2022 saw enormous highs and some key trends emerge in the area of qui tam law. FY2022 wrapped up with more than $2.2 billion being collected from settlements and judgements in civil cases alleging fraud against the government. The amount recovered in 2022 reveals several important developments in qui tam law and civil fraud claims that are worth examining in greater depth.
COVID-Related Fraud Settlements
It comes as no surprise that fraud settlements relating to the COVID-19 pandemic and relief programs rose exponentially during 2022. The initial panic of the health crisis led to widespread fraud and abuse of public funds as the government sought to inject stability back into an economy impacted by shutdowns. Additionally, the "new normal" created scores of opportunities for healthcare providers and businesses to profit off new policies and programs created for the greater good.
Oversight experts warn that a rise in telehealth medicine correlated to COVID-19 allowed for millions of false or wrongful claims to be funneled through for Medicare/Medicaid reimbursement. The US Department of Health and Human Services Office of the Inspector General issued a special fraud alert in the fall of 2022 for telemedicine scams. Similarly, the DOJ has announced enforcement actions totaling over $1.2 billion surrounding fraudulent telemedicine and testing claims. Pandemic or not, telehealth is likely here to stay and will continue to be a complex and worthwhile area of qui tam law.
Furthermore, the Project on Government Oversight (POGO) revealed in 2022 that about a quarter of the $800 billion lent out as part of the Paycheck Protection Program (PPP) from 2020 to 2021 was flagged for further review by the Small Business Administration (SBA). This SBA review applied "hold codes" to nearly 2.3 million PPP loans due to concerns of fraud, ineligible recipients, or other considerations. However, as of October 2022, the SBA has forgiven 95% of all Paycheck Protection Program loans. The majority (99.1%) of "special review" flagged loans, made in amounts over $2 million, were approved over the course of just a few of the final days of the Trump Administration.
Have dishonest individuals or companies managed to claim close to $100 billion in now- forgiven PPP fraud? If so, the SBA Inspector General warns that shaky government oversight may make reclaiming those misappropriated monies difficult.
Emerging Fraud Areas from 2022 and Beyond
Besides COVID-19 driven fraud, the following have become more prevalent areas of DOJ enforcement action during 2022.
With the launch of the Civil Cyber-Fraud Initiative, the DOJ announced its intent to aggressively hold contractors to certain standards involving cyber security. Several multi-million dollar settlements quickly followed, such as the July 2022 Aerojet decision. The propulsion and power launch company paid $9 million to settle allegations that it misrepresented its compliance with cybersecurity requirements in contracts involving NASA, the Department of the Defense, and other federal agencies.
Electronic Health Records (EHR) fraud represents a burgeoning area of enforcement. As healthcare continues to rely more heavily on electronic records, the federal government hasspent billions of dollars to incentivize healthcare providers to switch to EHR systems.
EHR vendors who have misrepresented their products' certifications or capabilities can be held accountable through the False Claims Act, even if they do not directly benefit from government expansion payments to hospitals or healthcare providers. Kickbacks in this area of healthcare have also proven to be common, as Modernizing Medicine Inc. can attest to. In November 2022, the EHR vendor agreed to pay $45 million to settle allegations that it paid and received illegal kickbacks to encourage adoption of its software.
The Association of Inspectors General assesses that at least 10% of the $1.2 trillion set aside for future infrastructure projects may be at risk for fraud. Examples of infrastructure fraud may include bid rigging, false invoicing, kickbacks, or substandard materials being used to complete key projects. As federal infrastructure funding for roads, bridges, expanded internet access and more has increased moving into 2023, so too have alarm bells about fraud.
Largest False Claims Act Settlements of 2022
Some of the largest settlements in 2022 involved not only enormous financial recovery and whistleblower payouts. They also revealed an ongoing abuse of the system and those who depend upon it most.
Anti-kickback settlement protects MS patients: In this 2022 anti-kickbacks case, biotechnology company Biogen was ordered to pay $900 million to settle allegations that they paid doctors in order to induce them to prescribe Biogen- specific MS drugs to their patients. Doctors and other healthcare providers were also paid extravagant speaking fees while being wined and dined in exotic locations as part of Biogen's "consulting program" aimed at influencing which drugs were prescribed to MS patients under their care. The whistleblower in the case, a former sales representative for the company, is set to receive at least $225 million from the settlement.
Texas construction company diverted $240 million from veteran-owned businesses: Two Texas business owners created a shell corporation in order to claim multi-million dollar government contracts earmarked exclusively for service- disabled veteran-owned small businesses. The jobs and funding were then disseminated into their larger, non-qualifying construction conglomerate. The $240 million payout was called "a victory for the rule of law" by Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division. Added Special Agent in Charge Jeffrey Breen, “Fraudulently obtaining multimillion-dollar government contracts from a program designed to benefit service-disabled veterans is reprehensible."
$233.7 million payout recovery in Medicaid Drug Rebate Program fraud case: Medicaid has always been a lucrative target for fraud, due to both the complex nature of insurance filings as well as its reach into many different areas of healthcare. 2022 saw the pharmaceutical manufacturer Mallinckrodt ARD LLC (formerly Questcor Pharmaceuticals, Inc.) ordered to pay $233,707,865 in restitution to both the federal program and qualifying states for defrauding the Medicaid Drug Rebate Program. The whistleblower in the case was awarded a payout of almost $47 million, or 20% of the overall recovery.
Anthem faces a $100 million Medicare Advantage fraud lawsuit: Medicare Advantage, also known as Medicare Part C, is particularly susceptible to fraud attempts as it integrates private insurers. The insurance giant Anthem is in line, along with fellow insurer Cigna, was hit with a massive lawsuit alleging the misreporting of Medicare Advantage data for reimbursement.
Looking at the Future of Qui Tam Law
The future of qui tam law looks to hold just as many highs and lows as 2022 brought to the field. Looking forward, an important Supreme Court decision looms, as SCOTUS considers the DOJ standard of dismissal in False Claims Act cases. Government contractor fraud may increase as national infrastructure projects get underway. Hopefully, more scam artists can be brought to justice by the expansion of the Civil Cyber-Fraud Initiative, EHR fraud prosecution, and more upcoming developments in qui tam law.