False Claims Act settlements and judgments returned $2.8 billion to federal agencies and programs in fiscal year 2018, with more than 89 percent of the recoveries coming from cases involving health care fraud, the U.S. Department of Justice (DOJ) said.

While False Claims Act recoveries from health care providers increased by $329 million from the last fiscal year to more than $2.5 billion, the overall total of recoveries plummeted by more than $584 million, DOJ figures show.

Reasons for the decline in the total False Claims Act recoveries are unclear, but some experts have suggested that the current administration is friendlier to industry and potentially more willing to overlook those that don’t always play by the rules.

Although it’s too early to tell, the decline in recoveries could also indicate that stronger whistleblower laws and protections are serving as a deterrent to fraud by sending a message to would-be violators about the consequences of cheating U.S. taxpayers.

Fiscal year 2018’s False Claims Act recoveries are the lowest since 2009 and they also mark the second year in a row that recoveries have declined. In comparison, False Claims Act recoveries hit an all-time high in 2014, returning $6.15 billion to U.S. and state coffers.

But the DOJ’s numbers also show that whistleblowers remain the force behind the False Claims Act.

Of the $2.8 billion in recoveries last year, nearly 75 percent of them – more than $2.1 billion – were qui tam cases, meaning they stemmed from whistleblowers who witnessed fraud or other wrongdoing and chose to file suit on behalf of the U.S. government.

Whistleblower awards given to relators whose False Claims Act cases resulted in a settlement amounted to $301 million collectively.

False Claims Act cases initiated by the DOJ without the help of a whistleblower accounted for nearly $770 million of the total 2018 recoveries – little more than 2.5 percent.

Health Care Fraud

The largest single recovery in 2018 came from the health care industry. In October, AmerisourceBergen and some of its subsidiary companies agreed to pay the U.S. $625 million to resolve allegations that they ran a profiteering scheme in which they bought sterile vials of cancer drugs from manufacturers, broke them open, pooled the contents, and then repackaged them into pre-filled syringes before distributing them to oncology practices.

On the same day the DOJ announced the Amerisource Bergen settlement, it also announced an agreement with HealthCare Partners, doing business as DaVita Medical Holdings, worth $270 million. That lawsuit alleged the company caused Medicare to overpay on insurance claims submitted by Medicare Advantage plan providers.

Some of the other largest recoveries in the health care industry came from United Therapeutics, which paid $210 million to resolve allegations it orchestrated a kickback scheme in which it used a foundation as a conduit to pay the copays of Medicare patients taking UT’s pulmonary arterial hypertension drugs; Alere, which paid $33.2 million to resolve allegations that it knowingly sold unreliable testing devices to hospitals; and Pfizer, which paid $23.8 million to settle kickback claims similar to United Therapeutics that accused the company of using a charitable foundation as a conduit to pay out-of-pocket copayments required of Medicare patients taking three Pfizer drugs.

Government Contractor Fraud

The U.S. reached one of the largest non-health-care-related settlements with Toyobo Co. Ltd. of Japan and its American subsidiary, Toyobo U.S.A., which paid $66 million to resolve claims they sold defective Zylon fiber used in bulletproof vests that the federal government purchased for federal, state, local, and tribal law enforcement agencies.

The U.S. also reached a settlement with Robert David, the former head of now-defunct Second Chance Body Armor, which sold defective Zylon bulletproof vests to the U.S. In that settlement, Mr. David agreed to relinquish $1.2 million in assets previously frozen by the U.S. government and pay an additional $125,000 for allegedly selling vests that put the lives of law enforcement officers at risk.

Cases Against Individuals

Federal prosecutors also initiated or joined False Claims Act lawsuits accusing individuals of defrauding government agencies and programs.

In June, three whistleblower lawsuits led to a $114 million judgment against Health Diagnostics Laboratory CEO LaTonya Mallory and two other individuals who allegedly co-conspired to pay physicians kickbacks for patient referrals and causing the submission of false claims to Medicare for diagnostic tests that patients didn’t need.

Another kickback case filed by a group of doctors and other health care professionals under the False Claims Act led to a $5.5. million judgment against neurosurgeon Dr. Sonjay Fonn, his fiancee Ms. Deborah Seeger, and their practices, DS Medical and Midwest Neurosurgeons.  The whistleblowers alleged that the couple engaged in a mutually beneficial kickback scheme that cheated Medicare and funded a lavish lifestyle.

According to the DOJ, whistleblowers filed an average of 12 False Claims Act lawsuits per day in the U.S. last fiscal year. Of the 767 False Claims Act lawsuits filed, 645 (84 percent) were brought by whistleblowers.

“Whistleblowers have played a vital role in unmasking fraudulent schemes that might otherwise evade detection,” said Assistant U.S. Attorney General Jody Hunt. “The taxpayers owe a debt of gratitude to those who often put much on the line to expose such schemes.”

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