Sunday, July 29, 2012

Obama administration introduces new efforts to crack down on health care fraud

The Department of Health and Human Services Secretary Kathleen Sebelius, and Attorney General Eric Holder, revealed a new public-private partnership to crack down on health care fraud yesterday.  The partnership will include insurance industry giants like United Health Group, Amerigroup Corporation and Blue Cross Blue Shield, as well as the industry lobby, American's Health Insurance Plans, government law enforcement agencies, the Department of Justice, and state and private fraud control units. 

Health care fraud costs the U.S. approximately $60 billion a year, according to an article by the Associated Press

The partnership will rely predominantly on sharing and analyzing data to reveal patterns that might indicate fraud. Trying to uncover healthcare fraud through data analysis is worthwhile, but the government should keep in mind that whistleblowers have been the most effective way to find billions that have been lost to Medicare and Medicaid fraud. 

Thursday, July 26, 2012

Treasury Secretary Geithner testifies about Libor scandal

U.S. Secretary of the Treasury Timothy Geithner defended his response to concerns about Libor manipulation in 2008 - when he served as president of the New York Federal Reserve - before  Congress yesterday. When asked what action was taken after receiving information about possible rate-rigging in 2008, Geithner said:
"...We took a very careful look at these concerns. We thought those concerns were justified and we took the initiative to bring those concerns to the attention of the broader US regulatory community, including all the agencies that have responsibility for market manipulation and abuse..." 
Geithner faced harsh criticism from members of the House, and testifies today in a second congressional hearing.  The Wall Street Journal posted a short video of Geithner testifying about Libor at yesterday's congressional hearing. (Subscription to the WSJ may be required.) 

Is there more corporate fraud, or is there more fraud being exposed by whistleblowers?

Eduardo Porter of the New York Times wrote an insightful article examining whether corporate corruption and fraud have increased in recent years. (See “The Spreading Scourge of Corporate Corruption.”)

Possibly what has changed is that there simply is more wrongdoing being exposed because more whistleblowers are coming forward, encouraged by the False Claims Act and whistleblower reward programs at the Securities and Exchange Commission, Internal Revenue Service and the Commodity Futures Trading Commission.

For instance, SEC officials say they are receiving many more “high-value” tips since the Dodd-Frank Act created an SEC whistleblower program. We know from our whistleblower clients that the possibility of a reward is a powerful reason insiders are willing to step forward and risk their careers. On the flip side, current corporate structures incentivize wrongdoing by making profits the overriding factor for bonuses and promotions. It’s time for companies to reward instead ethical conduct and compliance with laws.

Tuesday, July 03, 2012

Whistleblowers played key role in Glaxo's $3 billion settlement

Two whistleblowers represented by Phillips & Cohen provided critical evidence that helped launch massive government investigations into Glaxosmithkline's marketing practices, and resulted in the record $3 billion settlement yesterday.

Glaxo paid $1.017 billion to settle government charges based on the whistleblowers’ allegations and that of a separate “qui tam” (whistleblower) lawsuit regarding the “off-label” marketing of Advair, Wellbutrin, Imitrex, Lamictal, Zofran and Valtrex.

In addition, the British pharmaceutical company pleaded guilty to criminal charges for off-label marketing of Paxil, Welbutrin, and Advair, false price reporting practices, and failing to disclose the potential health risks of drugs to the FDA. The Department of Justice called the case the largest healthcare fraud settlement in U.S. history.

Phillips & Cohen represented key whistleblowers Thomas Gerahty, Glaxo's former senior marketing development manager, and former regional vice president Matthew Burke. The information provided by these whistleblowers contributed significantly to the government's case against Glaxosmithkline for its off-label marketing of Advair as a first-line asthma treatment. The extensive evidence and legal work prepared by Gerahty, Burke and Phillips & Cohen resulted in Glaxo settling the civil charges involving Advair for $686 million.

"The gravity of Glaxo's conduct cannot be overstated," said Phillips & Cohen attorney Erika Kelton. "The company's improper marketing practices extended across a wide range of its prescription drug portfolio. Given what we saw with Glaxo, Pfizer and other pharma companies, it's fair to conclude there has been almost no limit to what pharma companies have done to sell their products."

As many news outlets have pointed out, $3 billion represents only a fraction of the amount Glaxo made on these drugs during the years covered by the settlement. But the settlement is thought to be the first to include an agreement by the company to withdraw bonuses from top executives if they engaged in or supervised illegal behavior, according to the Wall Street Journal (subscription required).

“That creates pressure and it creates an element of responsibility,” Kelton told the New York Times. “I think it’s a good step in the right direction.”

The “qui tam” complaint, settlement agreement and exhibits for Gerahty and Burke’s whistleblower lawsuit are posted at