Healthcare, Pharmaceutical and Medical Device Fraud

Berger Montague’s Whistleblower, Qui Tam & False Claims Act practice group represents whistleblowers alleging fraud against the government in the healthcare, pharmaceutical and medical device industries.

State and federal governments pay hundreds of billions of dollars each year for prescription drugs, medical devices, hospital care, outpatient services, physician visits and nursing home care through Medicare, Medicaid, and other government healthcare programs. In making payments for these services, the Government relies on companies and individuals to abide by the law and submit accurate reimbursement requests. Although there are various audits and oversight programs, much of the healthcare system still relies significantly on the “honor” system, where providers and suppliers “turn square corners” in their dealings with the Government.

Unfortunately, some companies and individuals violate this “honor system” and submit false or fraudulent requests for payment. Indeed, whistleblower lawsuits in the healthcare, pharmaceutical and medical device industries have resulted in tens of billions of dollars in recoveries. Below are some examples of the types of fraud against the government that occur in the healthcare, pharmaceutical and medical device industries.

False Claims Involving Hospitals and Physicians

  • Billing for Services Not Rendered —Billing the Government for a service that was not provided to the patient is obvious fraud.
  • Upcoding — Upcoding is one form of billing for services that were not rendered. All medical procedures and diagnoses have an assigned “code” which determines how much the physician or hospital is going to get paid by the government. If a doctor or hospital knowingly bills for a higher “code” — and thus is paid more by the Government than the Government intended to pay for the service provided — fraud has been committed. For example, a patient is seen for a short time in the Emergency Room, but the hospital issues a bill for a complex medical visit.
  • Billing for Medically Unnecessary Services —This scheme involves providing a service and billing for that service, even though the patient did not need that type or quantity of care. For example, a patient only needs a basic eye exam which costs $75, but the physician orders a CAT scan and related testing which costs hundreds of dollars more.
  • Kickbacks — Kickbacks are items of value (money, gifts, trips, meals, etc.) provided by one party (often a hospital) in exchange for referrals or business from the other party (usually a physician). For example, a hospital reimburses a neurologist at twice the going rate for her services in exchange for the neurologist referring all of her patients to the hospital. The federal Anti-Kickback Statute generally prohibits the exchange of kickbacks for referrals.
  • Stark Law Violations — There are complex rules for referrals and self-dealing between entities that have common ownership. It is generally illegal for a doctor to make a referral to a business which he owns or in which he has a vested interest. For example, unless a “Safe Harbor” applies, a doctor may not refer one of his patients to a physical therapy business that the doctor also owns.
  • Fraudulent Cost Reporting — Hospitals are reimbursed based in part on how much it costs to run the medical facility. Cost reporting fraud occurs when a hospital knowingly inflates its cost report so that it receives extra money from the Government, or where the hospital mischaracterizes the nature of those costs by reporting that a false percentage of its medical care was provided to Medicaid or Medicare patients.
  • False Certifications — Many Government reimbursement systems require doctors and/or hospitals to “certify” that the healthcare services for which reimbursement is sought were provided in a lawful manner, e.g., in compliance with state and/or federal law. If a hospital certifies that it provided radiology services to a patient in compliance with the law, and it is later revealed that provision of the service involved payment of a kickback, fraud has occurred.
  • Unbundling or Fragmented Billing — Some medical events that commonly occur at or near the same time, such as the various medical procedures involved in the birth of a child, are billed under one code. Fraud occurs when a physician or hospital knowingly seeks to maximize profit by unbundling” or “fragmenting” that code and instead bills for each procedure separately.

False Claims Involving Pharmaceutical Companies 

  • “Off-Label” Marketing or Promotion — This occurs when a company, in an effort to increase sales beyond the approved uses for its drug, markets the drug for uses not approved by the FDA. There are various methods that pharmaceutical companies have used to commit this fraud, including the distribution of medical articles describing off-label uses, creating speaker bureaus of physicians that tout off-label uses, pitching their drug to entire specialty areas of physicians who would not be using the drug for its approved uses, such as promoting a psychiatric drug to weight-loss physicians; utilizing “advisory boards” to promote off-label messages while providing kickbacks to physicians, and hosting “Continuing Medical Education” seminars which involve off-label messages and information. Many of these facially legitimate business practices involve the unlawful provision of items of value (money, gifts, trips, meals, etc.) to induce increased sales, i.e., many of these practices can constitute an illegal “kickback” to the physician.
  • Best Price Fraud — Under the federal laws and regulations governing Medicaid, pharmaceutical manufacturers are required to give the Government the lowest or “best” price paid for a drug by a commercial customer.  Intentionally structuring prices to mask an actual best price or wrongly excluding certain “nominal price” sales from best price reporting are examples of best price fraud.

False Claims Involving Medical Device Companies

  • Off-Label Marketing or Promotion — The FDA regulates the use of medical devices in a variety of ways, including their approved uses, which often are very narrow in scope. Medical device companies, many of which are relatively new companies without established compliance programs, may be tempted to market their products for off-label uses. Off-label marketing is often combined with kickbacks, i.e., the unlawful provision of items of value (money, gifts, trips, meals, etc.) to induce increased sales of the device.
  • Defective Medical Devices — If a medical device manufacturer produces a medical device knowing that the device is defective, and the device is subsequently used to treat patients on a Government healthcare program such as Medicare or Medicaid, the manufacturer may be liable under the FCA.
  • Lying to the FDA — If a medical device manufacturer lies or fails to report required information to the FDA while getting its medical device approved, the manufacturer may be liable under the FCA.

Berger Montague’s Whistleblower, Qui Tam & False Claims Act practice group is familiar with the types of complex Government fraud schemes like those described above and has the experience and resources necessary to investigate and pursue virtually any type of fraud against the government in the healthcare, pharmaceutical and medical device industries.

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