Conning the IADC Newsletters

Abstract

International Association of Defense Counsel committee members prepare newsletters each month that contain a wide range of practical and helpful material. This section of the Defense Counsel Journal is dedicated to highlighting interesting topics covered in recent newsletters so that other readers can benefit from committee specific articles. Protecting Manufacturers from Qui Tam Actions Under the False Claims Act By D. Jeffrey Campbell and Frank Fazio, and Steven S. Vahidi IADC member D. Jeffrey Campbell is the Managing Principal at Porzio, Bromberg & Newman, P.C. in Morristown, New Jersey. Frank Fazio is a principal of Porzio, Bromberg & Newman, P.C., where he focuses his practice in the areas of pharmaceutical marketing and sales compliance, pharmaceutical and medical device product liability and toxic tort litigation. Steven S. Vahidi is an associate of Porzio, Bromberg & Newman, P.C., where he concentrates his practice in the areas of pharmaceutical marketing and sales compliance and product liability litigation. Their article, which originally appeared in the November, 2005 Medical Defense Committee newsletter, focuses on provisions in the False Claims Act that encourage whistleblowers to file lawsuits against their employers on behalf of the United States. The federal government is aggressively pursuing criminal and civil claims against pharmaceutical and medical device manufacturers for practices that violate the False Claims Act (FCA).1 The FCA provides that those who knowingly submit false claims to the government for payment are liable for treble damages, plus civil penalties, as well as possible exclusion from Centers for Medicare and Medicaid Services (CMS) programs. Federal prosecutors are taking advantage of a provision in the FCA that encourages whistleblowers to come forward with evidence of wrongdoing and file civil suits against violators of the FCA on behalf of the United States. Lawsuits filed by such whistleblowers are known as qui tam lawsuits. Under the tarn provision, whistleblowers who file an action on behalf of the United States can receive a portion of favorable settlements or judgments.3 Increasingly, pharmaceutical industry insiders are providing the government with evidence of wrongdoing. Much of the evidence involves illegal tactics to increase sales and market share, including off-label promotion and the use of bribes and kickbacks to induce providers to prescribe the company's products. Submitting claims to CMS for reimbursement of the cost of illegally-promoted products is a violation of the FCA. Qui Tam Prosecutions In October 2005, Swiss Drug maker Serono paid $567 million to settle claims under the FCA for improperly promoting, marketing, and selling its drug Serostim. Serostim, a human-growth hormone, is used to treat AIDS Wasting, a potentially fatal condition involving severe weight loss. Serono admitted that it had improperly marketed the human-growth hormone by supplying doctors with diagnosing software that had not been approved by the FDA. Serono also admitted to offering doctors allexpense paid trips to a medical conference in Cannes, France, in return for their writing new Serostim prescriptions. The Serono settlement is the third-largest FCA health fraud settlement in U.S. history and the largest prescription drug settlement to date.5 The investigation was initiated in Connecticut by a former Serono laboratory employee who filed a tarn claim under the FCA. Four other employees filed similar suits in other states. The five whistleblowers will share an award of approximately $51 million.6 Just in the last year, tarn False Claims Act actions against the medical industry have returned approximately $1 billion to government treasuries. The largest recoveries have come from pharmaceutical manufacturers. For instance, in December 2004, Gambro Healthcare agreed to pay $350 million in penalties for violating the FCA by providing kickbacks to physicians who recommended unneeded tests and services. …