False Claims Act: Whistleblower Gets Huge Payoff by Exposing Medicaid Fraud

February 16, 2012
By Villanueva & Sanchala on February 16, 2012 2:30 PM |

above-the-bar-logo.jpgDava Pharmaceuticals ("Dava"), a global pharmaceutical company, agreed this week to pay the U.S. government $11 million to settle allegations that it violated the False Claims Act. The government had charged Dava with violating its obligations under the Medicaid Prescription Drug Rebate Program ("Rebate Program"). A whistleblower brought the alleged fraud to the governments attention. If you are know of fraud being committed against the government at your workplace, call our Whistleblower Attorneys to help you determine if you have an action under the False Claims Act.

Pharmaceutical companies must enter into the Rebate Program if they want their products to be available to Medicaid beneficiaries under the Medicaid program. Under the Rebate Program, if you are a participating drug company, you must pay quarterly rebates to the state Medicaid programs, which are based in part on whether a drug is a "generic" or "branded" product and the difference between what the health care program paid for the drug and what other purchasers paid for it.

The settlement involves alleged conduct that occurred between October 2005 and September 2009. The government alleged that Dava, in order to lower its Medicaid rebate payments, incorrectly labeled its version of the drugs, cefdinir, clarithromycin, and methotrexate as "generic" drugs instead of accurately calling them "branded" products, which in effect lowered its overall percentage rebate that it owed to Medicaid. Dava also incorrectly figured out the average manufacturer prices for its versions of these drugs and thereby further reducing its Medicaid rebate obligation. In effect, Dava did not pay the full amount due to the Medicaid program and overcharged certain public health services for these products.

Of the $11 million settlement, the federal government will receive about $5 to $7 million while the Medicaid participating states will receive over $5 million. Dava will pay about $200,000 to certain public health services entities who overpaid for the drugs at issue.

Tony West, the Assistant Attorney General for the Civil Division of the Department of Justice, stated that "Pharmaceutical companies that participate in Medicaid must accurately report drug prices and pay their fair share of rebates to the federal and state governments." He added that "Settlements like this one help maintain important programs on which so many depend for needed health care."

The qui tam whistleblower statute is probably one the governments' most important weapons in combating fraud against the government. It allows private citizens with knowledge of fraud being committed against the government to bring an action on behalf of the government. Under these statutes, government can recover three times the amount it was defrauded as well as charge civil penalties of $5,500 to $11,000 per false claim. Depending on whether the government intervenes in the action or not, a whistleblower can receive between 15% to 30% of the government's recovery. Jim Conrad, the whistleblower in this case, will receive 15% of the government's recovery as his share for bringing Dava's fraud to the government's attentions.

Committing fraud against the government is the same as stealing from taxpayers. If the whistleblower in this case had not brought this action, Dava's fraudulent practices would probably have gone undetected, costing taxpayers million. If you know of fraud being committed against the government at your workplace, call our qui tam Whistleblower Attorneys at Villanueva & Sanchala at (800) 893-9645 to help you determine if you have an action under the False Claims Act..

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