The United States recently intervened in a False Claims Act lawsuit accusing Rite Aid of defrauding federal healthcare programs by seeking reimbursement for opioids the pharmacy allegedly dispensed in violation of the Controlled Substances Act. Continue Reading Controlled Substances Act and False Claims Act Collide
I recently authored an article for the American Bar Association (ABA) Health Law Section detailing the growing need for private equity firms to consider the increased risk of False Claims Act (FCA) liability.
Continue Reading Increased False Claims Act Exposure for Private Equity Firms Investing in Healthcare
The final months of 2021 saw a flurry of noteworthy False Claims Act (FCA) activity. Among other developments, appellate courts issued important decisions concerning materiality, the government’s qui tam dismissal authority, and the application of the Eighth Amendment’s Excessive Fines Clause. The fourth quarter also brought news of several significant settlements, including a group of eight- and nine-figure resolutions of alleged Anti-Kickback Statute violations by pharmaceutical manufacturers and the latest example of a private equity firm paying a substantial sum to resolve FCA allegations leveled against one of its portfolio companies.
This post summarizes key developments from the year’s final quarter and identifies important takeaways for healthcare providers and government contractors.Continue Reading False Claims Act Decisions and Settlements to Know from Q4 2021
In two prior posts [Government Files Amended FCA Complaint Against Private Equity Firm and its Portfolio Company and DOJ Intervention in Healthcare Fraud Case Highlights Potential Risks for Private Equity Firms], we wrote about the Department of Justice’s (DOJ) decision to intervene in a False Claims Act (FCA) case against a compounding pharmacy and its private equity backer.
The case, Medrano v. Diabetic Care Rx, LLC, was the first time we had seen the DOJ name a private equity firm in a FCA case involving allegations of wrongdoing by one of its portfolio companies, and we noted that this should be a wake-up call to private equity firms who are actively engaged in the management and control of healthcare companies in which they invest.
The alarm rang once again in September 2019, as the DOJ announced that it reached a $21.36 million settlement with Patient Care America (PCA), the compounding pharmacy at issue in the case, two of the company’s executives and, most notably, the private equity firm Riordan, Lewis & Haden Inc. (RLH) that managed PCA on behalf of its investors. The settlement was reached on ability to pay grounds.Continue Reading Private Equity Firm Settles FCA Case
On March 18, 2019, the Department of Justice (DOJ) filed an amended complaint-in-intervention in the False Claims Act (FCA) case against Diabetic Care Rx, LLC d/b/a Patient Care America (PCA); two of PCA’s executives; and the company’s private equity owner, Riordan, Lewis & Haden, Inc. (RLH). This filing comes on the heels of a March 5 decision by the U.S. District Court for the Southern District of Florida that dismissed for insufficient pleading DOJ’s FCA claim that the defendants submitted or caused the submission of false claims to TRICARE for compound prescriptions obtained through the payment of unlawful kickbacks to marketers, physicians and patients. This case is significant and has been closely watched by the industry because it represents the first time DOJ has intervened in an FCA suit against a private equity firm alongside a healthcare portfolio company accused of submitting false claims.
Government Accused Private Equity Owner of Being Involved in Kickback Activity
This matter involves allegations that PCA paid kickbacks to marketers to target TRICARE beneficiaries for compound pain creams, scar creams and vitamins, regardless of medical necessity. The marketers allegedly paid telemedicine physicians who prescribed the products without ever physically examining the patients, and colluded with PCA to pay many patients’ copayments to induce their acceptance of the lucrative compound drugs. As support for its claim against RLH, as the private equity firm, the government has repeatedly cited to evidence purporting to show RLH’s material day-to-day involvement in the operations of PCA and its awareness of the facts surrounding the alleged kickback conduct. The government has alleged that at all relevant times, RLH managed and controlled PCA through two RLH partners who also served as officers and/or directors of PCA and of two holding companies with an interest in PCA.Continue Reading Government Files Amended FCA Complaint Against Private Equity Firm and its Portfolio Company
The Department of Justice’s recent decision to intervene in a False Claims Act case against not only a compounding pharmacy but also the private equity firm that owns a controlling stake in it, underscores the potential risks private equity firms face when operating in the highly regulated healthcare space. On February 16, 2018, the United States filed a complaint in intervention in Medrano v. Diabetic Care Rx, LLC, Case No. 15-62617-CIV-BLOOM, alleging the compounding pharmacy, Patient Care America (“PCA”), paid illegal kickbacks to marketing firms who targeted military members and their families for prescriptions for compounded drugs the pharmacy then created not to meet individual patient needs, but rather to maximize reimbursement from Tricare, the federal military health care program. In a somewhat unique move, the government also named as a defendant the private equity company Riordan, Lewis & Haden Inc. (“RLH”), which manages and controls PCA through a general partner.
Continue Reading DOJ Intervention in Healthcare Fraud Case Highlights Potential Risks for Private Equity Firms