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Pharmaceutical Companies, Off-Label Promotion And Qui Tam Actions

By Randall L. Christian, Jason H.Casell and Francisco T. Rivas
June 28, 2011

The False Claims Act (FCA), as amended by the Federal Enforcement Recovery Act of 2009 (FERA), prohibits knowingly presenting a false or fraudulent claim to the federal government, and extends to those who submit or “cause” the submission of such claims. In pharmaceutical actions, most false claims qui tam actions brought by whistleblowers involve off-label promotion, kickbacks, pricing allegations, and reimbursement abuses. Although these start out as civil lawsuits, they often end with the Department of Justice (DOJ) pressing charges against the pharmaceuticals manufacturer. That was the case in the recently settled whistleblower action brought against UCB SA, the manufacturer of the epilepsy treatment drug Keppra. The pharmaceuticals maker settled the suit by pleading guilty on June 10 to a misdemeanor charge of misbranding its product by promoting its use for unapproved purposes. The company was forced to pay civil and criminal damages of more than $34 million.

The financial incentives created by the FCA have led to an explosion of whistleblower lawsuits and federal investigations. As of September 2009, the DOJ was actively investigating 996 whistleblower cases, up from 875 in 2008. Health-care fraud represents the majority of these cases. For example, in 1987, only three of the 30 total new federal qui tam lawsuits, or 10%, of the cases involved allegations of health-care fraud. In 2009, the total number of federal qui tam suits jumped to 433; a whopping 280, or nearly 65%, of those suits alleged health-care fraud. Partly in response to this explosion of qui tam activity, the federal government authorized $165 million to permit the DOJ to hire fraud prosecutors and investigators for 2010 and 2011. The combination of huge amounts of money at stake for companies, large recoveries for whistleblowers and their attorneys, and vast government resources to prosecute these cases constitute the elements of a perfect storm for pharmaceuticals companies.

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