A recent False Claims Act lawsuit claiming that a medical device company paid kickbacks to doctors illustrates an increasingly tenuous arrangement that may spur more whistleblower cases.
The Department of Justice intervened in the whistleblower suit against Life Spine seeking millions of dollars of damages for allegedly paying kickbacks in the form of consulting fees, royalties and intellectual property acquisition fees to induce physicians to use the manufacturer's spinal implants, devices and equipment.
The doctors who received these payments accounted for about half of the Huntley, Ill.-based company's domestic sales of spinal products from 2012 through 2018, the lawsuit claims. Life Spine would allegedly recruit surgeons who could use a high volume of its products and pay them to train other doctors, provide input on products and transfer their patents to Life Spine. The device manufacturer tied the payments to utilization, according to the suit.
Life Spine said in a statement that both parties are engaged in discussions and look forward to resolving the matter.
"This may be the tip of the iceberg for spinal FCA cases," said Mark Silberman, a partner in Benesch's healthcare and life science group who has served as a state and federal prosecutor. "I feel confident this is not the last notable case we will see."
Life Spine is one of a wave of cases that reinforced that an anti-kickback violation can also be an FCA violation, said Adam Tarosky, partner in Nixon Peabody's government investigations and white collar defense practice.
"That is a big area where the definition of fraud has been broadened," the former DOJ attorney who worked FCA cases said, adding that was set in motion by a provision of the Affordable Care Act.
More FCA lawsuits have been filed over the past decade, with the vast majority targeting the healthcare sector, a trend that is not expected to slow as the federal government and whistleblowers recover billions of dollars a year. Device manufacturers and pharmaceutical companies are often prime targets given the potential windfall for the federal government and whistleblowers, who can reap up to 30% of the total settlement depending on if the government intervenes. It joins about a quarter of the cases, a ratio that has dipped slightly as more FCA suits have been filed, according to the DOJ.
The number of healthcare-related whistleblower cases reached 446 in fiscal year 2018, up from 231 in 2008, DOJ data show. That accounted for more than two-thirds of all so-called qui tam lawsuits, which are filed by a private citizen, or relator. Non-qui tam cases are brought by an investigative government agency and may include civil fraud matters outside of the FCA.
Of the $2.11 billion in total qui tam settlements and judgments recovered by the DOJ in fiscal year 2018, $1.95 billion involved the healthcare industry. That compared to $969.3 million recovered in 2008; healthcare qui tam settlements have eclipsed $1 billion per year since then.
In total, qui tam healthcare cases yielded close to $23 billion over that 10-year span, while relators netted almost $4 billion of that sum.
"Every aspect of healthcare has seen a notable increase in False Claims Act cases," Silberman said.
There is no reason to think that the number of FCA cases will significantly decline, Tarosky said.
"(Qui tam and non-qui tam) settlements are north of $2 billion every year," he said. "The government makes a lot of money from FCA cases."