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At the end of December, the Second Circuit joined several other circuit courts in holding that a plaintiff adequately pleads an Anti-Kickback Statute (“AKS”) violation when she states with the requisite particularity that at least one purpose of the alleged scheme was to induce fraudulent conduct, the “at-least-one-purpose” rule.

In United States ex rel. Camburn v. Novartis Pharmaceuticals Corp., Relator Steven Camburn alleged that Novartis violated the AKS, and the False Claims Act (“FCA”), in marketing its drug Gilenya, which is prescribed for multiple sclerosis (“MS”).  Since approving Gilenya in 2010, the FDA has imposed a first-dose observation requirement for new patients, who must be monitored by a doctor while attached to an electrocardiogram machine for six hours.Continue Reading Second Circuit Adopts At-Least-One-Purpose Rule For Anti-Kickback Statute Violations

The SDNY U.S. Attorney’s Office has targeted several labs and their principals for False Claims Act violations arising out of reimbursements for COVID-19 testing services.  In a complaint filed on June 13, the government sued LabQ Clinical Diagnostics, Dart Medical Laboratory, Community Mobile Testing, and their CEO, Moshe Landau.

In response to the COVID pandemic, Congress mandated that private health insurers cover COVID-19 testing and required government health care programs to also cover such testing.  For uninsured persons, Congress appropriated funds for a federal program to reimburse health care providers furnishing COVID-19 testing to uninsured persons (the “Uninsured Program”), administered by an agency within the Department of Health and Human Services.  Before seeking reimbursement, however, COVID-19 testing providers were required to confirm that the patients were uninsured and no one else would pay for the testing. Continue Reading SDNY Sues Labs For Fraudulent COVID-19 Testing Under False Claims Act

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Recently, in United States ex rel. Hart v. McKesson Corp., the Second Circuit clarified the standard for acting “willfully” under the federal anti-kickback statute (AKS).

False Claims Act relator Adam Hart alleged that the defendant violated the AKS by providing business management tools to its customers, without charge, to induce those customers to purchase drugs from them.  The tools helped providers to maximize profits and mitigate the risk that reimbursement rates would fall below the cost of the drugs to them.  One tool, the Margin Analyzer, compared profit margins for drugs considered to be interchangeable, and the second, the Regimen Profiler, provided margin information for an entire course of treatment as opposed to specific drugs.  The unlawful kickback, according to relator, was that the defendant did not offer these tools on a stand-alone basis, but only offered them to providers who agreed to use the defendant as their primary wholesaler of branded and generic drugs.  The defendant allegedly provided the tools as a kickback to induce drug sales. 

The Second Circuit first addressed the proper understanding of “willfulness” under the AKS.  The Court held that, in order to violate the federal AKS, a defendant must act knowing that the conduct is in some way unlawful but does not have to know specifically that the conduct violates the AKS.  The Court stated that this interpretation accords with the general goal of criminal law to punish only those who act with a “vicious will.”  Notably, in 2010, Congress amended the AKS to provide that a violation does not require actual knowledge of the AKS or a specific intent to violate the AKS.  Also, particularly with respect to the analysis of applications of AKS safe harbors to conduct, this interpretation also avoids unfairly sweeping innocent conduct under the reach of the criminal statute.Continue Reading Second Circuit Defines “Willfulness” Standard Under Anti-Kickback Statute

The Supreme Court will hear argument next week in two consolidated cases that will decide what standard applies when a doctor asserts a good faith defense to a criminal prosecution for unlawful drug distribution.  The argument on Tuesday, March 1, will address the convictions of two doctors accused of running “pill mills” and seeking to profit in the midst of the national opioid crisis.  According to the Government, “the petitioners simply cloaked themselves in medical garb while acting as drug dealers, lining their own pockets by dispensing addictive, dangerous, and lethal drugs, aware all the while that their profit-seeking came at the expense of their patients’ health.”

Yiulu Ruan was convicted in the Southern District of Alabama of conspiring to unlawfully distribute controlled substances, unlawfully distributing controlled substances, and other offenses, and was sentenced to twenty one years and two months imprisonment.  His conviction was affirmed by the Eleventh Circuit.  Shakeel Kahn was convicted in the District of Wyoming of conspiring to dispense and distribute controlled substances resulting in death, unlawfully dispensing controlled substances, and other offenses, and was sentenced to twenty five years imprisonment.  His conviction was affirmed by the Tenth Circuit.
Continue Reading Supreme Court To Hear Argument Addressing Doctors’ Good Faith Defense To Pill Mill Prosecutions

SDNY Judge Jed Rakoff rejected Northwell Health’s bid for insurance coverage for its increased costs and business losses related to the COVID-19 pandemic in a recent decision.  As the COVID-19 pandemic unfolded, Northwell was inundated with new patients, had increased cleaning costs, and stopped offering outpatient care services and elective procedures.  In the ruling, Judge Rakoff held that Northwell was not entitled to coverage under two all-risks commercial property insurance policies.

The federal government declared a COVID-19 emergency on March 13, 2020, and New York State issued orders suspending or severely curtailing operations of certain businesses.   In its complaint, Northwell alleged that, while caring for over 100,000 COVID-19 patients, it incurred significant new costs, was forced to cease elective surgeries and close physicians’ practices, and saw fewer hospital admissions and visits.  Northwell alleged that the respiratory droplets carrying the coronavirus were “physical objects, carrying a physical substance, that attach to [and] cause harm to property.”  Examining several different policy provisions, the Court held that Northwell had failed to establish an entitlement to coverage.
Continue Reading Northwell Loses Bid For COVID-19 Insurance Coverage

Last week, in Washington v. Barr, the Second Circuit addressed a case seeking to strike down the federal government’s classification of marijuana as a Schedule I drug under the Controlled Substances Act (CSA). The Court held that plaintiffs had failed to exhaust their administrative remedies before the Drug Enforcement Administration (DEA). Rather than dismissing…

Home health care aides working twenty-four hour shifts can be paid for as little as thirteen hours under certain conditions, according to a March ruling from the New York Court of Appeals in Andryeyeva v. New York Health Care, Inc. The Court of Appeals remanded, however, for lower courts to consider whether employers were…

EDNY Judge Nina Gershon analyzed several False Claims Act issues in United States ex rel. Omni Healthcare Inc. v. McKesson Corp., ruling on first-to-file, Rule 9(b), and statute of limitations issues.

Relator Omni Healthcare alleged that defendants improperly used “overfill” in vials of injectable drugs. “Overfill” is the amount of a drug in excess…

In federal criminal investigations, corporate health care providers have faced a Department of Justice increasingly focused on individuals, one that has limited or foreclosed cooperation credit for corporations not providing complete information on all individual involvement. At a conference in late November, Deputy Attorney General Rod Rosenstein outlined a modification of these stringent guidelines, to…

As recounted in our recent analysis of the 2018-19 New York State Budget (“Enacted Budget”), the Enacted Budget included new restrictions on fiscal intermediaries participating in the Consumer Directed Personal Assistance Program (“CDPAP”) designed to prevent the dissemination of “false or misleading” advertisements.  Effective April 1, 2018, the newly enacted § 365-f(4-c) of the…