In July, the U.S. Department of Justice (DOJ) and U.S. Attorneys Offices announced several large False Claims Act (FCA) settlements stemming from qui tam whistleblower suits.

Under the FCA’s qui tam provisions, whistleblowers have the power to file suits on behalf of the federal government if they possess knowledge of an individual or company defrauding the government. The government may decide to intervene and take over the suit. Regardless of whether the government intervenes, if a qui tam lawsuit results in a successful settlement, the whistleblower is eligible to receive a substantial reward, typically between 15 and 30% of the monies collected.

Notably, in July, the DOJ announced several multi-million dollar settlements involving allegations of illegal kickbacks. The Anti-Kickback Statute (AKS) is a federal law that prohibits the exchange (or the offer to exchange) of any form of remuneration to induce or reward referrals for services or items reimbursable by federal healthcare programs, such as Medicare and Medicaid.

$34 Million Settlement with DaVita

On July 18, the DOJ announced that DaVita Inc., a healthcare company providing kidney dialysis services, agreed to pay $34 million to settle allegations that it violated the FCA through the illegal payments of kickbacks to induce referrals to DaVita’s dialysis centers and DaVita Rx, a former subsidiary that provided pharmacy services for dialysis patients.

“DaVita paid kickbacks to a competitor to induce referrals to DaVita Rx to serve as a ‘central fill pharmacy,’ or prescription fulfillment provider, for that competitor’s Medicare patients’ prescriptions,” the DOJ alleges. “In exchange, DaVita paid to acquire certain European dialysis clinics and agreed to extend a prior commitment to purchase dialysis products from the competitor.”

The DOJ further alleges that DaVita “provided management services to vascular access centers owned by physicians in a position to refer patients to DaVita’s dialysis clinics” and “paid improper remuneration to a large nephrology practice to induce referrals to DaVita’s dialysis clinics.”

The settlement resolves a qui tam whistleblower suit filed by Dennis Kogod, a former Chief Operating Officer of DaVita Kidney Care. Kogod will receive a $6,370,000 whistleblower award from the settlement proceeds. This significant settlement sends a clear message to the healthcare industry about the consequences of such practices.

$12 Million Settlement with Precision Lens

On July 25, the DOJ announced that Precision Lens and the estate of its former principal, Paul Ehlen, agreed to pay the United States $12 million to resolve allegations of illegal kickback payments to ophthalmic surgeons “to induce their use of Precision Lens products in cataract surgeries reimbursed by Medicare.”

According to the DOJ, “Precision Lens provided kickbacks to physicians in the form of travel and entertainment, including high-end ski trips, fishing, golfing, hunting, sporting, and entertainment vacations, often at exclusive destinations. For many of the trips, physicians were transported to luxury vacation destinations on private jets, including trips to New York City to see a Broadway musical, the College Football National Championship Game in Miami, Florida, and the Masters Tournament in Augusta, Georgia.”

The settlement stems from a qui tam lawsuit filed by whistleblower Kipp Fesenmaier. Fesenmaier’s suit also resulted in a related 2017 settlement in which Sightpath Medical, Inc. agreed to pay more than $12 million to settle charges of paying illegal kickbacks. Fesenmaier received approximately $2.3 million in the Sightpath settlement.

$5 Million Settlement with Admera

On July 24, the DOJ announced that Admera Health LLC, which provides biopharmaceutical research services for healthcare institutions and provided clinical laboratory testing services to healthcare providers relating to pharmacogenetics, agreed to pay $5.3 million to settle kickback allegations.

The DOJ claims that “Admera has admitted that it made millions of dollars of commission payments to independent-contractor marketers (the Marketers) to induce them to arrange for or recommend that healthcare providers order and refer clinical laboratory services to Admera, including genetic tests, that were reimbursable by Medicare and/or Medicaid, that it paid Marketers through arrangements that took into account the volume and value of genetic testing referrals, and that Admera was informed that the payment of commissions to independent contractors did not comply with the AKS but continued to enter into such contracts.”

The settlement resolves a qui tam whistleblower suit filed by Sunil Wadhwa and Ken Newton, co-founders of Financial Halo LLC/MedXPrime, a former third-party marketer for Admera. Wadhwa and Newton will receive a $862,343 whistleblower award from settlement proceeds.

$101 Million Settlement with Rite Aid

In the most notable July FCA settlement unrelated to kickbacks, Rite Aid Corporation and its subsidiaries agreed to pay $101 million to settle allegations that they violated the FCA by failing to accurately report drug rebates to the Medicare Program.

The allegations concerned Medicare Part D, where private sponsors offer and administer insurance plans providing prescription drug coverage to enrolled Medicare beneficiaries. Under Medicare Part D, sponsors must inform the Centers for Medicare and Medicaid Services (CMS) of any rebates or remuneration the plans receive. This allows the government to benefit from any price concessions drug manufacturers provide.

According to the government, Rite Aid and its subsidiaries “improperly reported to CMS portions of rebates received from manufacturers as bona fide service fees, even though manufacturers did not negotiate with the defendants to pay such fees.”

The settlement stems from a qui tam whistleblower lawsuit filed by Glenn Rzeszutko, a former RiteAid subsidiary RX Options employee.

In a separate settlement, Rite Aid and ten subsidiaries and affiliates agreed to pay $7.5 million and grant the government an allowed, unsubordinated, general unsecured claim of $401.8 million in Rite Aid’s pending bankruptcy case to settle allegations of violating both the FCA and Controlled Substances Act (CSA).

According to the government, “from May 2014 through June 2019, Rite Aid knowingly dispensed at least hundreds of thousands of unlawful prescriptions for controlled substances that (1) lacked a legitimate medical purpose and were not issued in the usual course of professional practice and/or (2) were not valid prescriptions, were not for a medically accepted indication or were medically unnecessary.”

The case resolves a qui tam lawsuit filed by Andrew White, Mark Rosenberg, and Ann Wegelin, who all previously worked for Rite Aid at various pharmacies. The whistleblowers will receive 17% of the government’s recovery as their share of the settlement.

Conclusion

These settlements further underscore the indispensable role of the qui tam whistleblowers in uncovering fraud and assisting the government to recoup taxpayer money. The enforcement of the False Claims Act. In the 2023 Fiscal Year, the DOJ recovered $2.68 billion from FCA settlements and judgments, more than $2.3 billion of which stemmed from qui tam whistleblower suits.

The settlements also highlight the DOJ’s focus on cracking down on illegal kickbacks.

“Improper financial arrangements between Medicare providers can distort the healthcare marketplace,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “We will hold accountable healthcare providers that seek to generate business by paying unlawful remuneration.”

Geoff Schweller also contributed to this article.