Academic journal article The University of Memphis Law Review

Crafting a Hybrid Weapon against Healthcare Fraud: Reflecting upon the Government's Use of the Civil False Claims Act as an Incentive for Whistleblowers and Advocating a More Aggressive Utilization of Permissive Exclusion as a Deterrent Measure

Academic journal article The University of Memphis Law Review

Crafting a Hybrid Weapon against Healthcare Fraud: Reflecting upon the Government's Use of the Civil False Claims Act as an Incentive for Whistleblowers and Advocating a More Aggressive Utilization of Permissive Exclusion as a Deterrent Measure

Article excerpt

I. INTRODUCTION .................................................................396

II. THE CIVIL FALSE CLAIMS ACT.........................................398

A. The 1943 Amendments...........................................401

B. The 1986 Amendments...........................................405

III. EMERGING HEALTHCARE FRAUD PRACTICES AND THEIR SUITABILITY TO QUI TAM LITIGATION ..............................410

A. Pharmaceutical Sales............................................. 411

1. "Marketing the Spread".................................. 412

2. Improperly Promoting Pharmaceuticals for "Off-Label" Uses..................................................... 414

B. Secondary Payer Fraud...........................................415

C. Overbiling..............................................................416

IV. SETTLEMENT AND THE RISE OF THE CORPORATE INTEGRITY AGREEMENT .....................................................................419

A. Settlement: A Lucrative Option for Relators in FCA Cases.......................................................................419

B. Corporate Integrity Agreements..............................420

V. ADVOCATING A PROPER BALANCE BETWEEN INCENTIVE AND DETERRENT MEASURES ............................................422

A. Mandatory Exclusion...............................................422

B. Permissive Exclusion...............................................423

C. Potential Application of Exclusion in FCA Suits ....424

VI. CONCLUSION.........................................................427

I. INTRODUCTION

Each year the fraudulent exploitation of the Medicaid and Medicare systems by healthcare organizations and individual physicians costs Americans billions of dollars. It is not surprising that such crimes often escape the government's attention because the regulations that govern the accounting of costs, marketing, and development by pharmaceutical companies, managed care organizations, and practicing physicians are maddeningly complex and easily lend themselves to unscrupulous misuse. In such a lucrative industry, some of these individuals and organizations have developed increasingly effective practices of overcharging the government for services rendered, avoiding their own rebate obligations, and in the case of pharmaceutical companies in particular, offering financial incentives to physicians who prescribe their drugs for uses not authorized by the FDA, Medicaid, or Medicare.

Fortunately, the United States government has a few important weapons at its disposal that aid it in identifying and punishing individuals and companies who perpetrate these frauds. In terms of detection, over the past twenty years, the False Claims Act ("FCA" or "Act") has become an increasingly popular tool by which the government may discover crimes that would otherwise go undetected. The FCA imposes penalties against those parties that defraud the federal government, sets treble damages for such violations, and allows the knowledgeable whistle-blowers, known as "relators," to obtain statutory percentages of the money judgment when these civil actions are successful. This aspect of the FCA is a particularly effective way of providing an incentive to parties with valuable insider information to come forward.

In terms of deterrent measures and punishment, perhaps the most powerful weapon in preventing future crimes such as these is the exclusion of guilty parties from participation in the Medicaid and Medicare programs. This measure is likely the most damaging to the guilty parties themselves because it is not only often accompanied by fines and penalties but also has a more long-term effect: the deprivation of the patronage of millions of Americans who participate in government healthcare plans and effectively billions of dollars.

While it would be more sensible and efficient for these two weapons to be used together for optimum fraud prevention, this has not been the case in recent years. …

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