Top Ten Healthcare Fraud Recoveries of 2021

Consistent with the trend in prior years, the bulk of the Justice Department’s fraud and false claims recoveries in 2021 stemmed from healthcare fraud matters. Most of the funds recovered arose from cases originated by whistleblowers under the qui tam provisions of the False Claims Act.

The majority of the recoveries on this list involve allegations of violations of the Anti-Kickback Statute, a federal law that prohibits medical providers from paying or receiving kickbacks, remuneration, or anything of value in exchange for referrals of patients who will receive treatment paid for by government healthcare programs such as Medicare and Medicaid. Unfortunately, with estimates of total US healthcare fraud as high as $230 billion, these settlements are a mere drop in the bucket. Whistleblowers need to stay vigilant to try and deter and combat fraud, return billions to taxpayers, and make healthcare more affordable for all. Here are the top ten healthcare recoveries of 2021 by the numbers:

Generic Drug Price-Fixing – in October, three generic pharmaceutical manufacturers, Taro Pharmaceuticals USA, Inc., Sandoz and Apotex Corporation, agreed to pay $447.2 million to resolve alleged violations of the False Claims Act arising from conspiracies to fix the price of various generic drugs. According to the Department of Justice, the companies’ conduct violated the Anti-Kickback Statute due to arrangements on price, supply, and allocation of customers with other pharmaceutical manufacturers of various generic drugs.

Sandoz’s payment of $195 million was enough to land the third spot on this year’s list of financial fraud recoveries. Sandoz is no stranger to FCA violations, having paid $12.6 million in 2015 to resolve allegations that the company inflated drug prices on Medicare sales. Apotek has also previously settled Antitrust violations, paying $24 million in 2020.

Indivior – In April, the pharmaceutical manufacturer agreed to pay yet another $300 million settlement to resolve criminal and civil allegations associated with the marketing of the opioid-addiction-treatment drug, Suboxone. The company claimed that the drug was safer and less susceptible to abuse than similar drugs. Indivior was also accused of using an internet and phone program, which was purported to be a recovery resource, to connect opioid addicts to doctors that were prescribing Suboxone at suspiciously high rates.

This settlement, with all 50 states and DC, is in addition to a $600 million settlement that Indivior reached with the federal government in 2020, placing third on last year’s list, and the $1.4 billion resolution with Indivior’s former parent, Reckitt Benckiser Group PLC (“RB Group”) which topped the 2019 list of healthcare recoveries.

Indivor’s placement at number two on this list shows the continued, fraud-filled fallout from the nation’s opioid crisis, most notably highlighted by last year’s largest healthcare fraud settlement, Purdue Pharma.

Alere – In August, Alere’s subsidiary, Arriva, paid $160 million to resolve allegations that Arriva provided unlawful patient inducements in the form of “free” or “no cost” glucometers and copayment waivers which can violate the Anti-Kickback Statute. The company also settled allegations that it billed Medicare for medically unnecessary glucometers and providing glucometers to beneficiaries who were deceased.

Alere is no stranger to FCA and fraud litigation. In July, Alere agreed to pay $38.75 million (No. 8 on this list) to resolve allegations that it knowingly sold its InRatio blood coagulation monitors despite receiving reports that the devices produced inaccurate readings. In 2018, Alere agreed to pay $33.2 million to resolve allegations that it failed to take appropriate corrective actions after receiving reports that its Triage point-of-care diagnostic testing devices produced erroneous results. And in 2017, Alere agreed to pay $13 million to resolve SEC claims of accounting fraud based on its recording of revenue based on sales of products still being stored at warehouses or otherwise not yet delivered to the customers.

Daniel McCollum – In September, a judgment of $140 million was entered against a number of pain management clinics, drug testing laboratories, and other businesses, Oaktree Medical Centre P.C., FirstChoice Healthcare P.C., Labsource LLC, Pain Management Associates entities, ProLab LLC, and ProCare Counseling Center LLC, all of which were affiliated with South Carolina chiropractor Daniel McCollum.

The businesses were alleged to have provided illegal financial incentives to providers to induce their referrals of urine drug tests in violation of the Stark Law and the Anti-Kickback Statute, and to have submitted false claims to federal healthcare programs for medically unnecessary urine drug testing, steroid injections, opioid prescriptions, and lidocaine ointment prescriptions.

Health Net Federal Services – Unique on this list because this settlement involves no allegations of fraud against the Medicare or Medicaid program, Health Net agreed to pay $97 million to resolve allegations that it overbilled the VA for services provided under an insurance arrangement called the Patient Centered Community Care Program, which provides coverage to veterans who cannot access VA facilities.

The Patient Centered Community Care Program (PC3), introduced in 2014, expanded VA services to cover veterans who waited more than 30 days for care or lived more than 40 miles away from a VA medical facility. Despite being relatively new, the program is no stranger to large frauds. Fraudsters against PC3 make their second top-five appearance on this list in the past two years. Last December, TriWest agreed to pay $179 million to resolve allegations that TriWest billed the VA twice for the same services, and paid for services for which TriWest received full or partial reimbursement from other healthcare providers and failed to return those overpayments. Good enough for fourth on last year’s list.

Sutter Health – In August, the California hospital giant agreed to pay $90 million to resolve allegations that it caused overbilling of the Medicare Advantage Medicare Advantage is a managed care program which pays provide insurers premiums to cover Medicare beneficiaries. The amount of those premiums is “risk adjusted” to pay higher premiums for older, sicker beneficiaries and lower premiums for younger, healthier ones. Sutter Health allegedly submitted inaccurate and unsupported medical information on tens of thousands of patients, causing those premiums to be inflated. Both providers like Sutter and insurers can be liable for fraud against the Medicare Advantage program. The whistleblower, Kathy Ormsby, was represented by a team from Constantine Cannon, Keller Grover, and Kleiman Rajaram.

Fraud against the Medicare Advantage program has been a recent hotbed of FCA litigation. Constantine Cannon represented Dr. Darren Sewell and Teresa Ross in successfully resolved whistleblower cases against Freedom Health and Group Health Cooperative respectively. Constantine Cannon is also involved in current litigation against UnitedHealth, Kaiser Permanente, and Independent Health, all alleging fraud against the Medicare Advantage program. The Department of Justice is also pursuing a similar case against Anthem. More developments in this area are sure to come in 2022.

Bristol-Myers Squibb – In April, the pharmaceutical behemoth agreed to pay $75 million to resolve allegations that the company failed to pay amounts it owed under the Medicaid Drug Rebate Program. That program pins the price Medicaid pays for drugs to inflation, requiring drug manufacturers to report the Average Manufacturer Prices (AMPs) of their Medicaid-covered drugs to the government; the higher the reported AMPs, the greater the rebate owed by the pharma company to the government. The whistleblower alleged that Bristol-Myers systematically under-reported their AMPs for several drugs.

Bristol-Myers Squibb is not the first manufacturer to run into issues with the program. In 2015, AstraZeneca and Cephalon paid a total of $54 million to resolve claims that they also improperly reduced AMPs by wrongfully accounting for service fees they paid to wholesalers. And in 2020, the government joined a whistleblower suit against another pharmaceutical giant, Mallinckrodt, which is now in Chapter 11 Bankruptcy, alleging violations of the laws. The suit focuses on Mallinckrodt’s Achtar gel, which is used to treat a variety of conditions, including MS and infantile spasms.  In 2001, when another drug company Questcor (which Mallinckrodt later acquired) secured the rights to manufacture the product, it cost only $50 a vial.  It has since skyrocketed to $40,000 per vial, an 80,000% increase or roughly 1,700 times the rate of inflation!

Alere (separate settlement) – In July, Alere and Alere San Diego agreed to pay $38.75 million to settle allegations of knowingly selling defective blood coagulation monitors, which are used to determine safe dosages of anticoagulant drugs, to Medicare beneficiaries. Too much anticoagulants could result in massive bleeding, while too little can result in blood clots and strokes.  By 2008, Alere had allegedly become aware of the fact that the software used in its INRatio monitors contained a material defect that caused some patients to see inaccurate results.  Although the company was also aware of dozens of deaths and hundreds of injuries associated with the devices, it failed to take them off the market and even continued to bill Medicare for the devices.
Prime Healthcare – Also in July, the hospital chain and several of its executives, agreed to pay $37.5 million to resolve two cases. The first alleged that Prime and a cardiologist, Dr. Siva Arunasalam, had a kickback arrangement in which Prime paid Arunasalam kickbacks in exchange for patient referrals and for using Arunasalam’s Medicare billing number to bill for services provided by a Dr. George Ponce, a physician who had been banned from billing Medicare or Medicaid. The second suit involved inflated billing of Medicaid and Medicare for implantable medical hardware.

Like other companies on the list, Prime is no stranger to healthcare fraud or FCA litigation. In 2018, the company agreed to pay $65 million to resolve allegations that 14 of its California hospitals improperly billed Medicare for admitting patients who only required outpatient care, and billed Medicare for treating more severe diagnoses than patients actually had.

Ambulatory Anesthesia of Atlanta – In November, the North Georgia anesthesia practice agree to pay over $28 million to resolve allegations that it entered into kickback arrangements by paying and receiving payments for medications, supplies, equipment, and labor as well as free staffing in exchange for the referral of patients. Anesthesia providers typically depend on hospitals and outpatient surgery centers for their income. If an anesthesia provider can secure an exclusive contract for services, it is guaranteed a steady stream of patient referrals during the term of the contract.

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