Earlier this week, Deputy Attorney General (AG) Sally Quillian Yates issued a memorandum to Department of Justice (DOJ) attorneys discussing the need to hold individuals accountable for corporate wrongdoing in both civil and criminal enforcement actions. Deputy AG Yates further discussed the memo in a speech yesterday at the New York University School of Law, emphasizing that “it is our obligation at the Justice Department to ensure that we are holding lawbreakers accountable regardless of whether they commit their crimes on the street corner or in the boardroom.”
The memo outlines 6 key steps for pursuing individual enforcement actions:
- To be eligible for anv cooperation credit, corporations must provide to the DOJ all relevant facts about the individuals involved in corporate misconduct. The memo makes it clear that companies seeking credit for cooperation will not be eligible until they satisfy the “threshold requirement” of “identify[ing] all individuals involved in or responsible for the misconduct at issue, regardless of their position, status or seniority”, and provide all facts related to that misconduct.
- Both criminal and civil corporate investigations should focus on individuals from the inception of the investigation. In doing so, the DOJ “maximize[s] the chances that the final resolution of an investigation uncovering the misconduct will include civil or criminal charges against” both the corporation and culpable individuals.
- Criminal and civil attorneys handling corporate investigations should be in routine communication with one another. The memo highlights the importance of regular communication between criminal and civil DOJ attorneys to ensure that parallel civil and criminal proceedings are pursued, when appropriate, against both corporations and individuals.
- Absent extraordinary circumstances, no corporate resolution will provide protection from criminal or civil liability for any individuals. Any such release of individual liability must be personally approved in writing by the relevant Assistant Attorney General or United States Attorney.
- Corporate cases should not be resolved without a clear plan to resolve related individual cases before the statute of limitations expires and declinations as to individuals in such cases must be memorialized. Any such declination must be approved by the United States Attorney or Assistant Attorney General whose office handled the investigation, or their designees.
- Civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual’s ability to pay. Acknowledging the dual interest in returning funds to the public fisc and deterring future misconduct, the memo emphasizes that individuals suits should be considered regardless of the individual’s ability to pay any settlement amounts because such actions “will result in significant long-term deterrence” and “minimize losses to the public fisc through fraud” over time.
The memo states that these process changes apply to all future civil and criminal investigations, as well as any current investigations to the extent practicable.
Public statements regarding the need for increased individual enforcement are not new. By way of example, see statements by DOJ officials here, here, and here. However, health care and life sciences companies need to recognize that the Yates memo represents a key shift in the DOJ by putting into place a specific framework for ensuring that DOJ civil and criminal investigators actively pursue individual enforcement actions in parallel with investigations of corporate misconduct.
The Health and Human Services (HHS) Office of Inspector General (OIG) released two reports yesterday related to Medicare Part D fraud. The OIG report, Ensuring the Integrity of Medicare Part D, “synthesizes numerous OIG reports that have identified weaknesses in Part D program integrity, and provides updates on Departmental efforts to address these weaknesses.” The report also identifies a number of recommendations made in previous reports that the Centers for Medicare & Medicaid Services (CMS) has not yet implemented, and encourages CMS to do so in order to protect the Part D program from fraud, waste and abuse.
The second OIG report, Questionable Billing and Geographic Hotspots Point to Potential Fraud and Abuse in Medicare Part D, summarizes OIG reviews that have revealed questionable billing associated with pharmacies, prescribers, and beneficiaries involving controlled and noncontrolled substances. These reviews were conducted because of the OIG’s ongoing concerns regarding abuse and diversion of Part D drugs. Notably, the report concluded that more than 1,400 pharmacies had questionable billing for Part D drugs in 2014 that “warrant further scrutiny.” Additionally, “geographic hot spots” for certain drugs in Los Angeles, CA; McAllen, TX; Miami, FL; New York, NY; and San Juan, PR suggest potential fraud and abuse.
On May 19, 2015, Vermont’s governor signed into law a state false claims act that largely mirrors the federal False Claims Act, including the ability of a qui tam relator to bring an action on behalf of the state. Vermont joins the 33 states and the District of Columbia that have enacted false claims acts to date. Additionally, on May 12, 2015, Maryland’s governor approved a bill that expanded the state’s false claims act, which was enacted in 2010 to combat health care fraud.
This trend is being driven, in part, by the significant recoveries that the federal government is obtaining in fraud cases related to the health care industry and other sectors. According to the Department of Justice (DOJ), it recovered nearly $6 billion in civil false claims cases in FY2014, nearly half of which was a result of whistleblower suits. A state false claims act is critical for the state to maximize its recoveries in these fraud cases. This is because a state with a false claims act that meets the requirements of the Deficit Reduction Act of 2005, as determined by the Health and Human Services Office of Inspector General (OIG), receives a 10% increase in its share of any amounts recovered under these laws.
Senator Grassley issued letters this week to the Centers for Medicare and Medicaid Services (CMS) and Department of Justice (DOJ) related to potential fraud in the Medicare Advantage program. Citing news articles, DOJ investigations and a recent Government Accountability Office report, Grassley states: “Some insurance companies that offer Medicare Advantage are allegedly engaging in billing abuse by altering patient records in order to claim patients are sicker than they actually are” because reimbursement is higher for sicker patients.
Grassley requested that CMS provide responses to the following questions:
- What steps has CMS taken, and is currently taking, to ensure that insurance companies are not fraudulently altering risk scores? Please provide a detailed explanation.
- Is CMS working in conjunction with DOJ to investigate risk score fraud? Please explain the relationship. If not, why not?
- Since the inception of Medicare Advantage, how many risk score audits has CMS conducted each year? For each year and each audit, what was the value of the overcharge? How much was recovered via settlement or other measures?
- How much money per year is allocated by CMS for auditing Medicare Advantage fraud, waste and abuse?
Significant recent regulatory and enforcement activity related to laboratory fees and services continues to demonstrate an increased focus on this industry. Government enforcers are active in cases involving both the laboratories and physicians involved in kickback schemes.
The U.S. Department of Justice (DOJ) announced in late March and early April that three New Jersey doctors were sentenced to prison for accepting bribes in exchange for referring patients to a medical-testing laboratory company. The DOJ also announced this month that a New York physician admitted to accepting bribes in the same scheme. According to the DOJ, 26 physicians and 12 other individuals have been convicted to date of participating in the bribery scheme with the laboratory and the government has recovered $10.5 million in forfeitures.
The Department of Justice (DOJ) announced this week that it recovered a record $5.69 billion in civil False Claims Act (FCA) settlements during fiscal year 2014. This recovery included $2.3 billion for FCA cases involving federal health care programs, such as Medicare, Medicaid and TRICARE. Some of the significant health care fraud recoveries included $1.1 billion for Johnson & Johnson’s civil FCA settlement ($2.2 billion total) in November 2013 and $116 million for Omnicare’s civil FCA settlement ($124 million total) in June 2014, as well as cases involving hospitals, home health service providers, and medical device companies. This was the 5th consecutive year that the DOJ recovered more than $2 billion in health care fraud cases due, in part, to the HEAT program.
Additionally, the DOJ disclosed that of the $5.69 billion recovered, nearly $3 billion related to lawsuits filed under the FCA’s qui tam whistleblower provisions. Whistleblowers received $435 million in payouts in the last fiscal year. There also are over 700 qui tam cases pending for the second consecutive year.