January 25, 2022
In 2021, the top Whistleblower Law Collaborative False Claims Act settlements recovered millions of dollars for our clients and the governments. These settlements returned almost $40 million to the United States and the Commonwealth of Massachusetts. In addition, our clients received millions of dollars in relator share awards.
Three of the 2021 False Claims Act settlements involved healthcare fraud. In each case, the settlements focused on violations of the anti-kickback and anti-self-referral laws. The fourth case involved procurement and contracting fraud in the environmental area.
In three of the four cases the settlement also imposed a multi-year compliance component with required reporting to the government. And in two of the cases, individuals involved in the wrongdoing were held accountable in addition to the company defendant.
Our top 2021 False Claims Act settlements will require wrongdoers to return nearly $40 million dollars to the government. Under the the False Claims Act’s relator share provisions, our clients will receive millions of dollars in return for assessing the governments’ recovery.
We are proud to have represented our clients in achieving these successes in 2021. Below we describe these four settlements.
Our first False Claims Act settlement of 2021 resolved allegations that athenahealth Inc. (Athena) paid illegal kickbacks to generate sales of its electronic health record (EHR) product, athenaClinicals. Athena paid the United States $18.25 million to settle two FCA qui tam cases. One of these cases was brought by WLC whistleblower clients. The United States and the relators contended that Athena offered and provided kickbacks to generate sales of athenaClinicals. Its violations of the Anti-Kickback Statute rendered claims that its health care provider clients to federal health care programs false or fraudulent under the FCA.
The kickbacks included lavish all-expense paid trips. These trips included Kentucky Derby, the Masters golf tournament, and New York Fashion Week. Athena also made payments to existing provider clients for referring new customers. The company also paid competitors discontinuing their to convert their customers to Athena’s technology. Athena serves more than 160,000 healthcare providers across the United States.
This notable settlement reflected the United States’ continued crackdown on EHR fraud and kickbacks in health care. EHR technology plays an important role in the provision of medical care to patients. Crucially, providers should be able to select an EHR platform without the influence of improper financial inducements. Athena was the Government’s fourth FCA settlement with an EHR company.
Diesel Direct, LLC, its chief executive officer, and senior vice president paid the Commonwealth of Massachusetts $850,000 to settle allegations that they violated the Massachusetts False Claims Act by overcharging the Commonwealth for substandard fuel delivered in violation of state contracts. In addition, Diesel Direct agreed not to bid on any contract with the Commonwealth or its agencies for five years. The Diesel Direct settlement resolved allegations brought by our whistleblower client in a qui tam action under the Massachusetts FCA.
Our whistleblower client alleged that Diesel Direct and the two executives entered into contracts with Massachusetts to deliver biodiesel. Biodiesel, a renewable fuel, reduces particulate matter and tailpipe emissions that contribute to global warming. But instead of delivering Biodiesel, the company knowingly delivered nonconforming petroleum diesel fuel. Moreover, it charged for the higher-priced and more environmentally-friendly biodiesel fuel. Through this scheme, Diesel Direct not only overcharged state agencies, but also caused them to consume fuel that emitted greater greenhouse gases and particulate matter into the atmosphere.
This 2021 top whistleblower settlement is notable for several reasons. First, it held two individuals within the company personally accountable: the Senior Vice President of Operations and the Chief Executive Officer. Second, it not only recovered money, but barred the company from contracting with the Commonwealth for five years. Third, it is, to our knowledge, the first settlement of a whistleblower-initiated qui tam action by the Attorney General’s False Claims Division whose mission is to safeguard public funds and promote integrity and accountability in public contracting. Lastly, the settlement reflects how the FCA can be used to protect against, and recover for, harms to the environment as well as to the taxpayers.
Arthrex, Inc., a Florida-based medical device maker primarily to the orthopedic surgery industry, paid the United States $16 million to resolve allegations brought by a WLC whistleblower client that Arthrex paid kickbacks to market two of its surgical products. Arthrex also entered into a five-year Corporate Integrity Agreement (CIA) with the Department of Health and Human Services Office of Inspector General (HHS-OIG) setting forth requirements for future compliance. The settlement resolved allegations by a WLC whistleblower client that Arthrex defrauded Medicare by paying illegal remuneration to Dr. Peter Millett, a Colorado based orthopedic surgeon. Arthrex paid these kickbacks, to induce Dr. Millet use Arthrex medical devices. This violated the federal Anti-Kickback Statute. Kickbacks render associated claims submitted to the Medicare program false or fraudulent in violation of the False Claims Act.
The kickbacks here took a different form than typically seen in a kickback case–they were paid in the form of royalties pursuant to a royalty agreement between Arthrex and the surgeon. The United States contended that in 2006, Arthrex had denied Dr. Millett’s request for royalties for his claimed contributions to the development of the SutureBridge and SpeedBridge kits—two Arthrex product lines that surgeons use in joint repair surgery. However, when Dr. Millett threatened to realign his loyalty to an Arthrex competitor in 2010, Arthrex not only acquiesced to Dr. Millett’s royalty request but also agreed to pay him royalties for past and future sales of SutureBridge and SpeedBridge kits at a higher percentage rate than was the company’s ordinary royalty practice. Pursuant to this agreement, Arthrex paid Dr. Millett millions of dollars.
This 2021 top whistleblower settlement is notable as an example of the Department of Justice’s and HHS-OIG’s continued focus on enforcing the Anti-Kickback Act regardless of how the illegal remuneration may be structured. Here it took the form of royalties. In announcing the settlement, the Acting U.S. Attorney for the District of Massachusetts stressed the corrupting influence of kickbacks and bribes to physicians and his office’s commitment to continue to punish such illegal conduct. Similar messages were delivered by the Department of Justice, the FBI, and HHS-OIG.
CleanSlate, a nationwide chain of opioid treatment centers, and its founder and former Chief Executive Officer paid $4.5 million to partially settle a False Claims Act case brought by our whistleblower client. This case involved fraud against Medicaid and Medicare. In addition, CleanSlate agreed to enter into an multi-year independent compliance program with annual audits reported to the Massachusetts Attorney General.
Among the allegations settled were that CleanSlate and its founder required expensive urine drug tests at every patient visit. They ran tests regardless of medical necessity, and illegally backdated prescriptions. Moreover, Cleanslate directed these tests to its own clinical laboratory, in violation of federal and Massachusetts anti-self-referral laws; here Defendants owned both the clinic and laboratory in Massachusetts and developed the policies directing the self-referrals. The company’s policies directed clinicians at CleanSlate to refer laboratory work to its own Holyoke laboratory. These policies therefore violated federal and state self-referral statutes. Consequently, associated claims submitted for payment by Medicare or Medicaid thus violated the False Claims Act.
This 2021 top whistleblower settlement is notable in light of the opioid crisis in Massachusetts, and because it is the “first of its kind” under the Massachusetts clinical laboratory anti-self-referral law originally enacted in 2014. That state law prohibits referrals between clinical laboratories and any entity with a direct or indirect ownership interest in the laboratory and vice versa. State law also prohibits a laboratory from testing any specimen from an entity it owns. The related federal settlement similarly covers allegations under the federal anti-self-referral law known as the Stark law.
Whistleblower Law Collaborative LLC, based in Boston, devotes its practice entirely to representing clients in bringing actions under the federal and state False Claims Acts and other whistleblower programs. Under the False Claims Act, a private citizen (known as a “relator”) who suspects or knows of fraud against the government can act as a whistleblower and file a sealed complaint on behalf of the government. If the case is successful, the relator is entitled to a share of the government’s recovery. Among the firm’s many successes is the government’s $465 million settlement with Mylan for failing to pay the correct Medicaid rebates on its high–priced drug EpiPen.
For more information, contact Whistleblower Law Collaborative LLC at 617.366.2800