The False Claims Act Effectively Fights Fraud, Waste, And Abuse In Clinical Research, Studies And Trials

By Shauna Itri, Whistleblower Attorney

A whistleblower or qui tam action can provide financial rewards to individuals who are retaliated against for providing information that a company or individual has defrauded the government. The primary statutes under which this relief may be sought are the federal and state False Claims Acts (“FCAs”).

The False Claims Act was signed into law during the Civil War and was subsequently amended several times. Since the time it was first enacted it has grown to become one of the most effective tools in fighting government fraud, and enforcing other laws and regulations applicable to virtually every segment of the healthcare industry. The False Claims Act places power within the hands of private citizens, with the assistance of an attorney typically paid on a contingent fee basis, to file a lawsuit if they have knowledge of fraud or dishonesty in certain transactions with the government. The citizens that bring a case on behalf of the government are called “whistleblowers.” Whistleblowers are provided with a financial reward if the suit is successful. The reward to the whistleblower is normally between 15% and 25% of the amount recovered.

Any persons or entities with evidence of fraud against government programs may file a whistleblower or qui tam lawsuit. A qui tam action must be confidentially filed under seal and its contents must be kept confidential until the seal is lifted. The complaint is not served on the defendant. If the plaintiff violates the provisions of the seal, his or her complaint could be dismissed. A copy of the complaint, with a written disclosure statement of substantially all material evidence and information in the whistleblower’s possession, must be served on the government (United States Attorney and/or Attorney General). Subsequent to the serving of the complaint and disclosure materials, the government will investigate the claims.

Recently government prosecutors and private attorneys have been using the False Claims Acts to enforce laws and regulations in clinical research and trials. Recent False Claims Act cases have been filed against companies for grant fraud, fraud in clinical trial billing, fraud on the Food and Drug Administration (“FDA”) (i.e., non-compliance with regulations), falsifying and fabricating data in grants or studies, off-label marketing of drugs and devices, and paying kickbacks in post-market clinical trials.

For example, allegations of violations of FDA regulations may give rise to a False Claims Act claim. The FDA has a series of laws that regulate the new drug approval process and the medical device approval or clearance process. During the pre-clinical research the Good Laboratory Practices regulations (“GLPs”) apply, during clinical trials the Good Clinical Practices regulations (“GCP”) apply, and during the manufacturing of the drugs the commercial Good Manufacturing Practices regulations (“CGMPs”) apply. As stated above, violations of any of these regulations could give rise to a False Claims Act case. In fact, in United States ex rel. Eckerd v, GlaxoSmithKline, a quality insurance manager filed a False Claims Act complaint against the company alleging that GlaxoSmithKline manufactured and distributed contaminated and adulterated products in violation of the CGMPs. The case settled for approximately $750 million and the whistleblower received an award of $96 million.

A case under the False Claims Acts can also be brought if companies or individuals falsify (making up data or results) or fabricate (manipulating research material, equipment or processes or changing/omitting data/results such that the research is not accurately represented) data. The following recognized behaviors are threatening and potentially fraudulent: overlooking others’ use of flawed data; changing the design, methodology or results of a study in response to pressure from a funding source; failing to present data that contradict one’s own previous research; circumventing minor aspects of human-subject requirements; and using inadequate or inappropriate research designs. Fraud also occurs in the grant application process when, among other things, companies or individuals fabricate or falsify data to secure grants, falsify or fabricate data in progress reports, and inappropriately transfer costs.

Fraud in clinical trial billing is arguably the most rampant. Medicare covers the routine costs of qualifying clinical trials and reasonable and necessary items and services used to diagnose and treat complications arising from participation in all clinical trials. Fraud occurs in clinical trial billing when the company/individual bills for services that are already paid for by the sponsor, billing for services promised free in the informed consent, billing for services that are part of a non-qualifying clinical trial or inappropriately using research funds to pay for routine care.

Fraud can also occur when companies fail to report adverse events. Companies are required to report adverse events or any untoward medical occurrence, unintended disease or injury, or untoward clinical signs (including abnormal laboratory findings) in subjects, users or other persons, whether or not related to the investigational medical device. The FDC adverse event reporting provision establishes timelines that trigger reporting obligations for manufacturers. In a False Claims Act suit against Guidant LLC and others, the whistleblower alleged that Guidant knowingly sold and withheld information from the FDA and medical professionals about a life-threatening defect in some of its implantable cardiac devices that could cause the devices to short-circuit without warning (see United States ex rel. Allen v. Guidant LLC et al.). In June 2005, the company finally went public about the problem with information it had known for 10 months. The case settled for approximately $30 million and the whistleblower received approximately $2.25 million.

Clinical research and trials has been under increased government scrutiny and an effective tool used to fight fraud, waste and abuse in this area has been the False Claims Act. Whistleblowers with information as to potential fraud are incentivized to report this fraud, based on the ability to receive a percentage of the recovery. The examples above are only some of the types of fraud that can be brought against companies and individuals; this is not an inclusive list.  

For more information on the FCA feel free to contact the author, Shauna Itri, at 267-973-4265, by email at sitri@bm.net, or at LinkedIn: www.linkedin.com/in/shaunaitri/.