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Health-Care False Claims Cases Reap $18.3 Billion, Report

Federal and state governments recovered $18.3 billion between 2008 and 2012 from lawsuits and criminal cases claiming health-care companies overbilled, according to an advocacy group that encourages whistle-blowers.

Taxpayers Against Fraud, a Washington-based group, released a study showing total health-care recoveries, excluding whistle-blower payments, rose to $5.8 billion last year from $1.5 billion in 2008. Those totals include criminal fines and state false claims recoveries, two figures not normally tallied.

Still, recoveries are a small fraction of the $2.8 trillion the U.S. spends annually on health care, or 17.8 percent of the gross domestic product, according to the World Health Organization. Senator Charles Grassley, an Iowa Republican who sponsored a 1986 amendment that propelled the U.S. law forward, said the Justice Department should do more to deter companies than collect payments.

“Right now, it’s a cost of doing business,” Grassley said in an interview. “When it’s a cost of doing business, behavior isn’t going to change and criminal prosecution needs to be pursued. When you jail somebody, it makes a bigger point than any fine you’re going to get.”

The health-care recoveries involve dozens of companies, including Pfizer Inc. (PFE), the world’s biggest drugmaker; GlaxoSmithKline Plc (GSK), the biggest U.K. drugmaker; Merck & Co. (MRK), the second-biggest U.S. drugmaker by sales; and McKesson Corp. (MCK), the largest U.S. pharmaceutical distributor. Many of the settlements involve corporate integrity agreements pledging compliance with the law.

29 States

Most cases were filed under the federal False Claims Act, the law that lets citizens sue on behalf of the government and share in any recovery. Twenty-nine states have similar laws. Most of the recoveries by the U.S. between 1987 and 2012 were in health-care cases, where the government recovered $24.1 billion, according to Justice Department statistics.

Between 2008 and 2012, the civil U.S. recoveries amounted to $9.4 billion, according to the Justice Department. The TAF report shows that criminal fines associated with false claims recoveries over the same period were $4.5 billion, while state recoveries were $4.4 billion. Taken together, the civil, criminal and state false claims recoveries account for the five-year total of $18.3 billion.

Whistle-Blowers

Whistle-blowers over that period collected $1.4 billion beyond the $9.4 billion paid to the U.S. The law allows whistle-blowers to recover between 15 and 30 percent. Not every case settled by the U.S. was initiated by whistle-blowers.

The TAF report argues that the federal government recovers about 20 times more than it spends on investigations and prosecutions of health-care fraud cases.

Whistle-blowing is increasing in other sectors, including finance and taxation. With programs in place at the Securities and Exchange Commission, the Internal Revenue Service, and the U.S. Commodity Futures Trading Commission, many more cases are coming, according to Patrick Burns, co-executive director of TAF.

“We are on the edge of a new era of incentivized integrity programs,” said Burns. “It takes a long time to investigate, negotiate and litigate these cases, but I think we will see billions recovered under these programs in the years ahead.”

To contact the reporter on this story: David Voreacos in Newark at dvoreacos@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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