Insurance Coverage for False Claims Act Lawsuits?

The number of qui tam actions brought under the False Claims Act (FCA) has increased dramatically over the past several years, as the incentives for bringing such claims have grown.

Reed Smith attorneys Brian Himmel and Natalie Metropulos have authored “Insuring Against FCA Suits in the Health Care Industry” in Corporate Counsel discussing the steps that health care service providers should take to insure themselves against allegations of FCA violations. Recommendations include assessing current insurance coverage for defending and resolving such claims, and additional types of policies that can provide FCA coverage.

To read the article, click here.

Supreme Court Invites Solicitor General Weigh In on Cert Petition Involving Specificity of False Claims Act Complaints

This post was authored by Daniel A.Cody

On October 7, 2013, in evaluating a pending cert petition, the U.S. Supreme Court invited the Office of Solicitor General to provide its views regarding the level of specificity required when alleging activities in violation of the civil False Claims Act (FCA) (United States ex rel. Nathan v. Takeda Pharmaceuticals North America, No. 12-1349, order 10/7/13).

On May 10, a pharmaceutical sales manager petitioned the Supreme Court to reinstate his whistleblower lawsuit alleging that Takeda defrauded the government by presenting false claims in connection with its marketing of the drug Kapidex, a proton pump inhibitor. The United States and multiple states’ attorneys general have declined to intervene in the action which generally alleges that Takeda engaged in a marketing/sales program to promote off-label use of Kapidex resulting in the improper presentation of claims for reimbursement to government health care programs. While having been granted three opportunities to allege specific examples of submission of such false claims, the Fourth Circuit in January unanimously affirmed the district court’s dismissal of the Third Amended Complaint for failure to plead fraud with particularity as required by Federal Rule of Civil Procedure 9(b).

Highlighting a split in the circuit courts regarding the level of specificity required for FCA complaints under Rule 9(b), Nathan asserts that the more lenient standards of the First, Fifth, Seventh, and Ninth Circuits should apply as he sufficiently alleged a “scheme” to submit false claims. Takeda argues that Nathan’s failure to identify any actual false claims or to reliably demonstrate that such a false claim was presented (rather than may have been presented) to the government fails under any reasonable interpretation of the Rule 9(b) requirements.

This year, the First, Fifth, and Ninth Circuits have reaffirmed their respective positions regarding 9(b)’s specificity requirements in FCA cases, and we will continue to monitor this case and further developments on this important threshold issue.

Whistleblower Cannot Rely on Stolen Patient Records

This post was written by Andrew Bernasconi & Nathan Fennessy.

A recent decision by the United States District Court for the Southern District of Ohio may make it much harder for qui tam relators to rely upon stolen medical records or patient information in False Claims Act (“FCA”) whistleblower actions. See Cabotage v. Ohio Hospital for Psychiatry, No. 11-cv-50 (S.D. Ohio July 27, 2012). In Cabotage, the district court held that a registered nurse was not permitted to support her allegations of FCA violations by relying on confidential protected health information that she surreptitiously removed from the hospital where she was employed.

The nurse in Cabotage purportedly removed the confidential protected health information as part of an “investigation” of alleged fraudulent conduct by the Medical Director. She subsequently provided this information to an investigator from the Department of Health and Human Services, but the agency declined to pursue a claim. After the nurse was terminated for other reasons, she commenced an action against her former employer under the FCA whistleblower provisions and the Ohio Whistleblower’s Act. During the course of discovery, the hospital learned about the nurse’s removal of confidential protected health information. After repeated requests to return the information were declined, the hospital filed a Motion for Return of Confidential Health Information.

The district court denied the motion on the grounds that the Health Insurance Portability and
Accountability Act of 1996 (“HIPAA”) did not vest the court with jurisdiction to provide the remedy sought by the hospital. The court concluded, however, that it possessed inherent authority to issue an order preventing the nurse from using the confidential information in the instant action because the information was confidential, potentially privileged, and had been obtained outside the discovery process governed by the court.

The court’s decision is qualified and stops short of creating a new rule applicable to whistleblower cases, but nonetheless provides a step in the right direction for defendants facing whistleblowers who have inappropriately used or taken confidential information from their employer.

 

FCA Qui Tam Relator Sanctioned for Destroying Evidence on Company-Issued Laptop

This post was written by Andrew Bernasconi and Nathan Fennessy.

In yet another reminder about the importance of maintaining evidence on company-issued laptops, blackberries, or other electronic devices; the United States District Court for the Northern District of California recently sanctioned a qui tam relator for destroying more than 10,000 documents on his company-issued laptop. Moore v. Gilead Sciences, Inc., No. C 07-03850 SI, 2012 WL 669531 (N.D. Cal. Feb. 29, 2012).

To read the full post on Reed Smith's Global Regulatory Enforcement Law Blog, click here.
 

Health Information Privacy and Incentives, Medicaid Funding, and Other Health Care Provisions in the American Recovery and Reinvestment Act

This post was written by Karl A. Thallner, Jr., Carol C. Loepere, Debra A. McCurdy, Brad M. Rostolsky, Jacqueline B. Penrod, and Amie E. Schaadt.

On February 17, 2009, President Obama signed into law H.R. 1, the American Recovery and Reinvestment Act (the “ARRA”). The sweeping $790 billion economic stimulus package includes a number of health care policy provisions. Reed Smith's Health Care Memorandum summarizes the major health policy provisions of the Act.