In 1995, the State of Texas passed its own version of the federal False Claims Act (“FCA”), the Texas Medicaid Fraud Prevention Act (“TMFPA”). The TMFPA is specifically geared toward combatting fraud against the Texas Medicaid Program. The Texas Medicaid Program provides healthcare and prescription drug coverage to low-income individuals. It also contains qui tam provisions, allowing private individuals who have knowledge about fraud against the Texas Medicaid Program to bring an action on behalf of the State of Texas for violations of the TMFPA. If the Attorney General declines to take over the action, the private person may prosecute the case under the TMFPA in the name of the State of Texas.
Texas Medicaid Fraud Prevention Act and Federal False Claims Act
Although the federal FCA and the TMFPA contain many similar fraud-fighting provisions, the TMFPA includes some unique terms:
- While the federal FCA applies to all false claims for payment or reimbursement (other than claims under the Internal Revenue Code), the TMFPA specifically targets Medicaid fraud, as discussed above.
- The TMFPA also provides for enhanced penalties, ranging from $5,500 to $15,000, for unlawful acts that result in injuries to elderly, disabled, or minor persons.
- Under the TMFPA, qui tam complaints initially remain sealed for 180 days, as opposed to 60 days under the FCA, although under both laws, prosecutors may request extensions of the sealing period based on good cause.
- The TMFPA does not require a false claim. Instead, the TMFPA prohibits unlawful acts, which are generally material false statements and misrepresentations affecting the Medicaid program.
- The available remedies are different under the TMFPA. Damages are not an element of a TMFPA claim. See Nazari et al. v. Texas et al., No. 03-15-00252, slip op. at 16 (Tex. App.-Austin, Feb. 26, 2016). Rather, a defendant who violates the TMFPA is liable to the State for the entire amount of the payment or benefit provided under the Medicaid Program times two. The State has no obligation to show that the payment or benefit is an overpayment or damages.
Texas Medicaid Fraud Prevention Act in Action
The Texas Attorney General’s Office has been at the forefront of prosecuting qui tam cases. In particular, the State of Texas has aggressively and vigorously pursued actions against pharmaceutical companies for fraudulent drug pricing. Some of the State’s more recent victories, returning tens of millions of dollars to the State’s general revenue fund, include the following:
- Taro Pharmaceuticals: In August 2014, the State of Texas reached a $19.5 million settlement with Taro Pharmaceuticals USA Inc. to resolve allegations that the drug company fraudulently reported inflated drug prices to the Medicaid program. Taro violated the TMFPA by misreporting the prices of numerous drugs to Medicaid over an 11 year period. The Company used illegally created spreads (a difference between the Medicaid reimbursement amount and the purchase price of the drug) to illegally induce pharmacies and other providers to purchase Taro’s drugs, to the detriment of the Texas Medicaid Program.
- Ranbaxy Laboratories: In October 2014, Ranbaxy Laboratories Inc., a drug company based in India, agreed to pay $39.75 million to settle a lawsuit with the State of Texas alleging that the company reported falsely inflated drug prices to the State Medicaid Office in order to increase reimbursements and thereby defrauded Medicaid in violation of the TMFPA.
- Glenmark Generics: In April 2015, the State of Texas settled another large drug pricing fraud case, this time against Glenmark Generics Inc. USA. The Company agreed to pay $25 million to settle allegations that it fraudulently reported inflated prices to the Medicaid program. The State’s investigation found that since 2005, the company violated Texas law by misreporting prices to Medicaid in order to induce pharmacies and other providers to purchase its products over its competitors’ products.
In total, as of April 2015, the Texas Attorney General Office’s Civil Medicaid Fraud Division has successfully recovered more than $600 million from defendants who have defrauded the State Medicaid Program in violation of the TMFPA. This incredible record of qui tam recoveries demonstrates the fraud-fighting power of aggressive State prosecutors working with the assistance of private individual whistleblowers.
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