Recent statutory changes have opened the door for a modest increase in qui tam actions over the last several years, a development that coincides with an increase in big-dollar recoveries.
Last November, Zane Memeger, U.S. attorney for the Eastern District of Pennsylvania, announced a record settlement for a single drug, the antipsychotic Risperdal, that was part of a $2.2 billion global accord with subsidiaries of Johnson & Johnson.
That was preceded by a settlement from Pfizer for $750 million in 2009, from GlaxoSmithKline for $471 million in 2010, and from Abbott Laboratories for $582 million in 2012, among others. Just last week, Memeger announced a $150 million qui tam settlement with a hospice care provider.
Out of 100 or 150 qui tam settlements that might be reached in a year, 60 or 70 percent of the recovery money is coming from the top five or six cases, said Patrick Burns, co-director of Taxpayers Against Fraud Education Fund, a nonprofit that advocates for strong whistleblower protections.
Most of those cases, though, are actually assemblages of several cases brought by different whistleblowers against the same company, he said. “So, the cases are bigger, but that’s because they’re several cases bolted together,” Burns said.
It took 25 years for the U.S. Department of Justice to break the $1 billion mark, Burns said. In 2009, Eli Lilly agreed to pay $1.4 billion for its off-label marketing of its antipsychotic drug Zyprexa.
The bundling of cases is a smart move for companies faced with serious allegations of fraud, Burns said, since they can group all the cases together and make it a single $400 million or $1 billion hit that they can announce once and get out the door.
As for the uptick in qui tam cases filed—from 433 in 2009 to 753 in the fiscal year ending in September 2013—legal observers largely agreed that it is due to recent statutory changes.
After the U.S. Supreme Court shielded subcontractors for the government from qui tam suits in Allison Engine v. United States in 2008, Congress passed the Fraud Enforcement and Recovery Act the following year to close off that route, making whistleblower cases easier to bring.
The year after that, Congress passed the Affordable Care Act, which included measures to strengthen the qui tam provisions of the False Claims Act. The majority of qui tam cases involve medical fraud.
“It’s been steadily building,” said Marc Raspanti, of Pietragallo Gordon Alfano Bosick & Raspanti in Philadelphia, of the trend in qui tam filings.
Beyond the statutory measures, Raspanti said, the government has become increasingly helpful in qui tam cases even if it decides not to intervene. It used to be that if the government chose not to intervene, the case would be a much heavier one for the relator to bring on his own. Recently, though, the government has been willing to file statements of interest and the like in cases that it hasn’t joined, which lightens the burden on the relator, Raspanti said.
This increasing willingness to help relators has been a “very, very helpful evolution” for the partnership between plaintiffs and the government, as the statute had intended, Raspanti said.
“The $2.6 billion in health care fraud recoveries in fiscal year 2013 marks four straight years the department has recovered more than $2 billion in cases involving health care fraud,” the Department of Justice said in a release announcing the results of the 2013 fiscal year. “This steady, significant and continuing success can be attributed to the high priority the Obama administration has placed on fighting health care fraud,” it said.
In researching the evolution of the qui tam provision, David Freeman Engstrom, a professor at Stanford Law School, has noted that there hasn’t been as sharp a rise as some have suggested. He compared the number of qui tam cases brought to the political and economic climate in which they were brought. Since the FCA’s resurgence in 1986, the number of cases have generally dipped during Republican administrations and risen while there is a Democrat in the White House.
His analysis of the short history of qui tam litigation also suggests that its trajectory could track the amount of government spending—if there’s more opportunity to defraud the government because the government is spending more money, the number of suits blowing the whistle would increase accordingly. Health care and defense spending has increased significantly over the nearly 30-year life of the FCA.
Considering those things, he said, there may not be as stark an increase as it might appear.
“I would call it an upward swing,” said Matt Webb, senior vice president for legal reform policy at the U.S. Chamber Institute for Legal Reform.
Webb attributed the peak in qui tam actions in the mid-to-late 1990s to increasing awareness of the strengthening of the act in 1986 and the dip in the 2000s to a saturation of the relatively small qui tam bar.
Following the statutory changes in the last several years, law firms have bolstered their qui tam practices, Webb said, which partially accounts for the recent increase in qui tam filings.
“Whistleblower lawsuits were in the range of 300 to 400 per year from 2000 to 2009, when they began their climb from 433 lawsuits in fiscal year 2009 to 753 lawsuits in fiscal year 2013,” according to the Department of Justice. “Due to the complexity of fraud investigations generally, the outcomes of many of the qui tam cases filed this past fiscal year are not yet known, but the growing number of lawsuits filed since 2009 have led to increased recoveries. Qui tam recoveries exceeded $2 billion for the first time in fiscal year 2010 and have continued to exceed that amount every year since.”