Interview transcript:
Terry Gerton You wrote recently about a relaunch of a working group partnering DOJ and Health and Human Services to detect and prosecute healthcare fraud. Tell us about the particular focus areas now that they’ve restarted.
Andrew Hoffman Sure thing. The group, the HHS DOJ False Claims Act Working Group that was recently announced, it’s a re-initiation or a reinvigoration of a group that was actually initially announced and started in the first Trump administration in sort of the waning days of December 2020, right after the election and before the Biden administration took over. And the Trump administration DOJ announced that they were going to start this working group to collaborate on anti-fraud enforcement in the healthcare and life sciences space, but with a focus on protecting government funds, many billions of dollars in government funds that had been injected into the economy and those industries in response to the pandemic, including in particular Operation Warp Speed, the program that was supposed to help us kickstart and generate medical countermeasures like vaccines. It appears, a month later, the Biden administration took over and the working group, by all sort of public indications, didn’t have much of an impact or any sort of continuing operation or impact through the Biden administration years, but now with a change back with Donald Trump back in the White House and new leadership at the Department of Justice, they’re reinvigorating the group, reinstituting it, but with a different set of focus areas, enforcement focuses that aren’t so closely tied to the pandemic.
Terry Gerton Well that makes sense. Tell us about the particular focus areas now that they’ve restarted.
Andrew Hoffman They announced, the working group announced that it has really six new priority enforcement areas. Some of them are pretty familiar. There are things that the Department of Justice has focused on for a while, and some of them more new or worth sort of pondering over. Things they’ve always focused on, the Medicare Advantage program, kickbacks to encourage or incentivize the utilization of drugs and medical devices, defective medical devices impacting patient safety, those sort of things have been a focus area for a while. But the new enforcement areas, with maybe a renewed focus, have to do with drug pricing, in particular rebate payments to get access to formularies. That’s something that we’ve seen a lot of enforcement from the Federal Trade Commission and state attorneys general, but maybe not so much from the Department of Justice. So that is interesting to see. It may portend that federal prosecutors think there are False Claims Act theories that might attach to conduct relating to the way drug prices are set and formulary inclusion decisions are made by payers. There’s also a new focus, or an increased focus, on manipulation of electronic health records to drive inappropriate utilization of drugs and biologics, so that’s sort of interesting to see that specifically called out in the announcement of the working group.
Terry Gerton So help us understand how these topics might relate to the False Claims Act. Could you give us an example of where those two sets intersect?
Andrew Hoffman One sort of common theory of False Claims Act liability relates to the payment of illegal remuneration or kickbacks to healthcare providers or doctors to encourage them or induce them, in the language of the statute, to increasingly prescribe certain medicines or certain procedures, what have you. And to the extent those drugs or services are reimbursed by a federal health care program like Medicare or Medicaid, the argument is that those kickbacks taint the resulting claims and that a false claim has been submitted to the federal government and that triggers pretty draconian penalties if that occurs and is proven. That can include treble damages, so three times whatever the government was out on the claim, plus civil penalties that are inflation adjusted so they keep going up, going up, going up. It’s not uncommon for settlements or judgments in this space and False Claims Act cases to get into the hundred of millions or billions of dollars.
Terry Gerton Wow, that’s really helpful, so thank you for that. I’m speaking with Andrew Hoffman. He’s a partner at DLA Piper. So how will this group work sort of in a practical, day-to-day basis? How do they get involved in the cases? How do find out about the cases?
Andrew Hoffman That’s really the very interesting thing about the working group, is it appears that by enhancing this coordination between the Department of Justice and the Department of Health and Human Services, and with their new emphasis on information sharing and data mining, that appears to signal that there may be increased government-initiated False Claims Act lawsuits at the margins, say more that are initiated by the government itself through its own monitoring and auditing. Traditionally, most False Claims Act cases start as whistleblower lawsuits, where people, traditionally people inside the company, will come forward with an allegation of fraud and file a lawsuit that then the Department of Justice will then be prompted to investigate and is actually required to investigate under the statute. And there were nearly a thousand new false claims that whistleblowers lawsuits filed last year. They’re called Qui Tam lawsuits. That number keeps going up every year. One hallmark of False Claims Act enforcement under the Trump administration, both back in the original 2016 version and the current version, is that it seems that there are indications that they’re going to be more active in terms of monitoring and managing whistleblower-initiated False Claims Act lawsuits. Back in the last Trump administration, they actually got more active in exercising their authority to affirmatively move to dismiss some whistleblower lawsuits over the whistleblower’s objection when they found that the claims lacked merit or contrary to government policy such that it, rather than helping the government recover fraud funds, it would actually deplete government enforcement resources that could be better focused on more meritorious cases.
Terry Gerton Well, so you just talked about two things, and I want to dig a little bit more into both of them, the data analytics and monitoring, but also the whistleblower issues, because this is talking about a potential that a whistleblow may receive up to 30% of the government’s recovery. So it sounds like they want to incentivize whistleblowers reports, but the data monitoring and the data mining, that seems kind of a new frame. Is this going to be more possible because of DOGE’s efforts to sort of combine all of these databases?
Andrew Hoffman I can’t say for certain that that’s the case, but the government’s focus on rooting out waste, fraud, and abuse is well-documented and I think the Department of Government Efficiency is just one way that the current administration has signaled that they are extremely serious about rooting out fraud in terms of government spending and taxpayer dollars. What I would say about the data mining that’s going to be done is that means that those are situations where the government itself is identifying the fraud and then beginning an investigation and perhaps filing a lawsuit or an enforcement action against a company in the health care or life sciences space. Like I said, traditionally, whistleblowers would be the ones who provided the leads to these investigations by and large. And no doubt, this announcement encourages whistleblowers to come forward. And the working group will consider their issues that they bring to the fore. But the fact that the government’s going to be searching out fraud in government databases, the government doing it itself is interesting. It is a shift and it’s possible that it could be the government doing some horizon scanning because the constitutionality of the False Claims Act, including the role of whistleblowers in terms of prosecuting fraud on behalf of the government, is subject to some very serious constitutional arguments, including three Supreme Court justices who have said in opinions in the recent years that they question whether this outsourcing of fraud enforcement from the executive branch to private individuals — something Congress did via statute — there are arguments, I think pretty decent arguments, that that outsourcing is actually contrary to the framers’ version of separation of powers. And that’s really something that’s distinctly supposed to be done by the executive branch and the Department of Justice. That’s being actively litigated in multiple circuit courts around the country. And I think it’s an issue you could see in the Supreme Court before too long.
Terry Gerton That is a really interesting spin on this whole issue. Just one last question. For companies who are in this space, what is your advice to them now, given these new parameters, the focus areas and the data mining, are there actions that companies should be taking to prepare or to protect themselves in these topics?
Andrew Hoffman For the general counsel of a life sciences or healthcare company, I would be carefully studying the working group’s stated enforcement priorities and assessing how they impact my company’s business and our operations. And then I would go back to our existing compliance program and ask whether existing controls are properly tailored to identify and remediate problems in those focus areas. Companies should already have internal whistleblower reporting procedures, policies, monitoring, auditing activities. I mean, those have long been the hallmarks of an effective compliance program. But the issue is I think you want to tailor those because your compliance resources are scarce and spread in a big company. And I would want to make sure that in a situation of scarce compliance resources, that we’re focusing them on the areas where the government and the plaintiffs bar are going to be specifically focused over the next, say, four to eight years.
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