DOJ Announces $5.7 Billion in FCA Recoveries in Fiscal Year 2021, with Boost from Purdue Settlement Claim
DOJ has released its annual announcement of recoveries in civil cases involving fraud and false claims against the government, and the total recoveries are eye-popping: $5.65 billion in settlements and judgments. These recoveries make FY2021 the second largest year in False Claims Act history, and the largest since 2014.
As in prior years, healthcare fraud dominated, with more than $5 billion of the total recoveries – 90% of the total. Recoveries in other areas – including procurement fraud and areas as diverse as defense contract fraud, customs fraud, and mortgage fraud – accounted for the remaining $650 million in recoveries.
And, as has also long been true, whistleblowers were critical to the government’s success. Whistleblowers filed 598 new actions the under the qui tam provisions of the False Claims Act during the last fiscal year. DOJ reported nearly $1.7 billion of government recoveries were in cases that had been initiated by whistleblowers, meaning that whistleblowers were responsible for 30% of the funds recovered.
The substantial recoveries of 2021 are a welcome sight after the last few years of lower recoveries. While this year’s increase is driven largely by blockbuster settlements with opioid manufacturers, this year’s recoveries represent an increase even without those settlements.
Healthcare Recoveries Grew in 2021
Healthcare is the leading source of recoveries under the False Claims Act, with the government and whistleblowers pursuing claims against pharmaceutical companies, managed care providers, hospitals, physicians, laboratories, durable medical equipment companies, home healthcare and hospice companies, and more. FCA recoveries restore funds to government healthcare programs including Medicare, Medicaid, and Tricare. And, as noted by DOJ, healthcare fraud enforcement protects patients in addition to taxpayers, as it targets medically unnecessary or potentially harmful treatment and medications.
Over half of this year’s $5 billion in healthcare recoveries is attributable to the $2.8 billion federal civil portion of the settlement with opioid manufacturers Purdue Pharma in October 2020 (which is during the government’s fiscal year 2021). However, as the DOJ press release notes, the Purdue settlement does not give the government a payment of $2.8 billion, but instead gives the government “an allowed, unsubordinated, general unsecured bankruptcy claim for $2.8 billion” in the company’s bankruptcy proceedings – and litigation over the company’s plan of reorganization is continuing.
Still, even without the $2.8 billion settlement, healthcare recoveries this year were in line with past recoveries, even up slightly from last year.
Our review of the top healthcare fraud recoveries of calendar year 2021 features many of the matters that contributed to this year’s success, including the $400 million generic drug price-fixing settlements, glucometer manufacturer Arriva’s payment of $160 million to resolve a whistleblower action alleging that it waived copayments and billed for glucometers without regard to eligibility or medical necessity, and the government’s $140 million settlements with chiropractor Daniel McCollum and his related entities, who were alleged to have provided illegal financial incentives to providers in violation of the Stark Law and the Anti-Kickback Statute.
DOJ also highlighted its pursuit of claims involving fraud in the Medicare Advantage program, including its $90 million settlement with Sutter Health (Constantine Cannon served as co-counsel for the whistleblower) and its $6.3 million settlement with Kaiser Foundation Health Plan of Washington, formerly known as Group Health Cooperative (Constantine Cannon is counsel for the whistleblower), and its intervention in cases involving Kaiser Permanente (Constantine Cannon serves as counsel for one of the whistleblowers) and Independent Health Corporation (Constantine Cannon serves as counsel for the whistleblower).
Whistleblowers are Critical in Fraud Recoveries – but Statistics Show Declines
In announcing this year’s results, DOJ noted that its enforcement efforts benefited from the “courageous actions” of whistleblowers who are “uniquely positioned to expose fraud and false claims and often risk their careers to bring these schemes to light.” Acting Assistant Attorney General Brian M. Boynton was quoted saying that such individuals are “justly rewarded under the False Claims Act.”
However, the $1.7 billion in recoveries attributed to cases initiated by whistleblowers in FY2021 represents the lowest total since 2008. To be sure, the Purdue settlement is not a whistleblower case, and the pandemic may seem to offer an explanation for some of the decline in actual recoveries, as trials and other court proceedings face delays (because few things encourage settlement like an impending trial date or a dispositive motion hearing).
Perhaps more troubling, however, is the fact that new filings by whistleblowers also remain low – the lowest they have been since 2010.
The pandemic seems less like an explanation here. The whistleblower programs of the SEC and CFTC, for example, have seen significant increases in new filings during the pandemic. It is interesting to compare the actual results with respect to whistleblower recoveries and new filings over time with the sometimes-hyperbolic claims of business and defense groups that the False Claims Act is “out of control.” In fact, despite increases in government spending, whistleblower filings and recoveries are not seeing corresponding increases, especially outside of healthcare.
The results are disappointing, because, as DOJ recognizes, whistleblowers are critical to enforcement efforts. Whistleblowers can pursue fraud against the U.S. by filing qui tam actions under the False Claims Act. Since 1986, the U.S. has recovered $48.2 billion in cases initiated by whistleblowers, representing 70% of the more than $70 billion recovered. The False Claims Act provides that successful whistleblowers are eligible to receive a share of the government’s recovery – up to 30% if the U.S. has not intervened to litigation the action, and generally between 15 and 25% if the government intervenes. In 2021, the U.S. paid out whistleblower rewards totaling over $327 million (and will no doubt finalize awards in this next fiscal year for recoveries in FY2021). Since 1987, the average award in intervened cases has been 16%, and the average award in non-intervened cases has been 25%.
As the DOJ press release highlights, its enforcement efforts are increasing in areas including Medicare Advantage fraud, cybersecurity, and COVID-19 fraud. And, DOJ is always interested in healthcare and pharmaceutical fraud, including fraud under the Anti-Kickback and Stark Acts, fraud involving government contracts, customs fraud, education fraud, housing and mortgage fraud, and more.
Becoming a whistleblower is rarely an easy decision, but holding wrongdoers to account is the right thing to do. For potential whistleblowers, it is important to find a lawyer who will be candid about the risks and rewards of being a whistleblower, who has extensive experience representing whistleblowers, and a record of success.
There’s More to the Story: What’s Missing from the DOJ Report
As we have cautioned before, the DOJ Annual Report, while useful, is missing critical data that can help paint a more complete picture of the government’s enforcement efforts, and the role of whistleblowers in those efforts. Important categories of recovery and areas where whistleblowers can make a difference are outside the scope of the report, including:
- Criminal penalties;
- Recoveries in cases delegated to United States Attorneys’ offices, instead of those handled by the Civil Division;
- Recoveries by state and local governments
- Recoveries by the government for fraud against non-governmental entities, such as by the Securities and Exchange Commission or Commodity Futures Trading Commission;
- Tax fraud and underpayment
Our Whistleblower Insider blog regularly analyzes the reports of federal agencies that work with whistleblowers, and we have already written this year about the annual reports from the whistleblower programs of the SEC and CFTC. If you would like more information about these annual reports or have questions about bringing a whistleblower claim, please contact us for a confidential conversation.
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