The False Claims Act, often referred to as the “Lincoln Law,” finds its roots in a critical period of American history – the Civil War – when President Abraham Lincoln proposed this pivotal legislation.
Enacted as a federal law, the FCA holds individuals and entities accountable for deliberately submitting false or fraudulent claims for government payment.
This act of legislation empowered individuals, appropriately termed whistleblowers, to stand on the side of justice by filing lawsuits on behalf of the government, potentially receiving a share of the recovered funds as a token of appreciation.
The FCA emerged in response to unscrupulous military contractors during the war who sought to defraud the government through deceitful practices like substituting boxes of sawdust for supplies.
Initially enacted in 1863, this law remained unchanged till 1943, despite amendments that diminished the value of qui tam actions, undermining its effectiveness.
It wasn’t until 1986 that FCA was revitalized, and incentives for private citizens to blow the whistle on fraudulent activities were restored.
Since then, it has stood as a guardian against fraud and false claims impacting many industries, ranging from life sciences and healthcare to procurement.
The FCA also extends protection to whistleblowers, shielding them from retaliatory actions when they report suspected violations. Some of the consequences of violating the FCA are fines, penalties, reputational damages, and exclusion from government programs.
Tips for Life Sciences Compliance Professionals
Here are some tips for life sciences compliance professionals to ensure that their companies comply with the FCA:
- Implement a robust compliance program that includes training employees on the FCA and their responsibilities under the law
- Monitor key risk areas to ensure compliance with applicable laws and detect fraudulent or non-compliant activities
- Developing and implementing policies and procedures to prevent and detect FCA fraud
- Establishing a hotline that employees can use to anonymously report suspected FCA fraud
- Regularly auditing the company’s compliance program to ensure that it is effective
- Develop policies and procedures to address kickbacks, off-label marketing, false billing, and price gouging
- Encourage employees to come forward with information about suspected FCA fraud
- Regularly review and update the company’s compliance program to ensure that it is aligned with the latest government guidance and enforcement trends.
Let’s further explore the four essential facets of the False Claims Act that every compliance professional should know.
1. The Qui Tam Concept in the FCA
In the False Claims Act (FCA), there exists a pivotal provision known as Qui Tam.
This provision encourages private citizens, often recognized as whistleblowers, to take legal action against individuals or entities who have defrauded the government.
The term “Qui Tam” finds its origin in a Latin phrase signifying “he who sues for the king as well as for himself.”
Essentially, this provision encourages those with knowledge of fraudulent activities concerning government programs or contracts to act on behalf of the government.
The whistleblower, acting as a relator, is entitled to a portion of the recovered damages, serving as an acknowledgment for exposing the fraud.
This mechanism has notably proven its effectiveness over the years, acting as a deterrent to fraud within various industries.
One significant reason for its effectiveness is the built-in incentives, ensuring that the qui tam relator receives a part of the recovered amount upon success.
In cases where the government intervenes, the whistleblower remains eligible for a reward, collaborating with the government’s legal team to pursue the case.
Conversely, if the whistleblower continues the case without government intervention and succeeds, they stand to receive a more substantial portion of the recovered funds.
The reach of FCA qui tam actions extends across various domains, encompassing federally funded programs like Medicare and Medicaid, as well as defense and other government contracts.
Those who deliberately make false claims face significant liabilities, including paying three times the government’s loss and civil monetary penalties for each claim.
In the fiscal year 2022, the Department of Justice (DOJ) successfully recovered over $2.2 billion under the FCA, a substantial portion of which—exceeding $1.7 billion—was attributed to the life sciences industry.
This inclusive sector comprised pharmaceutical companies, medical device manufacturers, and diverse healthcare providers, highlighting the impact and necessity of Qui Tam provisions in maintaining the integrity of government programs and contracts.
2. FCA Enforcement In The Life Sciences Industry
In 2009, the major settlements arising from Qui Tam’s actions predominantly targeted pharmaceutical and medical device companies.
According to the Department of Justice (DOJ), these sectors were accountable for staggering settlements amounting to $866.7 million for federal recoveries, with an additional $402 million directed back to state Medicaid programs.
This underlines the significance of strict adherence to pertinent laws and regulations within the life sciences industry.
Non-compliance with the False Claims Act (FCA) can have severe consequences. However, the proactive approach of implementing data-driven compliance monitoring can avert such repercussions.
This approach augments the organization’s compliance program capabilities with the ability to pinpoint the origins of risks, allowing timely remediation and mitigation of risks before they escalate to critical levels or draw the attention of regulatory authorities.
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3. FCA Covers Kickbacks, Off-Label Marketing, False Billing
Kickbacks are payments or other benefits that are given to healthcare providers in exchange for prescribing or recommending a particular product or service.
Off-label marketing is the promotion of a drug or device for use that is not approved by the FDA.
False billing is the submission of false or misleading claims to the government for reimbursement. Price gouging is the charging of excessive prices for products or services.
All these types of conduct are covered by the FCA. This means that companies that engage in these types of conduct could be liable for reputable damages and civil penalties.
4. What Makes FCA Effective In Combating Fraud?
As discussed earlier, one of the most unique features of the FCA is that it allows whistleblowers to file lawsuits on behalf of the government. This is one of the aspects that make FCA highly effective in combatting fraud.
If a whistleblower is successful in their lawsuit, they can receive a reward of up to 30% of the amount that the government recovers. This incentivization encourages whistleblowers to come forward with information about fraud.
Another unique feature of the FCA is that it allows the government to recover damages for fraud even if the government did not actually suffer any financial loss.
This is known as the “reverse implied certification” theory.
This theory is based on the idea that when a company submits a claim to the government, it is implicitly certifying that the claim is true and accurate.
If the claim is false or misleading, the company is liable for fraud even if the government did not actually lose any money.
Conclusion
Life sciences compliance professionals should be aware of the FCA and its key features. Here are some key takeaways from this blog:
- The FCA covers a wide range of conduct, including kickbacks, off-label marketing, false billing, and price gouging.
- The FCA has several unique features that make it particularly effective in combating fraud in the life sciences industry.
- The government is increasingly focused on FCA enforcement in the life sciences industry.
- Life sciences compliance professionals should take steps to ensure that their companies are in compliance with the FCA.
By following the tips in this blog, life sciences compliance professionals can help protect their companies from FCA investigations and lawsuits.
To see how qordata helps life sciences companies augment their compliance program to avoid such risks, schedule a meeting today.
