Outside Whistleblowers Key To $625M Amerisource FCA Deal

 In False Claims Act

Law360 (October 5, 2018, 9:36 PM EDT) — AmerisourceBergen Corp.’s recent $625 million False Claims Act settlement stemmed in no small part from misconduct uncovered by whistleblowers outside the company, showing that anyone with glimpses of shady business practices may be able to stitch together a massive fraud case.

The mammoth payout — among the 10 largest FCA deals in history involving pharmaceuticals — resulted from three suits filed by four whistleblowers. One of those whistleblowers was a consummate insider: Michael Mullen, a former chief operating officer at AmerisourceBergen Specialty Group who was also a member of Amerisource’s corporate ethics committee.

But the other three whistleblowers weren’t employed at all by Amerisource. Instead, they worked in health care settings where patients used drugs from a purported Amerisource pharmacy. The whistleblowers all became concerned that the drugs were being mass-produced in ways that violated federal law, and they eventually compiled detailed allegations that the U.S. Department of Justice credited when announcing the settlement on Oct. 1.

“You can never assume that a company’s fraudulent conduct will be hermetically sealed off such that only insiders can find it,” Jeanne Markey, a partner at Cohen Milstein Sellers & Toll PLLC who was not involved in the case, told Law360.

Two of the whistleblowers, Daniel Sypula and Kelly Hodge, were pharmacy workers at a Michigan hospital. Patricia Stamler of Hertz Schram PC, counsel for the two, told Law360 that her clients received “prefilled syringes for fictitious patients in amounts that greatly exceeded the proper dosage amount for a single patient’s treatment.”

The whistleblowers also received AmerisourceBergen marketing materials about prefilled syringes, which set off alarm bells because the drugs in question are usually sold in sterile glass vials. “They had grave concerns about the adulteration of these drugs,” Stamler said.

According to the DOJ, transferring the drugs to syringes from vials sometimes caused the medicines to become “contaminated with bacteria and other unknown particles.”

The fourth whistleblower was a Florida physician group called Omni Healthcare Inc. In its complaint, Omni said that “personal observation and documents” helped it recognize a scheme to sell unlawfully repackaged drugs that were used by cancer patients.

“They were approached and witnessed firsthand the scheme as it was deployed and promoted to them,” J. Marc Vezina, counsel for Omni, told Law360. “They were the target audience for the scheme.”

FCA whistleblowers tend to be employees of companies accused of fraud. To the extent that nonemployees bring FCA cases, they often have some sort of professional relationship, such as a consulting contract, that gives them an official window into a company’s billing shenanigans.

There have been a few previous instances of true outsiders becoming superstar whistleblowers in FCA litigation. One example is Louisiana doctor William St. John LaCorte, who has helped secure several eye-popping FCA settlements, including a $785 million payout tied to overbilling by Pfizer Inc. unit Wyeth.

Another example is Ven-A-Care of the Florida Keys Inc., which has secured numerous FCA settlements collectively worth hundreds of millions of dollars by exposing unlawful price inflation throughout much of the pharmaceutical industry.

Omni might be on track to make a similar name for itself. Prior to the Amerisource settlement, it helped the DOJ secure a $256 million settlement with Millennium Health over medically unnecessary genetic and drug testing. And going forward, Omni isstill pursuing an FCA case against drug distributor McKesson Corp., which is facing allegations similar to those against Amerisource.

Gordon Schnell, who represents FCA whistleblowers at Constantine Cannon LLP, told Law360 that one way of looking at nonemployee whistleblowers is that they are “not insiders within the companies but insiders within the industry itself.”

Close ties between the health care and pharmaceutical industries provide ample opportunities for professionals to spot unscrupulous practices at companies without actually working at those companies. As one example, Omni alleges in its ongoing suit against McKesson that it uncovered fraud by way of conversations with McKesson employees, visits to McKesson facilities, and catalogs and invoices for McKesson syringes.

“There will always be categories of outsiders who may be situated such that they may identify the fraud, most obviously the targets of the fraudulent marketing,” Markey said. “Doctors, pharmacists, subcontractors [and] even competitors with experience and expertise may not know exactly what is going on, but they may be able to piece together enough of it to hear alarm bells.”

The Affordable Care Act made it easier for outsiders to bring FCA suits that involve publicly disclosed information, eliminating a requirement that whistleblowers possess “direct and independent knowledge” of wrongdoing. But outsiders still face higher hurdles in showing that legal violations occurred and were intentional, as required under the FCA.

“It’s harder if you’re not an insider,” Schnell said. “Because if you’re not there in the room, if you’re not there with the internal documents, there’s an extra level of proof you have to overcome.”

But the nine-figure deal with Amerisource, in conjunction with major FCA settlements reached previously by other outsiders, suggests that the challenge is far from insurmountable.

“It’s a harder case to bring,” Schnell said. “But by no means is it stopping these kinds of whistleblowers or stopping firms from bringing these cases.”

https://www.law360.com/governmentcontracts/articles/1089597/outside-whistleblowers-key-to-625m-amerisource-fca-deal?nl_pk=a3467962-dd33-4efa-a9fc-bff3c03255e8&utm_source=newsletter&utm_medium=email&utm_campaign=governmentcontracts

 

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