor, Norvasc, Viagra, Zithromax, and Zyrtec, in violation of the Medicare and Medicaid Anti-Kickback Act and the False Claims Act. He also alleged that Pfizer had retaliated against him.

A number of other such suits were filed by other whistleblowers.  The government was able to substantiate allegations made in a number of the law suits and Pfizer agreed to pay a record-breaking criminal recovery of $1.3 billion dollars in addition to $1 billion to settle the civil cases alleging that the company caused the submission of false claims to the federal and states’ governments. Pfizer also entered into a Corporate Integrity Agreement with the HHS OIG.
United States and Commonwealth of Massachusetts ex rel. Johnston v. Aggregate Industries, PLC, et al., Civil Action No. 06-11379-GAO (D. Mass.) (criminal and civil settlements 2007 and 2008) (a/k/a the “Big Dig” settlements)
This whistleblower suit alleged wrongdoing in connection with the $14.6 billion reconstruction of downtown Boston’s roadways, tunnels, and bridges known as the “Big Dig”.  Among other things, he alleged that defendant Aggregate Industries supplied out -of-specification or non-conforming concrete to the Big Dig and that defendants Aggregate, Bechtel, and parsons Brinckerhoff failed to properly oversee the construction and as a result false or fraudulent claims for payment were submitted to the government and paid. His claims (and those of other whistleblowers) were settled as part of the settlements between the federal and state government and the defendants in 2007 and 2008.

In the 2007 settlement, defendant Aggregate Industries Northeast Region, Inc. F/K/A Bardon Trimount and Aggregate Industries, Inc. (“Aggregate”) paid over $42 million to resolve a criminal and civil investigation into Aggregate supplying 5,700 loads of out-of-specification or non-conforming “10-9” concrete to the Big Dig.  As part of this Big Dig concrete settlement, Aggregate Industries Northeast Region pled guilty to criminal charges that it conspired to submit false or fraudulent claims to the Government for that concrete and paid a criminal fine.  Aggregate also settled the Government’s civil claims, initiated by whistleblowers, by paying over $15.5 million to the Government under the federal and state False Claims Acts.  Aggregate  also agreed to contribute over $27 million to a fund to be used for future repairs on the Big Dig and Aggregate entered into a Compliance Agreement with the federal Department of Transportation.

In the 2008  settlement,  defendants Bechtel and Parsons Brinckerhoff, the management consultants to the Big Dig,  agreed to pay over $400 million to resolve their civil and criminal liabilities in connection with the “Big Dig” project, including, among others, liability stemming from their failure to institute concrete testing protocols at the construction site as well as in the materials lab to determine that all concrete delivered to the Big Dig by Aggregate met specifications and was placed pursuant to procedures.


[learn_more caption=”United States ex rel. Donigian v, St. Jude Medical Center, Civil Action No. 06-11166-DPW (D. Mass.) (civil settlement 2010)” state=”close”]


This False Claims Act qui tam suit filed in 2006 was resolved by St. Jude Medical Inc. of St. Paul, Minn., agreeing to pay the United States $16 million to resolve allegations raised by the whistleblower that the company used post-market studies and a registry to pay kickbacks to induce physicians to implant the company’s pacemakers and defibrillators.

Post-market studies are intended to assess the clinical performance of a medical device or drug after that device or drug has been approved by the Food and Drug Administration.   Registries are collections of data maintained by a device manufacturer concerning its products that have been sold and implanted in patients. St. Jude used three post-market studies and a device registry as vehicles to pay participating physicians kickbacks to induce them to implant St. Jude pacemakers and defibrillators.  Although St. Jude collected data and information from participating physicians, it is alleged that the company knowingly and intentionally used the studies and registry as a means of increasing its device sales by paying certain physicians to select St. Jude pacemakers and implantable cardioverter defibrillator for their patients. In each case, St. Jude paid each participating physician a fee that ranged up to $2,000 per patient.  St. Jude solicited physicians for the studies in order to retain their business and/or convert their business from a competitor’s product.

Mr. Thomas and Ms. Durrell were co-counsel in this case with attorneys Ken Nolan and Marcella Auerbach of Nolan & Auerbach, P.A.


[learn_more caption=”United States and the Commonwealth of Massachusetts et al. v. East Boston Neighborhood Health Center Corp, et al.,  Civil Action No. 03-12360-MLW (D. Mass.) (civil settlement 2008)” state=”close”]

In this False Claims Act qui tam case filed in 2003, the whistleblower alleged that Boston Medical Center (BMC) and its community health center, East Boston Neighborhood Health Center (EBNHC) submitted inappropriate charges to the Massachusetts Uncompensated Care Pool for emergency services performed at the health center. The Massachusetts Uncompensated Care Pool, now known as the Health Safety Net Trust Fund, and commonly referred to as the “Free Care Pool”, provides reimbursement to acute care hospitals and community health centers for medically necessary services provided to low-income, uninsured and underinsured residents of Massachusetts.  The Free Care Pool is funded in part by the federal and state governments.

The United States Attorney’s Office and the Massachusetts Attorney General’s Office investigated the whistleblower’s allegations and a civil settlement agreement was reached in 2008. Under the terms of the agreement, BMC and EBNHC paid $600,000.  Boston Medical Center and East Boston Neighborhood Health Center also agreed to enter into discussions with the Massachusetts Department of Public Health regarding the standards for operation in the Urgent Care Department of EBNHC.

The whistleblower alleged that East Boston Neighborhood Health Center and Boston Medical Center overcharged the government for services provided to patients seen in the Urgent Care Department of EBNHC.  The alleged overcharges submitted to the Free Care Pool were designed to compensate healthcare providers that are usually not open after 10:00 p.m., on Sundays, holidays, or for emergencies.  However, the Urgent Care Department was open for urgent care and emergencies 24 hours a day, 7 days a week.  By submitting these charges, authorities alleged that EBNHC increased its overall reimbursement from the Uncompensated Care Pool during the fiscal years of 2003 to 2006.


[learn_more caption=”United States ex rel. Garcia, et al. v. Serono, Inc., C.A. No. 03-CV-11892 (D. Mass) (criminal and civil settlement 2005)” state=”close”]

In this case, Mr. Thomas represented a whistleblower who filed a successful False Claims Act qui tam complaint against Serono, Inc., the Swiss manufacturer of the AIDS treatment drug Serostim. In a then record settlement reached with the Department of Justice and several state Attorneys General, Serono agreed to pay $704 million and plead guilty to scheming to boost sagging sales by, among other things, offering kickbacks to doctors to write prescriptions.

As part of the plea, Serono Laboratories was barred from participating in federal health programs for five years, paid a criminal fine of $136.9 million, and paid $567 million to resolve its civil liabilities under the False Claims Act. Serono also entered into a Corporate Integrity Agreement with the HHS OIG.

Serostim, which contains the human growth hormone Somatropin, was approved by the Food and Drug Administration in 1996 to treat AIDS wasting, an often-fatal condition involving severe weight loss. At about the time the FDA approved the drug, protease inhibitor drugs came on the market. Those drugs, when used in combinations or “cocktails,” sharply curtailed the AIDS virus in patients, making them less prone to AIDS wasting. Serono offered doctors free trips to the south of France in return for agreeing to write up to 30 new prescriptions for Serostim, which cost $21,000 for a 12-week treatment regimen. The company also conspired to introduce a new test for AIDS wasting, despite not having FDA approval. The test diagnosed AIDS wasting even in the absence of weight loss, with the United States estimating that 85 percent of the resulting Serostim prescriptions were unnecessary.


[learn_more caption=”United States and the Commonwealth of Massachusetts et al. v. Tushar C. Patel, M.D. d/b/a HCI/Metromedic Health Center and Fall River Walk-In Emergency Medical Office, P.C., Civil Action No.  03-11828-MLW (D. Mass.) (civil settlement 2005)” state=”close”]

In this False Claims Act qui tam case, the whistleblower alleged that defendants were billing and causing the billing of federal and state government health insurance programs for false and fraudulent claims generated by the Defendants’ clinics and medical offices.  These false and fraudulent claims involved “upcoding” on government insurance claim forms, the ordering of medically unnecessary tests, and submission of claims with materially false information concerning the identity of the patients’ doctor(s), whether the medical visit in question had occurred at all, and the true nature and extent of the patient’s visit in those instances when the patient had been in one of the defendants’ clinics.
Defendant Fall River Walk-In Emergency Medical Office (“FRWI”) was indicted on December 7, 2004 by a Bristol County grand jury on one count each of violation of the Medicaid False Claims Act and larceny over $250.  The indictments alleged that from May 2000 through May 2003, the corporation systematically defrauded the Medicaid program of $85,650 by filing 6,346 claims for physical therapy services performed by chiropractors for hundreds of patients.
In June 2005, the defendants reached a civil settlement agreement with the government, under which the defendants paid $315,000 to resolve the allegations raised in the whistleblower’s complaint. In addition, defendant FRWI entered into a plea agreement with the Commonwealth of Massachusetts and agreed to pay $85,000 in restitution to the Medicaid program.