Monthly Archives: August 2013

Feds Join Whistleblower Lawsuit Filed by Wisconsin Pharmacist

Jennifer Denk, a Wisconsin pharmacist, was shocked to learn that dangerous Schedule II narcotics and other medications were being dispensed under her name without a doctor’s prescription. When she discovered what was going on, she complained to her bosses at PharMerica, a large national company providing pharmaceutical products and services throughout the United States. PharMerica holds contracts to provide medications to Medicare and Medicaid funded patients at long-term care facilities. PharMerica management ignored Denk’s requests for proof that physicians were prescribing the drugs.

assorted-capsules-and-tablets-1028441-mDenk alerted federal authorities to what was going on and an investigation was undertaken. As part of the investigation, agents with the Drug Enforcement Administration (DEA) inspected PharMerica’s plant in Pewaukee, Wisconsin. These agents subpoenaed PharMerica’s company records in order to evaluate her claims. Naturally, because Denk’s Qui Tam complaint was sealed, her employer had no idea that she was the source of the information about these false claims for medications.

PharMerica directed Denk to withhold information from the federal authorities. Denk, who, as a federal whistleblower, is known as the “Relator,” was directed to selectively provide the DEA with only those records that were consistent with government regulations. She was directed to withhold other documents despite there being a court order – a subpoena — issued for the records. Again, Denk reported this misconduct to PharMerica’s Human Resources Department explaining that the request made by her supervisor was a felony requiring her to give false information to a federal law enforcement agency. Human Resources personnel sided with Denk’s supervisor directing her to lie to protect the company.  She refused to comply and was fired a short time later.

The case summarized above began in 2009, one year after Denk was hired to work as a pharmacist for PharMerica. She learned of the fraud after being with the company for only a few months, but obtained documentation to prove her claims. Denk’s lawsuit was recently unsealed by the Justice Department, after the federal government agreed to intervene and join her as the Plaintiff in her lawsuit. Before the case was unsealed, all information regarding the case was confidential and only Denk, the federal District Court and the government lawyers knew about the case. The lawsuit described the fraud in detail and concludes that the fraudulent practice of providing medications without physician written prescriptions was a standard practice of PharMerica not only in Wisconsin but throughout the country.

The lawsuit accuses PharMerica of several different false billing practices. These fraudulent claims are described as billing Medicare: (1) for drugs supplied to deceased patients; (2) billing for one high cost medication but providing a less costly medicine; (3) billing more than one time for the same medication delivery; and (4) failing to credit government health care programs when prescriptions were returned. The lawsuit also claims that PharMerica increased the cost to tax payers who fund Medicaid and Medicare by purchasing from drug manufacturers who provided rebates to PharMerica. This improper practice benefitted PharMerica while cheating the government programs.

The lawsuit also states that PharMerica allowed nursing homes—not patients’ doctors—to hand out dangerous prescription narcotics from “kit boxes” without keeping government mandated records. The staff at nursing homes would also fax requests to PharMerica for prescription refills of drugs such as OxyContin without a doctor’s prescription. PharMerica filled these requests contrary to Medicare and Medicare guidelines, laws, and best practices.

PharMerica has a history of violations known to the government as early as 2000. If the government is successful in prosecuting this lawsuit, PharMerica may be ordered to pay tens of millions of dollars to the government. Because Jennifer Denk provided crucial information to the government, she will receive between 15 and 25 percent of any recovery or judgment that the government obtains against PharMerica. In addition, because Jennifer Denk was fired because of her doing the right thing and whistle blowing, she may be entitled to an award of back pay and other damages in addition to what she receives from the government claims.

Like most Relators who blow the whistle on illegal practices, Denk isn’t really motivated by the money. In a newspaper interview Denk said that her professional ethics and concern for patients motivated her to blow the whistle. “I took an oath when I graduated from pharmacy school,” said Denk in a statement. “I felt I had no choice but to follow my oath.”

We salute Denk’s willingness to do the right thing. We are committed to assisting people with knowledge of false claims and false documents submitted to the government for payment. We are here to help you every step of the way.

Lower Court’s False Claims Act Ruling Assailed by US and Actos Victims in Amicus Briefs

The U.S. government wants an appeals court to overturn a federal judge’s ruling in a whistleblower case that accused the Takeda Pharmaceutical Company of failing to disclose adverse events associated with their drugs to the U.S. Food and Drug Administration (FDA). Pharmaceutical companies have taken notice of the ruling because it could be used to preclude whistleblower claims under the False Claims Act should the ruling stand. In other words, the ruling could strip away the government’s ability to enforce key regulations that stop drug companies from cheating the government and threatening public safety.

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Last November, U.S. District Court Judge F. Dennis Saylor dismissed two whistleblower lawsuits filed by Dr. Helen Ge, a former safety consultant for Takeda. According to Dr. Ge, the company misrepresented or altered adverse events associated with Uloric, Takeda’s gout drug. Furthermore, Dr. Ge claims that Takeda did not report instances of bladder cancer or congestive heart failure associated with Actos, a type 2 diabetes medication.

Dr. Ge claims that if Takeda had placed proper warnings on labels or issued safety alerts, the drugs would not have been as widely prescribed, and government health care agencies would not have paid for as many prescriptions. Also, if governmental entities had been properly apprised of the risks, such as bladder cancer, Actos’ approved uses may have been curtailed and its appearance on approved formularies possibly eliminated.

In his ruling against Ge, Judge Saylor stated that Dr. Ge did not provide any specific details of false claims, such as transaction details. Judge Saylor also maintained that the adverse events that Takeda failed to report were not necessarily tied to how much federal health care agencies paid for the medications. Finally, and probably most disconcerting for the government, Judge Saylor ruled that Dr. Ge should have petitioned the FDA to go after Takeda rather than bringing charges against Takeda in court.

The last part of the ruling is likely the biggest reason the government stepped in and filed an amicus brief less than two weeks ago, urging the First Circuit Court of Appeals (where Ge is appealing her cases) to overturn Judge Saylor’s decision. If the ruling were to stand, pharmaceutical companies could lie to the FDA about adverse events reports with no fear of being exposed to false claims liability.  The False Claims Act – the government’s most effective mechanism for combating fraud – would be compromised.

“In concluding that (Ge) failed to state a claim, the district court indicated that the existence of a regulatory mechanism that allows citizens to petition the FDA could preclude liability under the False Claims Act,” the U.S. brief reads. “The district court further suggested that the False Claims Act liability could never be premised on a failure to comply with the FDA’s adverse reporting requirements. Its reasoning on these points is mistaken, and were this Court to adopt such reasoning, the government’s enforcement of the False Claims Act could be significantly impaired.”

Michael L. Baum, one of Dr. Ge’s attorneys and senior managing partner at Baum, Hedlund, Aristei & Goldman, expressed gratitude about the government taking action in filing the amicus brief. “We are pleased that the United States submitted such a thoughtful, carefully reasoned amicus brief. We appreciate the supportive positions taken with respect to the legal theories asserted by Dr. Ge. The United States’ brief corroborates our briefing in the appeal and our motion for reconsideration. In particular, the government’s amicus brief contends that misleading consumers with unreported adverse events or a deceptive label can create False Claims Act (‘FCA’) liability. Administrative or any other remedies are not substitutes for FCA claims, a mistake in the lower court’s ruling highlighted by both the United States’ and Dr. Ge’s briefing.”

The Miller Firm, which represented Jack Cooper in the first Actos case to go to trial, also filed an amicus brief in an effort to overturn Judge Saylor’s ruling. The Miller Firm’s amicus brief points out that Dr. Ge’s claims are supported by an overwhelming amount of now publicly available documentary evidence showing Takeda’s awareness of a link between Actos and bladder cancer and its marketing attempts to suppress that link. The brief states that “patients and prescribers were well under-informed regarding adverse events that, even according to Takeda’s marketing research, would have been extremely important clinical information for FDA and physicians alike; and that but for this fraud, would have made a substantial and material difference in the prescribing habits and use of Actos.”

The case is United States of America ex rel. Helen Ge v. Takeda Pharmaceutical Co., Case No. 13-1088 and Case No. 13-1089, U.S. Court of Appeals for the First Circuit.

OMG – My Company is Cheating the Government – What Should I Do Now?

Anyone can be a whistleblower so long as he or she has insider knowledge about false claims made to the United States government and is not an active member of the military. Most whistleblowers never suspected that they would be reporting their employer for fraud. They are like you – a hardworking scientist, nurse, health care worker, physician, office manager, bookkeeper, CNA, test pilot, manufacturing technician, engineer – or anyone else who works for a company that provides products or services to the government (Department of Defense, Army, Navy, Air Force, Medicaid or Medicare or state government, county government or local government agency).

1305802_businesswoman_1Many whistleblowers have never been involved in the legal system before bringing a qui tam (federal false claim act) case. Although the law is complex, the basis is simple: It rewards those individuals who have evidence and personal knowledge about someone who gets more money than they are entitled from the government. This is called a False Claim Act or qui tam case. The falsification can involve many things. For example, it can include:

(1)     billing for products or services that are not provided;

(2)     billing for products or services that the law does not permit; or

(3)     billing for products or services that do not meet the government requirements.

It can also involve a company that fails to pay all that it owes to the government. This is a “reverse false claims act” case. An example would be a company that understates the value of goods imported from overseas in order to reduce the US Custom duties that must be paid. By falsifying import documentation the company pays less than they should for import duties, tariffs and penalties.

The federal law is the “False Claims Act” and it is found at 31 United States Code Section 3730 (31 U.S.C.A. §3730) and some related statutes. Many states have also enacted their own versions of False Claims Act laws and most have similar provisions or penalties.

Here’s an example of how a whistleblower is “born”:

After months of searching for a new job in the barely recovering economy, you land a great job. You are the new office manager for a small veteran-owned business. The company provides cables for government computers.

As you settle into the job you learn that the president of the company enters some of the accounts into the computer himself. This is unusual but not your concern. After a few months, you begin to wonder why the boss only enters data into the accounting computer on the one day of the week that the part time assistant is not scheduled to work. Out of curiosity, you check the data entered under the absent worker’s code. You learn that the boss has input billing statements for materials that were never delivered. All of the false billings are for government contracts. Immediately your Mother’s admonition “curiosity killed the cat” comes to mind and you decide to keep this knowledge to yourself.

A year later the boss is still improperly inputting data and you read about a qui tam (Federal False Claims Act) case where the whistleblower saved the government (and taxpayers) millions of dollars and received a large payment for his help. You wonder if you should report the false claims by your boss but you have no idea how to do it or if the case would be worth the risk. You are fearful (with good cause) that if the boss finds out that you discovered his fraud he will fire you immediately and you have a child to consider.

In the situation described above, the potential whistleblower would need to consider a few things:

Do I have evidence that I can show the government to prove what I am saying is true? Even if you know that something “wrong” is going on, that is not evidence. Hunches and suspicions may make for great T.V., but in reality only evidence can be relied upon to prove a case. Evidence can be documents proving the fraud, photographs, text messages, telephone messages, video tapes, computer data or other materials. If the fraud involved a defective product that is being sold to the government, a sample of the product would be evidence. So in the example above, if you can bring the billing documents, a list of the employee codes and pay or attendance records these would help prove your case. Did you complain to the boss about the billing in an email and did he email you back? If so, that may be evidence. Finally, do you have these items? Sometimes things kept at work disappear, so before bringing a claim you will want to have copies of the evidence.

Who else knows about the false claims? If more than one person knows about the fraud and the false claims being made, you will want to know their name and if possible some contact information. This is especially important if that person is no longer with the company. So in the example above, you may find out that your predecessor found out about the scheme by the boss and when he confronted the boss he was fired. That would be a very helpful witness for the government.

How much is the government’s loss? In some situations you cannot figure out how much the government has lost as a result of the false claims. But the lawyers for the government who handle these cases are so busy (particularly after the Sequester reduction in funding) that they only want to consider cases in the millions of dollars. So in the example above, if the company only provides a few thousand dollars of cables to the government each year, the case may not be of great interest to the government.

Do I go to the government without an experienced qui tam lawyer? If you know about fraud and false claims and you have the courage to report it, you should do so. But do you go on your own or wait to have a lawyer? In most instances it is not a priority of the government to look out for the whistleblower. They will take the evidence and your statement and thank you, but you may never hear anything again and almost certainly will not receive a reward. Having an experienced qui tam lawyer provides the best protection for several reasons. If the Federal (or State) False Claims act case is filed, it will most likely keep your involvement confidential for months if not years. Also, your interest in obtaining part of the moneys recovered by the government will be protected. You should know that in these types of cases, lawyers generally do not charge you anything unless there is a recovery from the wrongdoer. A lawyer can also help protect your rights should you be wrongfully terminated. Finally, many courts insist that only a lawyer can file a Federal False Claims Act case on your behalf.

 

 

What Does a Case Filed Under Seal Mean and What Happens if a Whistleblower Violates the Seal?

When a whistleblower lawsuit is filed, the court enters an order “sealing” the case. Whistleblowers may be confused about what the “seal” means. A “seal” is a court order directing that the clerk of court keep the case private and not open to the public. It is not available on the website maintained by the United States District Courts known as PACER. The order also directs the parties, their lawyers and anyone else who works in the court system, to keep the case confidential.

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It is clear that the intention of the court in entering such an order is to give the government the opportunity to investigate the alleged fraud before the defendant knows about the case and has the opportunity to destroy or change records, or speak with and change the testimony of witnesses. It also avoids the possibility that the company will file for bankruptcy or try to retaliate against the whistleblower.

The question frequently arises about what the “seal” means in day-to-day life. A qui tam case can take years before it becomes public, which is known as “lifting the seal.” In the meantime, can a whistle blower discuss the case with his or her spouse? What about colleagues that may have good information about the situation that led to the filing of the complaint? After the lawsuit is filed, can a whistleblower say anything about the case? Once that question is answered the next logical question is what happens if the relator (whistleblower) violates the seal? Is the case dismissed? Does the defendant get the case dismissed? These are all questions I am asked from time to time, so I wanted to spend some time providing answers.

First, anyone who intentionally violates a court order may be held in contempt of court.  Contempt may involve the court ordering the violator to pay a fine, do community service, or in very severe situations, to serve time in jail. Intentional violation of the court’s order sealing the case must always be avoided. But is telling your family about this important event an intentional violation? This past June, an Ohio court found that a whistleblower that told his family about his case did not violate the False Claims Act (United States ex rel. Donald Gale v. Omnicare, 2013 WL 2476853 (June 7, 2013, N.D. Ohio).

Defendants try to get these crucial cases dismissed for any possible procedural violation and they are frequently successful in doing so. It is for this reason that experienced qui tam lawyers be retained. They will file the lawsuit in camera (in private) and ask for an order sealing the case, which is required by law.

The Ohio case, in particular, shows just how far defendants are willing go to obtain a dismissal of these cases. The whistleblower in the Ohio case simply told his wife that he had filed a False Claims Act case. The court found that this was not a public disclosure and the whistleblower did not violate the seal. In a closer call, the whistleblower also told a former co-worker at his company that he was meeting with his lawyers to discuss his case. Again, the court found that the whistleblower did not violate the seal.

The defendant in the case claimed “if the relator so much as mentions attorneys or a lawsuit with the defendant to anyone except the government, the relator must be dismissed.”  The court, however, sided with the whistleblower in this case; ruling that dismissing the case would be going too far. In fact, several federal courts have held that the filing of the case cannot be discussed “publically” but that the actual fraud committed by a company may be publically disclosed (American Civil Liberties Union v. Holder, 673 F.3d 245, 254 (4th Cir. 2011)). For example, a relator cannot discuss the qui tam case she filed with the New York Times without violating the seal, but if she talks about the fraud itself without revealing that she has filed a qui tam action, she has not violated the seal (United States ex rel Lujan v. Hughes Aircraft Co., 67 F. 3d 242, 244 (9th Cir. 1995).

This case reminds us that, as a whistleblower, you are under intense scrutiny before you file your case until long after the case is “unsealed.” While discussing the case with your spouse may be acceptable, my advice is it’s always best to keep every aspect of the case to yourself, discussing the case solely with your attorney. There are many examples of a potential whistleblower that shared his concerns with a co-worker only to learn that the co-worker filed a False Claims Act (qui tam) case before he could hire a lawyer. The talkative whistleblower lost out on a substantial award because, as the saying goes “loose lips sink ships.” On the other hand, if something accidently slips out as you have lunch with friends, I would advise you to talk to your lawyer as soon as possible. While he or she will not be happy about the discussion, it is better for the lawyer to be prepared to address the issue than to be surprised by the defendant.

What Happens to a Qui Tam Case if the Whistleblower Dies?

A question that I have been asked is whether a qui tam action can proceed if a whistleblower (known as the “relator”) dies. The answer is YES.

Generally, a regular civil case will have to be dismissed if the plaintiff dies because he or she is the only party that has an interest in the outcome of the case and has the ability to sue. This is legally referred to as “standing.” This is not so in a federal whistleblower case. The case can survive, even if the relator dies.

The specific facts of each case ultimately determine whether a case is likely to survive the whistleblower’s death. The following scenarios illustrate some of these issues:

Example One

John works for a government defense contractor that builds replacement parts for military vehicles used overseas. Although all of the parts are required to be tested, only about 1 of every 100 parts is actually tested. John is responsible for testing at the plant and knows that most of the parts that are tested fail, but the contractor still sold the parts to the government. John has complained to his boss, who says there is no safety risk to the soldiers because the worst that can happen is that the vehicle will just stop.

John has all of the test records for the parts that failed on his office computer. He has notified the government that the documents are stored there, but he has not yet given the documents to the government. John filed a lawsuit, but is killed in a plane crash before he gets the documents from his office computer.

In Example One, the government may still be able to access the records from John’s computer. Without John to interpret them and testify about what actually occurred, however, the case will be far more difficult to prove. If John was the person responsible for completing the documents and they could not be verified without him, although the law would allow the case to proceed, the government may not believe it can prove its case without him. In this situation, the estate would probably not litigate the case alone.

Example Two

Mary is a nurse at a hospital where they have a rule that every emergency room patient on Medicare must be held for “observation” for 48 hours. The intake personnel place a unique code on every Medicare patient’s admission records (“MPH”), which is a signal to the nurses that the patient must be admitted and held for 2 days.

Mary has complained to her supervisors but nothing is done. Mary notifies the government about the scheme and provides the FBI with several patient charts with the MPH notification (although she blacks out the names of the patients). Mary files a whistleblower complaint and attaches these documents to her “disclosure memorandum,” but gets pneumonia and dies before she can meet with the government attorneys.

In Example Two, since Mary has filed a qui tam action and has given the government important evidence about the illegal scheme – which will likely lead investigators to more proof of the false claims filed by the hospital – the government will likely elect to continue the case. If Mary gave the evidence to a government investigator as a “good citizen” but without legally filing a False Claims Act case, even if the government investigates the case and recovers millions of dollars from the hospital, Mary’s estate would not receive a reward.

Echoing other court decisions, a recent case decided in the District of Columbia concluded that a qui tam (False Claim Act) case could continue after the death of a relator. The court reminded us that the False Claim Act’s “chief purpose … is to prevent the commission of fraud against the federal government and to provide for the restitution of money that was taken from the federal government by fraudulent means.”

Fortunately, this issue does not come up often, but it is worth knowing that some courts have  held that the family of a deceased whistleblower may recover the whistleblower’s reward. (U.S. v. NEC Corp., 11 F.3d 136 (11th Cir. 1993); (U.S., ex rel. Hood v. Satory Global, Inc., 2013 WL 2274798, *9+ (D.D.C. May 23, 2013)). This is not to say that it will be an easy road; the successful litigation of a qui tam action is never easy, and the death of the relator makes it much more difficult.

Many courts have little or no experience with a relator dying in a False Claims Act case, and the government will want to be convinced that it can prove the case without the whistleblower. An experienced qui tam attorney can help the estate of the deceased navigate through these complex legal and evidentiary issues. If you know that a loved one or relative was a whistleblower and filed a lawsuit, try to contact their lawyer as soon as possible after his or her death.  If you cannot find the lawyer or lawsuit, the Estate should hire an experienced Qui Tam lawyer to represent the estate and protect the interests of the whistleblower’s heirs.