New Settlement Shows the Power of Whistleblowers to Root out Fraud against Private Insurers
The nation’s biggest insurers, Medicare, Medicaid, and TRICARE already incentivize whistleblowers to report fraud. Because those programs are federally-funded, a whistleblower can bring suit under the False Claims Act and share in 15-30% of the recovery. The FCA is a law that allows private individuals alleging fraud against the government to bring a lawsuit in the name of the United States. The law leads to about $3 billion of annual recoveries and certainly deters billions more in fraud.
But what about fraud against private insurers? It’s estimated that they are defrauded of over $60 billion annually, with other estimates in the range of $230 billion. That’s a problem roughly the size of Portugal’s economy and has negative consequences for all consumers, as those facing rising premium rates know. Two states, California and Illinois, have mimicked the FCA and adopted laws that incentivize whistleblowers to come forward and report fraud against private insurance plans.
California has a law called the California Insurance Fraud Prevention Act, which was enacted in 2011, and allows whistleblowers to sue for fraudulent actions like inflating the amount on claims or paying kickbacks to physicians. The California Department of Insurance can join the lawsuit and the whistleblower reward ranges from 30-50% of the recovery. Illinois has a similar law, the Illinois Insurance Claims Fraud Prevention Act.
A new settlement under the California Insurance Fraud Prevention Act demonstrates the effectiveness of the law. Abbvie, a pharmaceutical company, has agreed to pay the California Department of Insurance $24 million to resolve allegations regarding the marketing of one of its drugs, HUMIRA, which is used to treat a variety of autoimmune diseases including rheumatoid arthritis and Crohn’s disease. Specifically, the allegations center around Abbvie’s use of “ambassadors,” registered nurses that counseled patients regarding HUMIRA and were employed by Abbvie, not by medical providers. That fact went undisclosed to patients. The company also unlawfully allegedly provided valuable professional goods and services to doctors at no cost to induce them to prescribe HUMIRA.
In addition to the $24 million, Abbvie has also agreed to change certain marketing practices in California. These include ambassadors revealing that they are Abbvie employees and the company implementing a policy prohibiting HUMIRA sales representatives from inviting prescribing physicians to offsite business meals, with some exceptions.
The lawsuit was initiated by a whistleblower, a registered nurse who worked as an ambassador in Florida. The whistleblower will receive $9 million of the settlement. A related False Claims Act lawsuit is ongoing in Federal Court in Chicago. California is not a party to that suit.
This is not the first sizeable settlement under the law. In 2015, pharmaceutical company Warner Chilcott agreed to pay $23.2 million to resolve allegations of drug marketing fraud by the California Department of Insurance. The whistleblowers, in that case, were former Warner Chilcott employees, they claimed the company knowingly used illegal inducements to influence physician decisions, including paying kickbacks and falsifying prior authorization forms to increase the number of prescriptions written for several Warner Chilcott medications.
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