False Claims Act May Trap Health Care Providers That Don't Submit Payment Claims To Medicare And Medicaid

Sunday, October 1, 2006 - 01:00

On September 11, 2006, the United States Department of Justice announced that it was intervening in a False Claims Act ("FCA") case filed by a "whistleblower" against pharmaceutical manufacturer, Dey Inc. ( United States ex rel. Ven-A-Care of the Florida Keys, Inc., et al. v. Dey Inc., et al. ) The Justice Department's action underscores the power of the FCA as a law enforcement tool and the risk that the FCA poses for any person or company doing business in the health care industry.

The FCA is violated by any entity that "presents or causes to be presented" knowingly false claims for payment to the federal government. The FCA is commonly known as a vehicle for suing those who submit Medicare or Medicaid claims alleged to be false. A lesser known aspect of the FCA is that the law creates liability for those who assist other persons or companies to submit a false claim.

The lawsuit against Dey is not based on an allegation that the pharmaceutical company submitted false claims to the Medicare and Medicaid programs. Nor is the lawsuit based on an allegation that Dey received any payment from Medicare or Medicaid. Instead, as with the many pharmacy pricing cases that have been brought, the lawsuit is based on an allegation that Dey's pricing practices led Dey's customers to submit false claims for drugs that they purchased from Dey.

According to the Justice Department, the Medicare and Medicaid programs pay for specified drugs based on aggregated pricing data such as the Average Wholesale Price ("AWP") and the Wholesale Acquisition Cost ("WAC") which are reported in trade publications. The Justice Department further alleges that the Medicare and Medicaid programs rely on the published pricing information as reflecting the true prices at which drugs are sold by manufacturers. Dey allegedly reported pricing information to the publications which exceeded the prices at which Dey actually sold its products. Furthermore, Dey allegedly reported the inflated prices to the publications knowing that the Medicare and Medicaid programs would rely on the prices in those publications to determine the payments to be made to Dey's customers.

This latest action by the Justice Department is an important reminder that health care providers should not view themselves as immune from FCA liability simply because they do not request or receive Medicare and Medicaid payments. Anyone who supplies incorrect information to another entity, knowing that the other entity will seek Medicare or Medicaid reimbursement based on the supplied information, is potentially liable under the FCA for "causing" a false claim.

Based on the federal government's expanded use of the FCA, it is essential that health care providers carefully evaluate their interactions with other providers - especially those known to submit Medicare and Medicaid claims - to ensure that their business relationships do not lead to FCA liability.

Joseph E. Casson (jcasson@proskauer.com) is a Partner and Co-Chair of the Health Care Department of Proskauer Rose LLP, Washington, DC. James P. Holloway (jholloway@proskauer.com) is Senior Counsel to the department.