Whistleblower Qui Tam Lawyer Blog
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The Justice Department announced that two cardiovascular testing laboratories, Health Diagnostics Laboratory, Inc. (“HDL”) and Singulex, Inc. have agreed to settle allegations that they violated the Anti-Kickback Stature and the False Claims Act.  HDL and Singulex will pay $47 million and $1.5 million, respectively.

According to its website, HDL, based in Richmond, Virginia, offers tests for the biomarkers that can indicate risk for cardiovascular disease, diabetes, and related diseases.  It has testing locations in Virginia, Colorado, Tennessee, and Texas.

Singulex is based in Alameda, California.  According to its website, it developed single molecule counting (SMC™) technology for clinical diagnostics and scientific discovery.

According to the Justice Department, three separate qui tam lawsuits were filed by whistleblowers alleging that the settling parties, HDL and Singulex, as well as others, paid illegal remuneration to physicians and hospitals in return for patient referrals.  The whistleblowers, Dr. Michael Mayes, Scarlett Lutz, Kayla Webster and Chris Reidel, alleged that the laboratories paid physicians groups and hospitals “process and handling fees” of between $10 and $17 for every patient that was referred to them for the blood tests.  In addition, the whistleblowers claimed that HDL and Singulex routinely waived patient co-pays and deductibles.

According to the whistleblowers, this remuneration was paid in violation of the Anti-Kickback Statute.  Under the Anti-Kickback Statute, it is illegal to solicit, receive, offer or pay remuneration (monetary or otherwise) in exchange for referring patients to receive certain services that are paid for by the government.

According to the qui tam complaints, many of the expensive specialty blood tests were medically unnecessary and the submission of claims to Medicare or other government healthcare programs for payment were false claims made in violation of the False Claims Act.

The whistleblowers also named other defendants in the qui tam suits: to wit, Berkeley HeartLab, Inc., BlueWave Healthcare Consultants, Inc., Floyd Calhoun Dent, J. Bradley Johnson, and Latonya Mallory.  The government announced that it has intervened as to those other defendants and those portions of the whistleblowers’ complaints remain pending.

The whistleblowers will receive a portion of the proceeds from the settlements with HDL and Singulex as their rewards under the qui tam provisions of the False Claims Act.

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The Justice Department announced that Medtronic plc and its affiliates, Medtronic, Inc., Medtronic USA Inc., and Medtronic Sofamor Danek USA Inc. (collectively “Medtronic”) have agreed to settle three whistleblowers’ qui tam complaint alleging Medtronic violated the False Claims Act.

Medtronic is a global healthcare company based in Minneapolis, Minnesota.  According to its website, Medtronic’s business units collectively employ approximately 85,000 people, operate in more than 160 countries, and serve over 53,000 patients.

The complaint filed by three whistleblowers alleged that Medtronic knowingly made false claims to the Veterans Administration and the Department of Defense concerning the country of origin of medical-surgical products sold to the United States through the VA Federal Supply Schedule Program.  Specifically, it was alleged that Medtronic certified that certain medical-surgical products were eligible for federal procurement under the Trade Agreements Act (“TAA”) because the products were either manufactured or “substantially transformed” in the United States.  The whistleblowers claimed that, in reality, the products were manufactured in China, India, Malaysia, or other “non-designated countries” and were not eligible for federal procurement under the TAA.

According to the complaint filed in the United States District Court for the District of Minnesota, whistleblowers Sonia Adams and Meayna Phanthavong were employees of Medtronic.  Ms. Adams worked in human resources at the Medtronic distribution facility in Memphis, Tennessee.  Ms. Phanthavong was a shipping and receiving clerk at the Memphis distribution facility.  Samuel Adam Cox III was as an information-technology consultant and executive in the medical device industry in 2007 and 2008. Mr. Cox began investigating country-of-origin violations by medical-surgical-supply companies with operations in Memphis after blowing the whistle on such violations by his former employer, Smith & Nephew Inc.

According to the Justice Department, the Medtronic products at issue were anchoring sleeves used to secure cardiac leads to patients, devices used in spinal surgeries, and a handheld device used in conjunction with wireless cardiac devices.  The allegations cover the period between 2007 and 2014.

The Justice Department stated that Medtronic will pay $4.41 million to settle the allegations.  The whistleblowers will share in $749,700 of the settlement proceeds as their reward under the qui tam provisions of the False Claims Act.

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According to the Department of Justice, ev3, Inc., formerly known as Fox Hollow Technologies, Inc., has agreed to settle a lawsuit alleging violations of the False Claims Act.    The Justice Department announced that ev3 will pay $1.25 million to settle allegations that it caused hospitals to submit false claims to Medicare for inpatient admissions that should have been billed as outpatient treatments.

According to the ev3 website, Fox Hollow was a California corporation that developed and marketed minimally invasive medical devices used to remove plaque in the treatment of peripheral artery disease.  Fox Hollow was acquired by ev3 in October 2007.  In 2010, ev3 became a wholly-owned subsidiary of global medical device company Covidien PLC.

According to the Justice Department, the lawsuit involved Fox Hollow’s device called the SilverHawk Plaque Excision System (“SilverHawk”). The SilverHawk was approved by the Food and Drug Administration for use in atherectomies.  An atherectomy is a minimally-invasive surgical procedure that uses a small cutting device attached to a catheter to remove atherosclerotic plaque from blood vessels in the body.  According to the whistleblower’s complaint filed under the qui tam provisions of the False Claims Act, most atherectomies can safely be performed as outpatient procedures.

The whistleblower, Amanda Cashi, a former district sales manager for Fox Hollow in Louisiana, alleged that Fox Hollow encouraged current and prospective hospital customers to bill procedures using the SliverHawk as inpatient, rather than outpatient procedures, to increase the profitability of the procedure and presumably increase sales of the SilverHawk device.  According to the complaint, Medicare reimbursement rates for a one-night inpatient admission is $10,000, but the reimbursement rate for an outpatient procedure is only $3,000. The complaint also alleged that, in order to persuade hospitals to bill federal health care programs at the higher-paying inpatient rate, Fox Hollow personnel provided hospitals with false and misleading “national benchmarks” indicating that SilverHawk procedures were classified as inpatient claims 80% of the time, when the actual percentage was much lower.   The Justice Department claimed that Fox Hollow caused twelve hospitals in nine states to submit claims to Medicare for medically unnecessary inpatient admissions for procedures that should have been billed as lower-rate outpatient procedures.

The whistleblower will receive $250,000 of the settlement proceeds as her reward under the qui tam provision of the False Claims Act.

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According to the Justice Department, the drug company Daiichi Sankyo, Inc. (“Daiichi”) has agreed to settle allegations that it paid illegal kickbacks to physicians in violation of the False Claims Act and Anti-Kickback Statute.    Daiichi is the U.S. subsidiary of global pharmaceutical company Daiichi Sankyo Co., Ltd. based in Tokyo, Japan.

According to its website, Daiichi engages in the research, development and marketing of pharmaceutical products and services in over 50 countries and employs more than 30,000 people.  Its U.S. headquarters are in Parsippany, New Jersey.

The Justice Department said the claims involved Daiichi’s prescription drugs Azor, Benicar, Tribenzor, and Welchol. Azor, Benicar, and Tribenzor are used in the treatment of high blood pressure. Welchol is used to treat both high blood sugar and high cholesterol in people with Type-2 diabetes and high cholesterol.

In 2010, Kathy Fragoules, a former Daiichi sales representative, filed a whistleblower case under the qui tam provisions of the False Claims Act in the United States District Court of the District of Massachusetts.  The whistleblower alleged that Daiichi paid improper remuneration to physicians in the form of lavish dinners and entertainment and speaker fees in violation of the Anti-Kickback Statute.

The Anti-Kickback Statute is a federal statute that prohibits offering or paying anything of value to induce referrals of federal health care program beneficiaries. In this case, it was alleged that Daiichi was making improper payments to physicians to induce them to prescribe its products, namely, Azor, Benicare, Tribenzor, and Welchol. The government contended that each submission made to Medicare and Medicaid for those improperly promoted prescription medications constituted a violation of the False Claims Act.

According to the whistleblower’s complaint, between 2005 and 2011, Daiichi allegedly paid speaker fees to physicians as part of its Physician Organization and Discussion Program.  It was alleged that physicians received speaker fees even when they only spoke to members of their own staff in his or her own office.

In addition to a payment of $39 million, Daiichi has agreed to be bound by a corporate integrity agreement with the Department of Health and Human Services-Office of Inspector General. The whistleblower will receive approximately $6 million of the settlement proceeds as her reward under the qui tam provision of the False Claims Act.

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The Justice Department announced that AstraZeneca has agreed to settle a qui tam lawsuit brought by two whistleblowers concerning the gastrointestinal drug Nexium.  The lawsuit alleged that AstraZeneca caused the submission of false claims to government health care programs Medicaid, Medicare, and TRICARE in violation of the federal and several states’ False Claims Acts and violated the Anti-Kickback Statute.

According to its website, AstraZeneca is a worldwide biopharmaceutical company operating in more than 100 countries.  It manufactures over 45 prescription medications for treatment of ailments in the areas of cardiovascular, gastrointestinal, infectious, neurological, oncology, and respiratory medicine.  The allegations related to AstraZeneca’s drug Nexium.  Nexium is a proton pump inhibitor used to decrease the amount of acid produced in the stomach. Typically, Nexium is used to treat gastroesophageal reflux disease (GERD).

According to the Complaint filed in the U.S. District Court for the District of Delaware, the two whistleblowers initiated their lawsuit under the qui tam provisions of the federal False Claims Act and similar statutes of California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Illinois, Indiana, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Rhode Island, Tennessee, Texas, Virginia, and Wisconsin in 2010.

The whistleblowers, Paul DiMattia and F. Folger Tuggle, are both former executives of AstraZeneca.  DiMattia was an employee of AstraZeneca or its predecessors for twenty-five years. At the time of his departure from the company in 2009, he was the Executive Director of Commercial Operations. Tuggle was first employed by AstraZeneca in 1999.  At the time of his termination in 2009, he was the Managed Markets Account Director– Medco.  According to the Complaint, Tuggle also alleged he was terminated in retaliation for his complaints about AstraZeneca’s marketing practices.

According to ABC News, the allegations made by the whistleblowers, and later the government, involve an alleged kickback scheme whereby AstraZenca gave $100 million in price concessions on Nexium to pharmacy benefits manager Medco Health Solutions in exchange for favorable positioning of Nexium on Medco’s list of approved mediations and its promotion and purchase of Nexium. The lawsuit alleged that the discount to Medco violated the Anti-Kickback Statute and caused false claims to be submitted to government health care programs.

According to the Justice Department, AstraZeneca will pay $7.9 million to resolve the allegations. The whistleblowers will share in $1.4 million of the settlement proceeds as their reward under the qui tam provisions of the False Claims Act.

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According to the Justice Department, medical device manufacturer Medtronic, Inc. has agreed to settle a whistleblower’s qui tam case alleging it violated the False Claims Act by promoting a medical procedure that had not been approved by the Food and Drug Administration.  The Justice Department said the allegations involved claims made to Medicare and TRICARE (the government health care program for military members and their dependents).

According to its website, Minnesota-based Medtronic employs over 85,000 people in more than 140 countries.  It lists its core technologies as 1) electrical stimulation; 2) implantable structural devices; 3) targeted drug and biologics delivery; 4) powered and advanced energy instruments; 5) surgical navigation and imaging; and 6) patient and device management.

According to the Minnesota Star Tribune, a former Medtronic salesperson, Jason Nickell, filed a whistleblower complaint under the qui tam provisions of the False Claims Act concerning the way the company was promoting its neuromodulation devices to physicians and hospitals.  Specifically, the whistleblower alleged that the company paid doctors in 20 different states tens of thousands of dollars to induce medical providers to use its devices for an off-label use that had not been approved as safe and effect by the Food and Drug Administration.  The off-label use involved an investigational procedure known as subcutaneous peripheral nerve field stimulation (“Sub-Q stimulation”).  In Sub-Q stimulation, a spinal cord stimulation device is placed just beneath the patient’s skin near an area of pain. Electronic pulses produced by the device create a tingling sensation intended to reduce chronic pain.

According to the whistleblower, Medtronic sales staff was directed to promote Medtronic’s devices for Sub-Q stimulation use by selling devices to pain management physicians at steep discounts and promising the doctors that they could make $10,000 profit on each patient.  Allegedly, hospitals were instructed to submit bills to Medicare using a billing code assigned to the FDA-approved use in order to get reimbursement for the off-label use.

The Justice Department announced that Medtronic will pay $2.8 million to resolve the allegations.  Medtronic has not admitted any liability.  The whistleblower will receive approximately $600,000 of the settlement proceeds as his reward under the qui tam provisions of the False Claims Act.

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According to the Justice Department, hospice providers Good Shepherd Hospice, Inc.; Good Shepherd Hospice of Mid America, Inc.; Good Shepherd Hospice Wichita, L.L.C.; Good Shepherd Hospice Springfield, L.L.C.; and Good Shepherd Hospice – Dallas, L.L.C. d/b/a Compassionate Care (collectively “Good Shepherd”) have agreed to settle allegations that they violated the False Claims Act and Anti-Kickback Statute.  Good Shepherd, headquartered in Oklahoma City, does not operate hospice facilities; rather, it provides hospice services to patients in the patients’ homes, in long-term care facilities, assisted living facilities, and nursing homes.  According to its website, Good Shepherd has fifteen offices in Oklahoma, Missouri, Kansas, and Texas.

Hospice care is provided to patients who are terminally ill and are expected to have six months or less to live. It focuses on the relief of pain, symptoms, and stress, instead of on curing an illness.  Once a Medicare or Medicaid patient begins receiving hospice care, he or she is no longer eligible to receive treatment intended to cure the terminal illness, prescription drugs to cure the illness (rather than pain medication), care in an emergency room or ambulance transportation.

In 2011, two former employees of Good Shepherd filed a whistleblower lawsuit under the qui tam provisions of the False Claims Act alleging that Good Shepherd knowingly submitted false claims to government health care programs for patients who were not terminally ill and did not meet the criteria for hospice care.  According to the complaint, whistleblower Kathi Cordingley was the Executive Director of Good Shepherd’s Kansas City, Missouri, office from November 2010 until she left in April 2011. Whistleblower Tracy Jones was a registered nurse, also in its Kansas City, Missouri facility, from October 2010 until she was terminated in April 2011. In January 2015, Ms.  Cordingley notified the federal court that Ms. Jones had passed away during the pendency of the case.

The whistleblowers alleged that Good Shepherd was engaging in the following wrongful conduct: (1) admitting patients who were not eligible for hospice care; (2) failing to follow plans of care for hospice patients as required by Medicare; (3) manipulating the Medicare cap on annual reimbursements to hospice care providers; and (4) paying various forms of unlawful remuneration to induce the referral of hospice patients in violation of the federal Anti-Kickback statute.

The complaint also alleged that Ms. Cordingley’s complaints about these fraudulent practices to her superiors were ignored, leading to her resignation.  In addition, when Ms. Jones complained, Good Shepherd allegedly retaliated against her by terminating her employment.

According to the Justice Department, Good Shepherd has agreed to pay $4 million to resolve the allegations. It also agreed to enter into a corporate integrity agreement with the U.S. Department of Health and Human Services-Office of the Inspector General.  The whistleblowers will be entitled to share in $680,000 of the settlement proceeds as their reward under the qui tam provisions of the False Claims Act.

 

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According to the Memphis Business Journal, Ageless Men’s Health, LLC, based in Tennessee, has agreed to settle allegations that it violated the False Claims Act.  Ageless Men’s Health, LLC (“Ageless”) operates more than two dozen testosterone replacement therapy clinics across the Unites States.  According to the Ageless website, it currently maintains clinics in Arizona, California, Colorado, Georgia, Illinois, Mississippi, Nevada, New York, Tennessee, Texas, and Utah.   The Memphis Business Journal reported that the False Claims Act allegations relate to the submission of invoices for patient evaluation and office visits while patients were receiving testosterone replacement therapy injections.

The allegations were first raised in a whistleblower lawsuit filed in 2013 under the qui tam provisions of the False Claims Act.  According to the complaint filed in the U.S. District Court for the Western District of Tennessee, the whistleblowers are former employees of the Ageless’s Oak Court location in Memphis.  Whistleblower Robert Booth was a physician’s assistant and Wanda Scallorn was employed by Ageless in its accounts receivable department.

The government alleged that, between 2009 to 2013, Ageless submitted claims to Medicare and TRICARE (the health program for the U.S. military) for a medically unnecessary office visit each time a patient received a testosterone injection.  Government health care programs such as Medicare and TRICARE will only pay medical practitioners for treatments and procedures that are medically necessary.

The whistleblowers alleged in their complaint that Ageless upcoded the visits to increase the amount that could be billed to Medicare and TRICARE by $40 per visit. The whistleblowers claimed this resulted in the receipt of improper revenues by Ageless in the amount of $2,912,000 over the four years.   The whistleblowers contended that each submission of an upcoded invoice to the government was a violation of the False Claims Act.

The U.S. Attorney’s Office for the Western District of Tennessee stated that Ageless agreed to pay $1.6 million in settlement of the False Claims Act allegations.  In addition, Ageless agreed to be bound by a corporate integrity agreement.  The whistleblowers may be entitled to share in a percentage of the settlement proceeds as their reward under the qui tam provisions of the False Claims Act.

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According to the Justice Department, Community Health Systems Professional Services Corporation based in Franklin, Tennessee and three of its affiliated hospitals in New Mexico (collectively “CHS”) have agreed to settle False Claims Act allegations first raised in 2005. The affiliated hospitals are Eastern New Mexico Medical Center, Mimbres Memorial Hospital and Nursing Home, and Alta Vista Regional Medical Center.

The allegations stemmed from New Mexico’s now discontinued program, Sole Community Provider (“SCP”).  The SCP program supplemented Medicaid funds paid to hospitals in rural areas.  The federal government reimbursed approximately 75% of the state of New Mexico’s health care payments under the SCP program.  The state’s 25% share of SCP payments was required to be funded by the county or the state according to federal law.  Federal law prohibits private hospitals from funding a state’s Medicaid obligation so that the states have an incentive to curb increasing Medicaid costs.

The Corporate Crime Reporter reported that, in 2005, Robert Baker, a former revenue manager for CHS, filed a whistleblower complaint under the qui tam provisions of the False Claims Act against the CHS defendants and two other New Mexico hospitals, Carlsbad Medical Center and Lea Regional Medical Center.   In the Complaint, the whistleblower alleged that the hospitals made improper donations to Chaves, Luna, and San Miguel counties which were ultimately used to fund the state’s obligations under the SCP Program.   The government claimed that CHS concealed the true nature of the donations to avoid detection by authorities and resulted in CHS receiving federally funded SCP payments in an amount that was three times what CHS donated.

The federal government partially intervened in the whistleblower’s case against three of the five New Mexico hospitals.  The government did not intervene in the allegations against Carlsbad Medical Center and Lea Regional Medical Center; as such the whistleblower proceeded individually against those hospitals.  The Justice Department stated that the allegations against all of the hospitals have been resolved.  CHS has agreed to pay $75 million to settle the False Claims Act allegations.  The whistleblower will receive approximately $18.6 million of the settlement proceeds as his reward under the qui tam provisions of the False Claims Act.

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According to the Daily Business Review, U.S. District Judge Amy Totenberg recently fined two whistleblowers $1.6 million for sending e-mails to two reporters in Atlanta about their pending False Claims Act case while it was under seal.  The case at issue was filed under the qui tam provisions of the False Claims Act in 2006 by Victor Bibby and Brian Donnelly against numerous lending institutions including JPMorgan Chase & Co., Bank of America, Wells Fargo Bank, Wells Fargo Home Mortgage and Mortgage Investors Corporation.

The whistleblowers, employees of Georgia mortgage broker U.S. Financial Services, Inc., filed the complaint alleging that multiple mortgage lenders defrauded military veterans and the federal government in connection with a Veterans Affairs loan refinancing program.  As with all cases filed under the False Claims Act, the case was initially sealed for a period of 60 days while the government investigated and decided whether or not to intervene.  As is the norm in qui tam cases, the government obtained several extensions of the statutory seal period.

According to the Daily Report newspaper, almost four years after the case was initially filed, but while it was still under seal, the whistleblowers engaged in confidential correspondence with an investigative reporter and producer at a Fox affiliate television station in Atlanta.  Nothing was published by the press, however, until after the case became unsealed approximately one year later.

After five years of investigation, the government ultimately declined to intervene in the False Claims Act case, the case became unsealed, and the whistleblowers proceeded on their own.  Subsequently, the whistleblowers settled with all of the defendants except Wells Fargo and Mortgage Investors Corporation.  The government recovered approximately $161 million in the settlement.  The two whistleblowers shared in around $43 million as their reward under the qui tam provisions of the False Claims Act.  Sometime after the settlement, Wells Fargo learned of the whistleblowers’ communications with the news media while the case was under seal.  Wells Fargo then moved to dismiss the False Claims Act case citing the whistleblowers’ violation of the seal, despite the fact that news of the lawsuit was not disclosed until after the seal was lifted.

In her January 5, 2015 order, Judge Totenberg denied the dismissal, instead imposing a sanction of $1.6 million against the whistleblowers to be paid to the government within 75 days.  The judge stated that, by contacting the media while the case was sealed by law, the whistleblowers “tarnished and jeopardized their ‘whistleblower’ representative role on behalf of the government.”  Wells Fargo has since appealed the denial of its dismissal motion.