The False Claims Act and Qui Tam Lawsuit

The False Claims Act ( FCA) was originally enacted during the Civil War with the purpose of protecting the Union Army from unscrupulous suppliers. More recently, the FCA has been a powerful tool to fight fraud on the part of government defense contractors and since 1999 there have been an ever growing number of prosecutions concerning the sales, marketing and pricing practices of pharmaceutical companies.

The FCA combats fraud by imposing civil liability on individuals or entities that “knowingly presents or causes to be presented, a false or fraudulent claim for payment or approval” to the federal government. 31 U.S.C. § 3729.

Essential to the effectiveness of the FCA is the ability of whistleblowers to sue on behalf of the United States. This provision known as a “qui tam” provision allows the individual with evidence of fraud against the federal government, referred to as the “relator” to sue the perpetrator to recover the stolen funds. Qui Tam is an abbreviation of the Latin phrase “qui tam pro domino rege quam pro sic ipso in hoc parte sequitur” meaning “he who as well for the king as for himself sues in this matter.”

The FCA provides for up to treble damages, and the relator is entitled to receive between 15 and 25 percent of the amount recovered by the government through the qui tam action.

Prosecutors and whistleblowers have made headlines using the FCA to fight virtually every kind of healthcare fraud from billing for procedures that were not performed to off label marketing of pharmaceuticals. The New York Times reported on the largest FCA settlement to date in June 2012, “the British drugmaker GlaxoSmithKline agreed to plead guilty to criminal charges and pay $3 billion in fines for promoting its best-selling antidepressants for unapproved uses and failing to report safety data about a top diabetes drug. . . . The agreement also includes civil penalties for improper marketing of a half-dozen other drugs.”

However, liability extends well beyond the marketing of pharmaceuticals and into the R&D process. There is a growing trend in prosecutions associated with the falsification of data in laboratory studies and clinical trials. Should a pharmaceutical company outsource a portion of this function to a Contracted Research Organization (CRO), it is clear that pharmaceutical companies remain liable for the CRO’s actions.

Clinical and medical trial fraud occurs when a pharmaceutical manufacture provides false data to the FDA, withholds or alters negative data regarding the safety and efficacy of a drug, violates the recognized norms of research in order to influence trial outcome or fails to follow study protocol. An example of R & D fraud would be a defective pharmaceutical causing birth defects or suicidal behavior, where the manufacture concealed the risks and continued to market the drug falsely promoting the efficacy and miscoding side effects.

Clinical and medical trial fraud is actionable under the FCA as a form of healthcare billing fraud when Medicaid and Medicare (or other federally funded health program) make payments for drugs whose FDA approval was based on false information. With fraudulent FDA approval, the drug in question would not necessarily be safe or effective. And an unsafe and/or ineffective drug would not be reasonable or necessary—a requirement to be reimbursed under any federal healthcare program. Thus under the FCA, a whistleblower with knowledge of clinical trial fraud or falsification of data used in the FDA approval process, is able to bring a qui tam action against the pharmaceutical manufacturer.

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