No one was immune from the impacts of the COVID-19 pandemic in 2020, and that includes the Department of Justice (“DOJ”). After years of steady decline in False Claims Act (“FCA”) recoveries, DOJ reported its lowest annual haul since 2008. On January 14, 2021, DOJ released detailed statistics regarding FCA recoveries during fiscal year 2020, during which DOJ reportedly obtained more than $2.2 billion in civil FCA settlements and judgments, of which $1.8 billion related to matters involving the health care industry. This represents a significant downward trend from the high water mark in 2014 when DOJ recovered a record $5.69 billion. Since then, the number of dollars recovered has generally trended downward—2015 ($3.5 billion), 2016 ($4.93 billion), 2017 ($3.47 billion), 2018 ($2.9 billion), and 2019 ($3 billion). The lower numbers in fiscal year 2020 are undoubtedly reflective of the ongoing pandemic which shuddered businesses and delayed ongoing investigations and litigation while the country adapted to remote technology. However, indicative of more cases being dismissed is the fact that fiscal year 2020 saw a significant uptick of non-qui tam cases filed—a twenty-five year high of 250 filed in fiscal year 2020—up from 148 cases filed in 2019. Even in light of a nearly 50% increase in new matters filed, recoveries dropped significantly.
While recoveries under health care-related cases (which constitute the lion's share of annual FCA recoveries) had remained relatively constant over the last several years, those numbers too are down in 2020. With that said, DOJ reported the largest FCA recoveries from the health care sector, including a $591 million settlement over claims of kickbacks paid to doctors to induce them to prescribe its drugs, and another $148 million over illegal payments of patient copays for the companies' own drugs through purportedly independent foundations that the companies treated as conduits for these payments.
Although FCA recoveries from procurement fraud typically pale in comparison to those from the health care sector, DOJ reported recovering $57 million from large federal contractors related to invoices submitted to the US Department of Energy containing inflated labor hours and work not performed. DOJ also recovered $37 million from a contractor over a bribery scheme to steer government contracts for training simulators to the company, which also involved a personal civil liability settlement from the company's president and CEO. In making good on its stated promises to continue holding individuals accountable, particularly senior executives and owners, DOJ reported numerous high dollar settlements with individuals as well as companies in both the health care and procurement sectors.
Notably, DOJ reported that, of the $2.2 billion in FCA recoveries in fiscal year 2020, $1.6 billion arose from qui tam litigation, marking the lowest recovery from whistleblower litigation since 2008. The number of qui tam cases filed in 2020 was 672 (approximately 13 cases per week), falling within the typical range of new cases filed, which have oscillated from 576 to 757 during the last 10 years. As with non-qui tam cases, the statistics reflect a higher dismissal rate of qui tam cases in the last few years.
DOJ's report was explicit in noting that the $2.2 billion in recoveries does not include settlements obtained, but not yet finalized, in fiscal year 2020. This reportedly includes two high profile settlements involving opioid prescriptions—a $2.8 billion settlement with a large pharmaceutical company which has been delayed due to chapter 11 bankruptcy and a $600 million settlement with another pharmaceutical company, of which only $300 million has been paid to date.
Many factors are likely to see these numbers rise again in 2021 and beyond, including the adjustment to remote work and the resumption of previously stayed litigation. However, the most likely reason for FCA litigation and recoveries to trend upward will result from the multiple trillions of dollars doled out by the government in the form of stimulus payments and loans through the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act— many of which containing strict qualification requirements—that the government will be auditing for years to come. In fact, DOJ recently announced its first civil settlement to resolve allegations of fraud against the Paycheck Protection Program of the CARES Act. Given the heightened risk of accepting government stimulus funds requiring certain eligibility representations, combined with a mounting federal deficit that must be addressed sooner rather than later, enforcement actions are likely only going to increase. While industry should always brace for the inevitable knock on the door from government investigators, that rings even more true as the pandemic subsides and the world strives to return to normalcy.
Originally Published by Seyfarth Shaw, January 2021
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