DOJ recovered more than $3.7 billion from False Claims Act cases in 2017

$2.4 billion came from healthcare, including high-profile settlements with EHR vendor eClinicalWorks and EpiPen maker Mylan.
By Bernie Monegain
11:06 AM
DOJ health care fraud

U.S. Justice Department civil cases of fraud and false claims against the government netted $3.7 billion in recoveries, Acting Assistant Attorney General Chad Readler of the DOJ’s Civil Division announced in late December. Many of the settlements involved the healthcare industry, including drug companies, hospitals, pharmacies, laboratories, and physicians.

At issue are cases that occurred in the Justice Department’s fiscal year ending Sept. 30, 2017. Recoveries since 1986, when Congress strengthened the civil False Claims Act, now total more than $56 billion, according to a government release.

This is the eighth consecutive year the department’s civil healthcare fraud settlements and judgments have topped $2 billion. The $2.4 billion total involved the healthcare industry, including drug companies, hospitals, pharmacies, laboratories, and physicians. It reflects federal losses alone. In many cases, the DOJ was able to recover millions of dollars more connected with state Medicaid programs.

Here are some of the biggest Justice Department recoveries from the healthcare sector:

EHR maker eClinicalWorks and certain of its employees paid $155 million to resolve allegations that they falsely obtained certification for the company’s electronic health records software by concealing from its certifying entity that its software did not comply with the requirements for certification.

[Also: eClinicalWorks to pay $155 million to settle suit alleging it faked meaningful use certification]

For example, rather than programming all the required standardized drug codes into its software, the company allegedly “hardcoded” into its software only the drug codes required for testing. As a result of the deficiencies in its software, ECW allegedly caused physicians who used its software to submit false claims for federal incentive payments. The government alleged that ECW paid unlawful kickbacks to certain customers in exchange for promoting its product.

In some cases, individual owners and executives of private corporations agreed to be held jointly and severally liable for settlement payments with their corporations. Girish Navani, Rajesh Dharampuriya, and Mahesh Navani, three of the founders of eClinicalWorks, agreed to joint liability for the $155 million settlement. Also, three other eClinicalWorks employees – developer Jagan Vaithilingam and project managers Bryan Sequeira, and Robert Lynes – entered into separate settlement agreements to resolve liability for their alleged personal involvement in the conduct.

The largest recoveries involving the healthcare industry this past year – more than $900 million – came from the drug and medical device industry. Shire Pharmaceuticals paid $350 million to resolve allegations that Shire and the company it acquired in 2011, Advanced BioHealing, induced clinics and physicians to use or overuse its bioengineered human skin substitute by offering lavish dinners, drinks, entertainment and travel; medical equipment and supplies; unwarranted payments for purported speaking engagements and bogus case studies; and cash, credits and rebates.

The settlement included $343.9 million in federal recoveries, and another $6.1 million in recoveries to state Medicaid programs.

Drug manufacturer Mylan Inc. paid approximately $465 million to resolve allegations that it underpaid rebates owed under the Medicaid Drug Rebate Program by erroneously classifying its patented, brand-name drug EpiPen – which has no therapeutic equivalents or generic competition – as a generic drug to avoid its obligation to pay higher rebates.

Between 2010 and 2016, Mylan increased the price of EpiPen by approximately 400 percent yet paid only a fixed 13 percent rebate to Medicaid during the same period based on EpiPen’s misclassification as a generic drug. Mylan paid approximately $231.7 million to the federal government and $213.9 million to state Medicaid programs.

The department also reported a significant recovery from Life Care Centers of America, which paid $145 million to settle allegations that it caused skilled nursing facilities to submit false claims for rehabilitation therapy services that were not reasonable, necessary, or skilled. This was the largest civil settlement with a skilled nursing facility chain in the history of the False Claims Act, according to the DOJ.

Forrest Preston, the owner of Life Care Centers of America, agreed to joint and several liabilities for the $145 million settlement, and Nicholas and Gregory Melehov, the owners of Medstar Ambulance, agreed to be jointly and severally liable for a $12.7 million settlement with their company.

Twitter: @Bernie_HITN
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