Fireman's Insurance To Pay Out $44 Million For False Claims Case

Fireman’s Fund Insurance Company has agreed to pay $44 million to settle allegations under the False Claims Act that it knowingly issued insurance policies that were ineligible under the U.S. Department of Agriculture’s (USDA) federal crop insurance program and falsified documents, the Justice Department announced today.  Fireman’s Fund, an Allianz SE subsidiary headquartered in Novato, California, provides personal and commercial property insurance throughout the United States.

“Federal crop insurance provides vital support for farmers suffering crop losses due to natural disasters,” said Acting Assistant Attorney General Benjamin C. Mizer of the Department’s Civil Division.  “The Department of Justice will continue aggressively to pursue those who abuse this important program.” 

Between 1999 and 2002, Fireman’s Fund operated a crop insurance business and participated in the federal crop insurance program.  Under the program, Fireman’s Fund sold and serviced crop insurance policies that were reinsured by the USDA for a portion of the risks.

The United States alleged that between Jan. 1, 1999, and Dec. 31, 2002, Fireman’s Fund knowingly issued federally reinsured crop insurance policies that were ineligible for federal reinsurance.  Specifically, Fireman’s Fund allegedly backdated policies, forged farmers’ signatures, accepted late and altered documents, whited-out dates and signatures, and signed documents after relevant deadlines.  The policies were issued by Fireman’s Fund offices in Modesto, California; Lambert, Mississippi; Fargo, North Dakota; Lubbock, Texas; Prosser, Washington; and Overland Park, Kansas. 
“Today's announcement shows how working alongside our partners in law enforcement, we will ensure the integrity of the crop insurance program for American taxpayers and producers alike,” said Risk Management Agency Administrator Brandon Willis of the USDA.

Adventist Healthcare Admits Guilt For ViolatingFalse Claims Act

Adventist Health System Sunbelt Healthcare Corporation (Adventist) has agreed to pay $5,412,502 to resolve claims that it violated the False Claims Act by providing radiation oncology services to Medicare and TRICARE beneficiaries that were not directly supervised by radiation oncologists or similarly qualified persons, the Department of Justice announced.  Adventist is a non-profit healthcare organization operating a large network of hospitals in the South and the Midwest, and doing business in Florida as Florida Hospital.         

“The settlement demonstrates our continued vigilance to ensure that federal health care beneficiaries receive the highest quality of patient care,” said Acting Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “It is critical that health care providers adequately supervise the services they provide to their patients.”

Radiation oncology services provided to patients served by Medicare and TRICARE, the Department of Defense’s health care program, must be directly supervised by a radiation oncologist or similarly qualified personnel.  The United States alleged that, from Jan. 1, 2010, through Dec. 31, 2013, Adventist violated this supervision requirement for radiation oncology services provided to federal health care program beneficiaries at several Florida locations, including in Altamonte Springs, Daytona Beach, Deland, Kissimmee, Orange City, Orlando, Palm Coast and Winter Park.  These services included radiation simulation, dosimetry, radiation treatment delivery and devices, and intensity-modulated radiation therapy.

“Medicare and TRICARE patients deserve high quality health care,” said U.S. Attorney A. Lee Bentley III of the Middle District of Florida.  “We will not tolerate providers recklessly cutting corners, particularly when furnishing such critical medical services as radiation oncology.”
The settlement partially resolves allegations made in a qui tam lawsuit under the False Claims Act filed in Tampa, Florida, by Dr. Michael Montejo, a radiation oncologist and former employee of Florida Oncology Network P.A., a radiation oncology group.  The act permits private individuals to sue on behalf of the government for false claims and to share in any recovery.  Dr. Montejo will receive $1,082,500 as his share of the recovery. 

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Cardiac Monitoring Company to Pay $6.4 Million Thanks to the False Claim Act

BioTelemetry Inc., a heart monitoring company headquartered in Malvern, Pennsylvania, has agreed to pay $6.4 million to resolve allegations made under the False Claims Act that its subsidiary, CardioNet, overbilled Medicare and other federal health programs for Mobile Cardiac Outpatient Telemetry services when those services were not reasonable or medically necessary.

“Billing for a higher-level service that is not necessary to treat a patient’s condition to receive higher reimbursement from federal health care programs will not be tolerated,” said Acting Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “Such conduct wastes critical federal health care program funds and drives up the costs of health care for all of us.”

 “This settlement should send a message to all providers: do not misuse federal billing systems to improperly gouge the healthcare system upon which so many Americans rely.”

An MCOT monitor provides real-time, outpatient cardiac monitoring.  MCOT monitors are worn by patients for a period of time during which the device continuously records the activities of the patient’s heart, including any irregular rhythms or other cardiac event, and transmits data to CardioNet’s diagnostic center using cell phone technology.  Traditional, less expensive event monitors only download patient data periodically over a landline.

The government alleges that CardioNet was aware that MCOT services were not eligible for Medicare reimbursement when provided to patients who had experienced only mild or moderate heart palpitations, since less expensive monitors could effectively collect data about those patients’ conditions.  Nonetheless, CardioNet allegedly submitted claims to Medicare for those patients containing the billing code for the more expensive MCOT services along with an inaccurate diagnostic code that misrepresented the true condition of the patients and their need for MCOT services.

“Federal employees deserve health care providers, including remote monitoring companies, that meet the highest standards of ethical and professional behavior,” said Inspector General Patrick E. McFarland of the U.S. Office of Personnel Management.  “Today's settlement reminds all providers that they must observe those standards, and reflects the commitment of federal law enforcement organizations to pursue improper and illegal billings that increase the cost of medical care.”

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.

  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $23.8 billion through False Claims Act cases, with more than $15.2 billion of that amount recovered in cases involving fraud against federal health care programs.

Pharmaceutical Companies Contradicting Official Safety Warnings

According to The Washington Post The Food and Drug Administration is proposing to allow pharmaceutical companies to contradict official safety warnings in sales presentations to customers.

Though an FDA warning can scare off buyers, the new proposal would allow drugmakers to present customers with information that undermines official warnings as long as it comes from a peer-reviewed journal article.

The proposal is supported by the manufacturers, who argue the policy would allow them to give doctors and hospitals the benefits of the latest research.

But the proposal is drawing criticism from public-health advocates, who argue that because individual studies can differ widely in their results, a drug company could easily mislead customers - and possibly endanger patients - by presenting only a selection of new research.

The proposal "seriously undermines FDA authority," Sidney Wolfe, founder of Public Citizen's Health Research Group, wrote the agency. "Its main supporters are drug companies and their associations, all of which would benefit from being allowed and encouraged to sell more drugs by making them seem safer than FDA has judged them to be."

Under the proposal, the FDA would not "object to the distribution of new risk information that rebuts, mitigates, or refines risk information in the approved labeling." Studies must be "well-designed" and "at least as informative as the data sources" the FDA used in generating the official warning.

For example, a drugmaker could present evidence that the severity or frequency of a side effect is less than that suggested by the FDA-approved label. Or it could question whether the drug causes the side effect at all.

Exactly what drugmakers can tell customers has been the subject of regulation and sometimes - when the side effect has led to heart attacks, cancer, or suicide - billion-dollar penalties. But the industry has pushed back in recent years, arguing that under First Amendment, the government cannot curtail their right to disseminate information.

The proposal seems bound to increase drug sales because it is explicitly geared toward undermining the FDA warnings, rather than enhancing them, critics said. The proposal allows the dissemination of information that "rebuts or mitigates" the risk identified by the FDA, or information that "refines" the risk as long as it "does not indicate greater seriousness of the risk."

In a letter to the FDA, the pharmaceutical industry's chief lobbying group, PhRMA, said that while the agency has an "important role in evaluating the safety and efficacy of new medicines . . . we also must recognize the critical need for health-care professionals to receive the most current, accurate and comprehensive scientific information."

"The Constitution's protection of an open and robust exchange of ideas . . . limits FDA's ability to regulate scientific communication," according to the letter signed by PhRMA vice president Jeffrey K. Francer. "PhRMA respectfully submits that FDA should give additional consideration to these First Amendment limitations in issuing final guidance."

Specialty Compounding Distributing Adulterated Drugs!

The U.S. District Court for the Western District of Texas entered a consent decree of permanent injunction against Specialty Compounding LLC, Raymond L. Solano III and William L. Swail to prevent the distribution of adulterated and misbranded drugs, the Department of Justice announced today. 

The department filed a complaint in the U.S. District Court for the Western District of Texas on Feb. 23, at the request of the U.S. Food and Drug Administration (FDA).  According to the complaint, Specialty Compounding manufactured both sterile and non-sterile drugs at a facility in Cedar Park, Texas, and distributed the company’s drugs to hospitals, surgery centers and health clinics in Texas and throughout the United States.  As noted in the complaint, Solano is Specialty Compounding’s pharmacist-in-charge and co-owner, and Swail is Specialty Compounding’s Managing Partner and co-owner. 

The complaint alleges that Specialty Compounding manufactured a sterile injectable drug product that tested positive for bacterial growth.  In addition, according to the complaint, in August 2013, FDA received reports from two Texas hospitals that 17 patients had developed bacterial infections caused by Rhodococcus equi after receiving infusions of calcium gluconate manufactured by Specialty Compounding.  Specialty Compounding ceased sterile drug manufacturing operations in August 2013, and recalled all lots of its unexpired sterile drug products distributed since Feb. 1, 2013.
“Specialty Compounding’s manufacturing practices posed a serious risk to the public health,” said Acting Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division. 

“The American public needs to have the confidence that pharmaceutical drugs on the market are safe and effective.”
In conjunction with the filing of the complaint, the defendants agreed to settle the litigation and be bound by a permanent injunction.  As part of the settlement, the company and its owners have committed to implementing corrective actions before resuming production of sterile drugs.  Specifically, the injunction prohibits Specialty Compounding and its owners from manufacturing, holding or distributing sterile drugs until they comply with the federal Food, Drug, and Cosmetic Act and its regulations.  The permanent injunction also provides the defendants cannot resume distribution of sterile drug products until they receive written approval from the FDA that they are in compliance with the remedial provisions of the permanent injunction.  

As described in the complaint, the FDA inspected Specialty Compounding’s Cedar Park facility in August and September 2013, and found insanitary conditions and numerous violations of the current good manufacturing practice requirements for drug products.  Among other observations, the FDA found that the company was distributing some of their drugs without receiving a valid prescription for an identified individual patient and was introducing into interstate commerce unapproved new drugs and misbranded drugs.  In addition, as alleged in the complaint, analyses of samples of a drug product collected by the FDA found bacterial contamination in one of the company’s drugs.  The company initiated a recall of all injectable drugs on Aug. 9, 2013. 

The government is represented by Trial Attorney Jessica Gunder of the Civil Division’s Consumer Protection Branch, with the assistance of Associate Chief Counsel Melissa Mendoza of the Department of Health and Human Services’ Office of General Counsel’s Food and Drug Division.

Johnson & Johnson Responsibility For Risperdal Limited To 3 Years Retroactive

The South Carolina Supreme Court cut more than half of a $327 million penalty levied on a Johnson & Johnson subsidiary for whitewashing links between its anti-psychotic drug Risperdal and diabetes, limiting claims to a three-year statute of limitations. The state high court cut the penalty to $136 million, limiting claims to three years from a January 2007 tolling agreement between the subsidiary and the state.

The court agreed with Ortho-McNeil-Janssen Pharmaceuticals Inc.’s argument that the trial court erred in granting the state’s motion for a directed verdict on the statute of limitations on claims over alleged labeling violations. 

The state supreme court rejected Janssen’s argument that the statute of limitations bars all the state’s claims over the Risperdal labels. The court’s opinion stated further:

We reject Janssen’s position, for Janssen misapprehends the statute of limitations and the concept of continuous accrual of this … cause of action. The labeling claim presents a series of discrete, independently actionable wrongs that are at the core of the typical unfair trade practice action.

Janssen also argued that the statute of limitations applied to claims that it violated the South Carolina Unfair Trade Practices Act by sending “dear doctor” letters that glossed over diabetes risks from Risperdal. The November 2003 “dear doctor” letter spurred the U.S. Food and Drug Administration (FDA) to send a warning letter to Janssen in April 2004, according to the ruling. The court ruled that until the FDA sent its letter, Janssen’s deceptive conduct couldn’t have been discovered before then.
Janssen introduced Risperdal in 1994. Starting in the mid-1990s, evidence began to emerge that Risperdal and other atypical anti-psychotic drugs were associated with diabetes and other metabolic side effects, according to the ruling. The state of South Carolina filed suit in 2007, arguing that Janssen sent misleading letters to more than 7,000 to protect billions of dollars in Risperdal sales. The trial court ordered Janssen to pay $327 million in 2011. States such as Louisiana and West Virginia launched cases against J&J after the FDA ordered the company in 2003 to revise prescribing information for Risperdal to include a warning for an increased risk of diabetes among users

Whistleblower Awards Nearing $50 Million

Washington D.C., March 2, 2015 — 
                    
The Securities and Exchange Commission today announced a whistleblower award payout between $475,000 and $575,000 to a former company officer who reported original, high-quality information about a securities fraud that resulted in an SEC enforcement action with sanctions exceeding $1 million.

Officers, directors, trustees, or partners who learn about a fraud through another employee reporting the misconduct generally aren’t eligible for an award under the SEC’s whistleblower program.  However, there is an exception to this exclusion that makes an officer eligible if he or she reports the information to the SEC more than 120 days after other responsible compliance personnel possessed the information and failed to adequately address the issue.  This is the first SEC whistleblower award to an officer under these circumstances. 

“Corporate officers have front-row seats overseeing the activities of their companies, and this particular officer should be commended for stepping up to report a securities law violation when it became apparent that the company’s internal compliance system was not functioning well enough to address it,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement. 

The SEC has now awarded 15 whistleblowers since its whistleblower program began more than three years ago.  Payouts have totaled nearly $50 million out of an investor protection fund established by Congress.  The fund is financed entirely through monetary sanctions paid to the SEC by securities law violators, and no money is taken or withheld from harmed investors to pay whistleblower awards.

Whistleblower awards can range from 10 percent to 30 percent of the money collected in a case.  By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.

“Receiving information and cooperation from company insiders is particularly useful in the early detection of securities fraud, and we will continue to leverage whistleblower information to help combat securities law violations and better protect investors and the marketplace,” said Sean McKessy, Chief of the SEC’s Office of the Whistleblower.  “Meanwhile, companies must have rigorous internal compliance programs that adequately address and remedy potential violations voiced by their employees as well as by their officers, directors, or other individuals.”

Whistleblower Case Reassigned Due To Judge Lynn Hughes Procrastination

 Houston federal judge who has been accused of unfairly stalling a federal whistle-blower lawsuit for years has been removed from the case by the 5th U.S. Circuit Court of Appeals for ignoring its instructions.

In a rare move, a three-judge panel determined that the case should be assigned to a jurist other than U.S. District Judge Lynn Hughes.

The appeals court concluded that Hughes would have "substantial difficulty in setting aside his previously-expressed views" and that "reassignment would be advisable to preserve the appearance of justice, given the long delays, repeated errors, and cursory reasoning in the district court's opinions to date."

The case was originally filed in 2006 in an Oklahoma federal court by two government auditors who accused Shell Exploration of fraud under the False Claims Act, which allows individuals to sue on behalf of the government. If successful, plaintiffs receive a bounty or a share of any money returned to federal coffers.

The workers, who were employed by the Minerals Management Service - an Interior Department agency - claimed that they discovered unauthorized deductions related to Shell's operation of offshore drilling platforms that bilked the United States out of at least $19 million in royalties from 2001 to 2005. (The government declined to join the lawsuit.)

The case was transferred to Houston in 2007 and landed on Hughes' docket.

In 2011, the district court granted summary judgment to Shell on the grounds that the False Claims Act prohibited the auditors from bringing the suit on the government's behalf as whistle-blowers and that the claim already had been revealed publicly.

The 5th Circuit reversed that decision in 2012 and remanded the case for a redetermination by Hughes.

Instead of complying with the court's order, Hughes granted Shell's 2013 request for a second summary judgment. In that opinion, the district court judge did not clarify why the original summary judgment was thrown out by the appeals court.

The plaintiffs again challenged the decision. This week, the 5th Circuit determined that Hughes should not preside over the case.

"We reverse the district court's judgment, remand this action, and direct the Chief Judge of the Southern District of Texas to reassign the case to a different district judge," 5th Circuit Judge W. Eugene Davis wrote for a panel of three jurists including Judges Jacques L. Wiener Jr. and Catharina Haynes.

The Feb. 23 opinion further stated that Hughes "disregarded" the higher court's mandate on remand and concluded that his treatment of the case "might reasonably cause an objective observer to question [the judge's] impartiality."

When reached in his chambers Friday, Hughes declined to comment.