A ‘Game Changing’ Ruling For Whistleblowers // Pharmalot

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â A ‘Game Changing’ Ruling For Whistleblowersâ 

By Ed Silverman // â  June 3rd, 2011â  // 9:52 am

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In what is being called a game-changing decision, a federal court has ruled

that a drug or device maker remains liable under the False Claims Act even when

a pharmacy or hospital was unaware that a kickback was made to a doctor to

induce the sale of a product for which reimbursement was sought from Medicare

and Medicaid.

The ruling, which was issued earlier this week by US Court of Appeals for the

First Circuit, has the potential to alter the outcome of countless whistleblower

lawsuits that were filed against drug and device makers defending kickback

charges, according to lawyers who have reviewed the decision ( â you can read

the ruling hereâ ).

Other courts, for instance, have previously ruled that the False Claims Act

could not have been violated if a pharmacy does not know that a prescription was

only written because a drugmaker gave a kickback to a doctor. Whistleblowers

have argued, however, that a violation occurs once reimbursement is sought from

Medicaid or Medicare.

One recent example involved a whistleblower lawsuit brought by former Pfizer

exec Rost, who charged the drugmaker with marketing the Genotropin human

growth hormone for unapproved uses. Last fall, a US District Court Judge in

Boston ruled against him, in part, because a pharmacist could not have known

that a doctor wrote a prescription due to a kickback from a drugmaker (â read

hereâ ). He plans to appeal.

“This means that you can’t play games and use somebody indirectly to

accomplish the dirty work for you and get away with avoiding a false claims,â€

says Sheller, an attorney in Philadelphia who represents whistleblowers.

“You can’t just simply pay off a doctor to write scrips and then when the

pharmacy fills it, Medicaid and Medicare can’t recover.â€

Adds Jeb White of Nolan & Auerbach, which has also brought whistleblower, or qui

tam, lawsuits against the pharmaceutical industry: “This decision is a

game-changer, for it rejects a lot of the judicially-created obstacles for

legitimate FCA cases.â€

In the case that prompted the latest ruling, a regional manager for Blackstone

Medical filed a whistleblower lawsuit charging the device maker with paying

kickbacks in the form of consulting agreements, research grants and other

inducments, such as travel, in order to use its spinal surgical devices.

Hospitals then sought reimbursement from Medicare and Medicaid (â read the

lawsuitâ ).

In explaining its decision, the court dispensed with Blackstone’s arguments by

noting that none of the cases cited by the device maker “addressed the

possibility of imposing FCA liability on a defendant who had caused another

entity to present a materially false or fraudulent claim for payment to the

government.†Blackstone argued that “no court has held that a hospital’s

truthful certification†can be rendered false “by the acts of an unrelated

third party somewhere in the supply chain.â€

The appeals court also noted that an earlier ruling by US District Court in

Boston “concluded its analysis with the statement that ‘the Amended

Complaint contains no allegations that the hospitals themselves received

kickbacks, or that they knew or should have known about the kickbacks received

by the doctors.’ †The appeals court then promptly disagreed.

“When the defendant in an FCA action is a non-submitting entity, the question

is whether that entity knowingly caused the submission of either a false or

fraudulent claim or false records or statements to get such a claim paid. The

statute makes no distinction between how non-submitting and submitting entities

may render the underlying claim or statements false or fraudulent…(in previous

rulings) We have made clear that unlawful acts by non-submitting entities may

give rise to a false or fraudulent claim even if the claim is submitted by an

innocent party.â€

The appeals court continued by noting that Blackstone argued that “only

persons who knowingly submit or cause the submission of a false or fraudulent

claim can be held liable for violating the FCA. (But) the term ’causes’ is

hardly boundless; it has been richly developed as a constraint in various areas

of the law.â€

“The device maker was saying ‘they can’t hold us responsible because the

hospital believed it was doing the right thing and had no knowledge,†says

Sheller. “They thought they would get away with it as long as it was an

indirect kickback. What’s pretty clear is they better stop bribing doctors.â€

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