Rare "Qui Tam" Jury Verdict Underscores False Claims Act's Impact on Regulatory Enforcement
Commentary by Jason S. Kanterman
On August 3, 2022, a jury returned a rare verdict in a qui tam False Claims Act ("FCA") matter, finding a pharmaceutical company liable for $61 million in damages arising out of purported misconduct involving the Medicaid Drug Rebate Program. The FCA generally provides for the trebling of actual damages which may make the final judgment more than $180 million. Such an amount is exclusive of any statutory penalties or attorney fees and cost awards that may be imposed by the Court.
In a Complaint filed in the United States District Court for the Northern District of Illinois, the relator alleged that the pharmaceutical company violated the best price provisions of the Medicaid Drug Rebate Program. The program generally requires drug manufacturers to give the federal government the lowest and best prices, which the company was found in violation of by artificially manipulating the average wholesale price ("AWP") it was reporting to the Centers for Medicaid and Medicare Services. The relator asserted that the federal government and state participants in the Medicaid program were charged more than they should have been for particular products. The relator alleged that the pharmaceutical company used a complex array of symbiotic agreements with its private purchasers to conceal the true AWP, and then used that manipulated AWP to charge the government an inflated sum.
Pursuant to the FCA and state equivalents, the overwhelming majority of any monies recovered would be returned to the states that overpaid for the products and the relator may receive a share (somewhere in the range of 25 percent of the total amount recovered) for his efforts.
Commentary
While jury trials in qui tam matters are rare, explosive verdicts of this kind serve as sobering reminders that the False Claims Act remains a potent enforcement tool in the Government's arsenal for pursuing fraudulent actors. The Department of Justice reported that in 2021, there were more than $5.6 billion in settlements and judgments from False Claims Act litigation, with more than $1.6 billion of that figure flowing from whistleblower-initiated qui tam matters. Businesses engaging with federal and state governments must be cognizant of their obligations to those sovereigns and must ensure compliance with all applicable statutory and regulatory obligations.