Qui Tam Lawsuits Help the Federal Government Recoup Billions

Qui Tam lawsuits, better known as "whistleblower suits" are helping to uncover fraud against the federal government. Brought under 31 U.S.C. § 3729, these lawsuits with a funny name have helped the federal government recover $2.5 billion in health care fraud judgments alone.

The qui tam lawsuit is a subset of the federal False Claims Act, which allows private citizens to bring suit on behalf of the federal government to recover money fraudulently taken. The whistleblower, known as a "relator" in a qui tam lawsuit, may also recover a portion of the government's damages, but he must be able to prove that he has first-hand knowledge of the alleged fraudulent activity.

The money that has been recovered under the False Claims Act will go to programs that help prevent fraud for the 2011 fiscal year. In total, the government has recovered $4 billion under qui tam lawsuits, $385 million of which whistleblowers received in 2010 for alerting the government to fraud in their workplaces.

Of the money recovered, more than half of it came from pharmaceutical companies like Novartis Pharmaceuticals and GlaxoSmithKline. Novartis pleaded guilty to illegal marketing after it advertised a drug for a use that was not approved by the Food and Drug Administration (FDA). The company paid $420 million in fines.

In a 60 Minutes report that aired earlier this year, former GlaxoSmithKline employee Cheryl Eckard detailed how she helped the federal government get $750 million out of GlaxoSmithKline for distributing adulterated drugs. In the interview, Ms. Eckard explained how her inspection of the company's plant in Cidra, Puerto Rico, turned up contaminated medications, medications that were stronger or weaker than intended, and mix-ups of different medications. After reporting her findings to a vice president within the company, Eckard realized that the company was going to hide the problem from the FDA rather than fix it. When prescription mix-ups were reported by pharmacies, the company denied any involvement. Eckard was later laid off and brought suit as a relator under the False Claims Act.

Other suits have been filed against hospitals accused of overcharging Medicare. In particular, the government found that more than 30 hospitals overcharged Medicare for Kyphonplasty, a type of back surgery that can safely be done without making the patient stay overnight at the hospital. But these hospitals were having the patients stay overnight, garnering them additional payments from Medicare. Combined, these hospitals were required to pay back to the government $101 million.

The federal government expects to uncover more fraudulent practices like the ones mentioned above thanks to the new health care law, which created a new agency and expanded another agency to help uncover fraud. More notably, the new law is expected to save the federal government an additional $4.9 billion in the next decade just by uncovering fraud. This money will be sent back to Medicare and should be able to keep the program afloat, at least until 2027.

Other industries found to have undertaken fraudulent actions include the oil and gas industry. Just this year, Shell Oil Company agreed to pay $2.2 million to settle a False Claims case that alleged Shell knowingly underpaid royalties on federally owned natural gas leases.

Although the qui tam lawsuit has been criticized for giving too much money to whistleblowers, it may help the government save face with the American people, especially since the federal government hit its debt ceiling of $14.3 trillion today.

Don't hesitate to contact Kay Van Wey at (800)489-5082 for a free, no obligation consultation.

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