Feds collect record $4.9 billion under False Claims Act

Led by the record-breaking legal settlement with drugmaker GlaxoSmithKline, federal collections through the civil False Claims Act exceeded all previous years, topping $4.9 billion in the fiscal year ended Sept. 30.

The one-year tally by the Justice Department included settlements with mortgage lenders and military contractors, but the biggest single chunk—more than $3 billion—came from healthcare companies accused of defrauding Medicare and other government healthcare programs. Fiscal 2012 marked the first time that healthcare tallies topped $3 billion.

The False Claims Act is a Civil War-era federal statute designed to encourage whistle-blowers to file lawsuits when they have insider knowledge of companies defrauding the government. The act was overhauled in 1986, and has since become “the most powerful tool that we have to deter and redress fraud,” Tony West, acting associate attorney general, said in a news conference Tuesday.

The law carries significant financial penalties, including $11,000 per violation and up to triple the original damages to the government. It also allows whistle-blowers who come forward with non-public information to collect up to 30% of the total settlement. Most FCA cases are brought by whistle-blowers on behalf of the government.

Top among the healthcare settlements in 2012 was GSK's agreement to pay $1.5 billion in civil remedies to resolve charges, without admitting liability, in allegations that it promoted Paxil, Wellbutrin, Advair, Lamictal and Zofran for off-label uses, as well as making false statements about the safety of Avandia and paying kickbacks to doctors to prescribe Imitrex, Lotronex, Flovent and Valtrex.

GSK's civil payments were part of a $3 billion “global” settlement with federal and state governments that also included criminal fines and pleas and an unusual corporate integrity agreement that changed how the company compensates sales staff and executives.

Also in 2012, the Justice Department reported collecting $441 million to resolve allegations that Merck illegally marketed the painkiller Vioxx, which was pulled from the market in 2004. That settlement, which came without an admission of wrong-doing, was part of a $950 million resolution that involved criminal and civil fines and settlements.

The 2012 numbers do not include the $561 million in False Claims Act settlement payments with Abbott Laboratories, which will be included in 2013's statistics, the Justice Department announcement said.

The Justice Department collected some $3 billion in fiscal 2011.