The recent rise of qui tam actions
Though the federal False Claims Act was enacted in 1863, lawsuits brought under the Act have recently increased dramatically.
Photo by Leo Reynolds (Flickr).
Editor’s Note: This article is the first in a three-part series on the False Claims Act.
Litigating a False Claims Act (“FCA”) lawsuit can cost billions of dollars. Generally, the most common type of FCA action is known as a qui tam action or a whistleblower lawsuit. A qui tam action permits a private citizen, known as a relator or whistleblower, to sue companies that commit fraud against government programs. By imposing treble damages and providing awards of fifteen to thirty percent of the recovery to persons who bring such cases, the government relies on the FCA as a tool to prevent fraudulent activity.
The FCA in part states that any person who knowingly presents fraudulent claims for payment or approval to the government is liable to the United States for a civil penalty of not less than $5,000 and not more than $10,000, plus three times the amount of damages the government sustains. Although the penalty may not seem large, the penalty and the treble damages apply to each false act, which can push the total damages amount into the “billions.”
Among the many lawsuits that have dominated the legal arena, FCA lawsuits, and specifically, qui tam actions, have recently exploded. Even though the FCA was enacted by Congress in the 1800s, it has gained great momentum over the last decade and more specifically, since the 2010 passage of the Affordable Care Act. In 2013, qui tam activity from the healthcare and pharmaceutical sectors alone led to government recovery of hundreds of billions of dollars.
On the federal level, the U.S. Department of Justice announced that it had recovered $3.8 billion in fiscal year 2013 under the FCA. Fiscal year 2014 has further displayed impressive figures recovered by the government from pharmaceutical and medical device companies, including settlements with Johnson & Johnson ($2.2 billion) and Endo Health Solutions, Inc. ($192.7 million), as well as settlements with medical centers, such as Halifax Hospital Medical Center ($85 million) and Amedisys, Inc. ($150 million).
While the federal government has been busy litigating lawsuits in the pharmaceutical and healthcare sectors, state governments have been equally occupied in broadening their FCA legislations to be more similar to the federal FCA. A principal driver for this activity was the Deficit Reduction Act of 2005, which authorized states to receive ten percent of the federal government’s share of recovered Medicare funds if their FCA laws were “at least as robust as the federal FCA.” Consequently, states such as California, New York, Florida, and Texas have signed laws that easily enable plaintiffs to bring state false claim actions.
Unfortunately, as many whistleblowers are employees of a company, they run the risk of retaliation despite an anti-retaliation provision located in the FCA. While the FCA may offer grand recoveries, whistleblowers also risk suspension from their employments as well as monetary damages and therefore, they must exercise extreme caution when pursing an action under the False Claims Act.
