For organizations and individuals in the health care and life sciences sectors, fraud-related exposure is one of the most significant risks to be managed because it can have a profound detrimental impact on legal standing, finances, and reputation. Among the more significant emerging fraud enforcement areas involves application of the federal False Claims Act (FCA) to perceived abuses in the manufacturing and delivery of opioids.

The FCA is a powerful tool that is used extensively by the government and private litigants to pursue fraud and misconduct claims relating to government projects and funds. On March 7, 2018, Mr. Joseph Hunt, the presidential nominee to lead the U. S. Department of Justice (DOJ) Civil Division, stated that under his leadership, the Civil Division would continue to focus on FCA enforcement actions and described the statute as one of the Division’s “best tools” in combatting fraud.

At his nomination hearing before the Senate Judiciary Committee, Mr.  Hunt also testified that he was “very excited” about what the Civil Division can do to combat fraud and that he intends to focus on elder abuse and the opioid epidemic. With regard to opioids, Mr. Hunt stated, “We can use the FCA as an effective tool…with respect to the distribution chain, from manufacturers to hospitals to distributors and pharmacies and doctors,” adding that he “intend[s] for us to devote resources to that.”

Overview of Opioid-Related Enforcement Initiatives

Mr. Hunt’s statements came on the heels of U. S. Attorney General Jeff Sessions’ February 28, 2018 announcement of a new “Prescription Interdiction and Litigation (PIL) Task Force.” The Task Force will use the FCA and other tools to target manufacturers, distributors, prescribers, and retailers who facilitate the misuse of opioids. The Task Force will also review pending state and local government litigation to determine if federal law may be applied to facilitate resolution.

The Task Force expands upon the recently launched DOJ Opioid Fraud and Abuse Detection Unit, which deploys sophisticated data analytics to target clinicians and pharmacies that over-prescribe or over-dispense opioids. According to a January 30, 2018 announcement, these efforts will be aided by expanding the number of DEA agents and investigators in the Unit.

The above indicates a sustained commitment by federal law enforcement to pursue criminal and civil remedies targeted at abuse at all steps in the opioid supply chain, from manufacturer to dispenser. This effort is combining resources across agencies, is focused on both criminal and civil enforcement, and is intended to complement both state and local enforcement efforts as well as whistleblower-initiated FCA litigation. A case in point is last summer’s health care fraud takedown—DOJ’s largest ever—in which over 1,000 federal and state law enforcement agents arrested more than 400 defendants, including 50 physicians, for opioid-related violations. Of these, more than 120 were charged with crimes.

These law enforcement efforts are coupled with robust administrative enforcement efforts by the U.S. Department of Health and Human Services Office of Inspector General (OIG). In the summer 2017 take-down described above, for example, exclusion notices were issued to almost 300 medical professionals and pharmacists for opioid diversion and misuse activity. These notices bar submitting claims to, and participation in, all federal health care programs, including Medicare and Medicaid.

More generally, the OIG is deploying analytic and audit tools to combat opioid‑related abuses in the health delivery system. The OIG’s July 2017 Data Brief regarding opioids in Medicare Part D showcases the OIG’s use of data analytics to reach conclusions regarding “extreme use” and “questionable prescribing.” The OIG has indicated its intention to conduct a similar analysis regarding Medicaid beneficiaries. In addition, the OIG Work Plan and various audit initiatives have added opioid‑related measures.

FCA Developments

The FCA is one of the federal government’s primary and most powerful means for combating fraud and misconduct related to government projects and funds. In 2017 alone, the DOJ obtained more than $3.7 billion in settlements and judgments under the FCA. Although the DOJ pursued enforcement actions across a broad array of industries, the health care industry remains a top priority. Indeed, out of the $3.7 billion the DOJ obtained in 2017, $2.4 billion involved the health care industry, including drug companies, hospitals, pharmacies, laboratories, and physicians.

In general, the FCA imposes liability upon any person or company who knowingly submits, or causes another to submit, a false claim or makes a false record or statement in order to get a false claim paid by the government. The statute allows the government to seek three times the amount of damages caused by the false statement, plus a civil penalty of $5,500–$10,000 for each false claim submitted to the government, plus its costs in bringing a civil action to recover these damages and penalties. The FCA also incentivizes “whistleblowers” to bring claims against companies (usually, the employer of the whistleblower) for alleged violations of the statute, by entitling the whistleblower to receive 15–30% of the recovery. In addition, many states have similar FCA statutes that are enforced by the state Attorney General and have similar whistleblower provisions.

While the full extent to which the FCA can be applied to various actors in the opioid distribution chain remains to be seen, Mr. Hunt’s recent comments, his anticipated confirmation, and the DOJ’s recent opioid‑related enforcement efforts suggest that the DOJ will continue to vigorously pursue these types of FCA enforcement actions. Among recent actions were the following:

• On January 24, 2018, the DOJ announced that a Tennessee chiropractor paid more than $1.45 million to resolve FCA allegations related to improper opioid prescribing, predicated on a violation of the Controlled Substances Act.
• On September 8, 2017, a California pharmaceutical company agreed to pay more than $7.55 million to resolve FCA allegations that it paid kickbacks to physicians to induce prescribing of a fentanyl-based drug.

The DOJ recently settled several civil actions, also with significant fines and penalties, based on violation of the Controlled Substances Act.

Finally, civil FCA investigations very often involve parallel criminal investigations. Decisions made in either the civil or criminal investigation can affect the other, with potentially significant consequences. Thus, it is critical to seek guidance from experienced counsel if you or your company is subject to an FCA investigation.

Please contact the following attorneys in our Government Enforcement & White Collar Defense and Health Care groups or any other Hinckley Allen attorney with whom you regularly work, with any questions related to this alert.

• Michael L. Koenig at (518) 396-3100 or [email protected]
• Victoria P. Lane at (518) 396-3112 or [email protected]

This is the first in a series that focuses on emerging areas of fraud enforcement in the health care sector. Future alerts will address similar enforcement trends associated with patient assistance programs, home health, long-term care, behavioral health/substance use disorder treatment, and other topics.

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