September 22, 2020

Volume X, Number 266

September 21, 2020

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Medicare Fraud Uncovered by Multiple Whistleblowers

Third-party fund which allegedly funneled illegal Medicare copay reimbursements for pharmaceutical companies settles False Claims Act case

The Department of Justice (“DOJ”) settled another portion of a long-running legal saga involving a False Claims Act (“FCA”) case concerning Medicare fraud against numerous pharmaceutical companies and other entities.  Last week, the DOJ announced it had reached an agreement to settle an FCA case against Patient Services, Inc. (“PSI”).  The DOJ alleged PSI served as a conduit to funnel illegal kickbacks from pharmaceutical companies to unsuspecting Medicare patients.  PSI agreed to pay $3 million to settle the FCA claims it was facing.  Based on the amount of fraud that PSI partook in, this amount could have been much higher.  The DOJ lowered the amount based on its analysis of “PSI’s ability to pay after a review of its financial condition.”

The DOJ previously settled with three pharmaceutical companies that conspired with PSI for hundreds of millions, and first became aware of this far-reaching scheme through several whistleblowers who had worked at the pharmaceutical companies.  These individuals initiated multiple FCA cases on behalf of the government by filing qui tam complaints. As a part of the settlements, they received sizable whistleblower rewards for their roles in uncovering the medicare fraud.

In part to help hold drug prices in check, Medicare patients who buy prescription drugs are often required to make a partial payment in the form of a copay.  It is a violation of the federal Anti-Kickback Statute for a pharmaceutical company to either directly or indirectly cover the costs of these copays.  Likewise, it is illegal for a third party to serve as a conduit which passes money between the pharmaceutical company and Medicare consumers.  If a company violates the Anti-Kickback Statute, such infractions can form the basis for liability under the FCA.  Such violations open the door for liability up to three times the amount of federal dollars reimbursed via Medicare for the drugs.

In this case, PSI allegedly established and ran separate copay funds for three different pharmaceutical companies.  These funds provided financial assistance to consumers unable to afford copays on certain drugs.  These three companies, who have already settled FCA cases with the DOJ for their role in the scheme, were InsysAegerion, and Alexion.  In each instance, PSI would set up a fund through which the pharmaceutical company would make supposed charitable donations.  These donations, however, would be distributed to Medicare patients for the specific and limited purpose of paying copays on the respective pharmaceutical company’s drugs.  The DOJ described one such scheme between PSI and Aegerion, writing:

The government also alleged that, in 2013, at Aegerion’s request, PSI created a fund for homozygous familial hypercholesterolemia (HoFH), which can be treated by Juxtapid, a drug that was sold by Aegerion.  The government alleged that PSI allowed Aegerion to participate in establishing the patient eligibility criteria that PSI used to cover copayment obligations of patients taking Juxtapid and PSI’s HoFH fund allowed Aegerion to pay for Medicare patients’ copayments to eliminate any price sensitivity to physicians prescribing and patients taking Juxtapid.

These allegations are quintessential examples of Anti-Kickback Statute and FCA violations.

The government’s investigation into this matter initially began after multiple qui tam relators filed FCA cases.  The FCA allows individuals with inside knowledge of fraud, known as relators, to file complaints in the name of the United States to recover taxpayer dollars from fraudsters.  Relators are entitled to a percentage of any recovery that the government receives as a result of such complaints.  As described by the DOJ, the FCA is “[o]ne of the most powerful tools in [the] effort” to combat Medicare fraud.

Copyright Kohn, Kohn & Colapinto, LLP 2020. All Rights Reserved.National Law Review, Volume X, Number 27


About this Author

Todd Yoder Whistleblower Attorney Kohn Kohn Colapinto

Todd Yoder is an associate with the whistleblower law firm Kohn, Kohn & Colapinto, LLP. Since graduating cum laude from the Georgetown University Law Center in May 2016 he has represented whistleblowers in federal court and before federal agencies where he has helped secure numerous legal victories for his whistleblower clients.