A record number of False Claims Act (FCA) matters were initiated in FY 2020, according to newly released Department of Justice (DOJ) statistics. At the same time, the government recovered just $2.2 billion in FCA settlements and judgments, its lowest tally in a dozen years. The relatively low total, however, will prove to be a short-lived trend. More than $3 billion in settlements were completed shortly after the fiscal year’s September 30 close, and the increase in new FCA matters last year signals the DOJ is becoming more proactive and aggressive in rooting out fraud against the government.
Total cases
The FCA is the primary tool used by DOJ to combat fraud against government programs. In FY 2020, 922 FCA actions were initiated, representing a 17 percent increase from the prior year, when 786 new matters were brought. Just as it has impacted everything else, the pandemic was a factor in last year’s FCA trends. The sharp increase in new actions can partly be attributed to efforts to stem fraud arising from the Coronavirus Aid, Relief, and Economic Security (CARES) Act. But the COVID-19 crisis also slowed the DOJ in bringing matters to resolution, helping to account for the 28 percent decline in recovery from the $3.1 billion total posted in FY 2019.
Healthcare fraud
Year after year, the vast majority of FCA matters involve the healthcare sector, including drug and medical device manufacturers, managed care providers, hospitals, pharmacies, hospice organizations, laboratories, and physicians. In FY 2020, more than $1.8 billion of the more than $2.2 billion recovered stemmed from healthcare fraud against government programs like Medicare, Medicaid, and TRICARE.
The largest recoveries involved the drug industry. Notably, Novartis Pharmaceuticals Corp. agreed to pay $591 million to resolve claims that it paid kickbacks to doctors to induce them to prescribe its drugs. Further, crackdowns on abuse involving opioids continued to be a major priority for DOJ, which reached a major civil and criminal settlement with Purdue Pharma for false claims submitted to federal health care programs arising from the company’s practice of unlawfully promoting and inducing opioid prescriptions. The recovery, which occurred in October and was not reflected in the FY 2020 total, included a $2.8 billion civil settlement and an additional civil settlement against members of the Sackler family for $225 million.
Another major DOJ focus has been to discipline pharmaceutical manufacturers for unlawfully protecting their high drug prices by funding co-payments for Medicare patients through private foundations. Novartis and Gilead Sciences paid a combined settlement exceeding $148 million to resolve such claims, while the DOJ initiated similar actions against Teva Pharmaceuticals USA Inc. and Teva Neurosciences Inc. in August 2020.
A $145 million settlement against Practice Fusion Inc. reflects another DOJ priority: combatting fraud schemes involving electronic medical records. Practice Fusion settled allegations that it accepted kickbacks from Purdue Pharma in exchange for implementing clinical decision support alerts in its electronic health records software that were designed to increase prescriptions of OxyContin.
DOJ vs. whistleblowers
While some FCA matters are brought by the government directly, the majority are initiated by whistleblowers acting on behalf of the government, which is referred to as a qui tam action. Whistleblowers receive a share of any recovery, ranging from 15 to 30 percent. But rather than whistleblowers, this year’s significant spike in actions can mainly be attributed to cases initiated by the DOJ. The department started 250 actions in FY 2020, up sharply from 148 the prior year and the highest total since 1994. While cases brought by whistleblowers increased from 638 to 672, the percentage of cases brought directly by DOJ (27%) is the highest it has been since 2008, indicating the department’s increasing proactivity and reliance on its own audits and investigations to uncover fraud against government programs.
Looking ahead
Companies can expect 2021 to be an active year for FCA enforcement as the federal government looks to recoup dollars amid the stalling economy and the enduring pandemic. Enforcement related to COVID-19 relief programs will be a major priority, as pandemic-related benefits have been widely dispersed with sums well in excess of relief efforts in prior crises. Beyond pandemic-related fraud, opioids will likely remain a major area of focus. Based on President Joseph Biden’s campaign promise to hold big pharmaceutical companies and executives accountable for their role in the opioid crisis, the new administration is likely to turn to the FCA as a tool in this fight.
