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How does the False Claims Act bootstrap other theories of liability and turn into civil damages, violations of other statutes, including criminal laws? As Bob Thomas’ Health Care Fraud and Abuse seminar at Boston University Law School moves along this fall, one of the more interesting questions students are examining is how the ever-useful federal False Claims Act (and its state analogs) can be used to create liability – treble damage liability no less – for violations of other laws, such as the Anti-Kickback Statute, Stark Statute, and the Food Drug and Cosmetic Act. The question is key to understanding health care enforcement strategies.
The answer in a nutshell is in the definition of a “false or fraudulent claim.”
The False Claims Act, codified at 31 U.S.C. § 3729 et seq., provides a civil remedy to the federal government against persons or entities who submit false or fraudulent claims to the government for payment (or who conspire to do so or cause others to do so). But there can be many ways in which claims can be false or fraudulent; indeed, the number of ways is limited only by the human imagination for gaming the system. In an easy case, if a doctor submits a claim to Medicare for a service he or she did not perform, the claim is false and should not have been paid, and the doctor is liable for up to three times the value of the claim and a penalty of $11,000.
There are, however, many more subtle forms of false or fraudulent claims still reachable under the False Claims Act. As the B.U. seminar has explored, if pharmaceutical companies market their drugs “off label,” i.e., beyond the approved indication, such marketing can cause resulting prescription claims submitted by doctors to be considered false or fraudulent. Similarly, when a service is rendered to a patient by a doctor whose actions are motivated by kickbacks or by a pattern of self-referrals, the resulting claim can be considered false or fraudulent as well, by having been tainted by underlying violations of the Anti-Kickback Statute or the Stark law. In some of these scenarios, the civil False Claims Act complaint will actually allege a violation of criminal law as grounds for civil liability.
Needless to say, there is a lot to litigate when whistleblowers or prosecutors plead cases in these more subtle fact patterns. If the civil burden of proof is the lesser “preponderance of the evidence” standard, but the underlying violation of law is a criminal statute, which would normally require a “proof beyond a reasonable doubt” standard, what ultimately must be established for the plaintiffs to carry the day? Might a defendant argue that there should be no civil liability where the government cannot prove the case to the criminal standard? (This is one of many reasons why whistleblowers and prosecutors prefer charges with diverse theories of liability, to sidestep some of these more thorny, and eminently litigable, issues.)
Two cases we were recently involved in demonstrate how complex these issues can become – and how easy they can become case studies for law school seminars. In Hutcheson v. Blackstone and New York v. Amgen, two cases in which we represented the whistleblowers, the defense attorneys successfully argued to a district judge that the underlying kickbacks alleged could not have been the basis of False Claims Act liability, because the claims submitted to the government were submitted by entities allegedly unaware of the kickback activity, or because the claim form did not expressly make reference to the separate legal duty. The district judge dismissed both cases, which were appealed together to the First Circuit. In these two resulting landmark opinions, the First Circuit reversed the decisions below, reinstated the cases, and clarified the law significantly. How so?
Blackstone and Amgen rejected a whole patchwork of judicial decisions that had become hopelessly entangled over the question of “what is false or fraudulent?” Over the decades since the False Claims Act was amended in 1986, the courts had devised a number of non-statutory terms for answering the question, such as whether the claim “impliedly certified” compliance with other laws. What Blackstone and Amgen did, and other courts should follow, is bring us back to statutory basics. What is false or fraudulent under the False Claims Act, the court held, is often contextual and fact-driven, and therefore not so easily disposed of on a motion to dismiss. In other words, if discovery shows that a defendant used marketing incentives in a way that violated the Anti-Kickback Statute, for example, that alone may be enough to attach liability even if the claim form did not actually mention the Anti-Kickback statute.
With lawyers on all sides of the enforcement arena looking for ways in which to zealously advocate for their clients’ interests, these complexities won’t be going away soon. (That’s one of the reasons, perhaps, that courts do not even allow whistleblowers to represent themselves in False Claims Act cases.) All involved agree, though, that the False Claims Act is an extraordinary powerful and versatile tool for the government and for the whistleblowers who bring cases to the government. The law has both substantive and procedural advantages. It has its own clear liability provisions but can also reach out, with Velcro-like arms, and attach liability for other violations of different laws. This is the primary reason why False Claims Act settlements have been consistently going up since 1986.