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Catch of the Week: Roche and Humana Agree to Settle Kickbacks in the Medicare Advantage Program

Posted  February 9, 2021

A recent settlement of a whistleblower case might be a sign of things to come for litigation under the False Claims Act (FCA) in the whistleblower program. Pharmaceutical company, Roche, and Medicare Advantage insurer, Humana, have agreed to pay $12.5 million to resolve allegations that the companies violated the anti-kickback statute. This is the first FCA settlement resulting out of a pharmaceutical company allegedly paying kickbacks to a Medicare Advantage Organization.

Medicare Advantage, also known as Part C of the Medicare program, is a managed care model where the government pays Medicare Advantage Organizations, private insurance companies such as Humana, premiums to insure Medicare beneficiaries.  The premium amounts are determined by the demographic makeup and the health status of the insured beneficiaries, with sicker, older members drawing a higher payment from the government than younger, healthier ones. This model contrasts with “traditional” Medicare (Parts A and B of the program) where the government pays for each individual healthcare service performed, in what is known as a fee-for-service model. In the Medicare Advantage program, the number of government payments are not directly linked to which healthcare services are performed.

Crystal Derrick, an account manager for Roche’s diabetes testing products and the whistleblower who filed this case in 2014, alleged that Humana and Roche entered a kickback where Roche forgave certain Humana debts in exchange for Humana purchasing Roche diabetes testing supplies and favoring Roche diabetes testing supplies over competitors’ products in Humana’s Medicare Advantage plans. Ms. Derrick alleged that this was a violation of the anti-kickback statute which prohibits medical decision makers from paying or receiving kickbacks, remuneration, or anything of value in exchange for referrals of patients who will receive treatment paid for by government healthcare programs such as Medicare. Ms. Derrick also alleged that Roche fired her as retaliation for blowing the whistle on the company’s corrupt scheme.

Humana argued that because of the payment mechanism of the Medicare Advantage program, it collected no additional money from the government due to Roche’s debt forgiveness. Specifically, the insurer argued that because Medicare Advantage payments are not based on the cost of provided services, but only on the demographics and health status of its beneficiaries. The whistleblower argued that Humana agreed to follow all conditions of the Medicare program, including not violating the anti-kickback statute. In 2018, a federal court in Chicago sided with the whistleblower and denied Humana’s motion to dismiss the case.

The case was brought under the whistleblower provisions of the False Claims Act, which allows private parties to file suit on behalf of the government, alleging that the government was defrauded. To incentivize whistleblowing, the government shares a portion of any recovery with the whistleblower. Here, Ms. Derrick will receive 29% of the recovery, or just over $3.6 million.

As this case demonstrates, relationships in the highly regulated healthcare industry are often fraudulent and opaque. Whistleblowers, insiders who are willing to come forward, are needed to shine a light on these corrupt practices and help the government recover taxpayer dollars.

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Tagged in: Anti-Kickback and Stark, Catch of the Week, FCA Federal, Managed Care, Medicare, Whistleblower Case,