The False Claims Act (“FCA”) was enacted in 1863 as a tool to deter fraud against the government. The FCA prohibits presenting to the government a false or fraudulent claim for payment or approval. Congress strengthened the FCA in 1986 when it amended the qui tam provisions of the law to provide financial incentives and a procedural structure to whistleblowers – or relators – so that individuals could bring false claims act cases on behalf of the government. 

Qui tam actions, particularly healthcare-related, have increased exponentially in recent years. Of the $3 billion recovered by the Department of Justice from civil fraud and abuse cases in 2019, $2.6 billion involved the healthcare industry. In 2019 alone, the government paid $265 million to whistleblowers. While qui tam actions provide an important tool in the government’s fight against fraud, the potential recovery for whistleblowers presents a lucrative opportunity. Just as opportunists will seek to take advantage of the government when presenting false or fraudulent claims, opportunists will seek to take advantage of whistleblower rewards. 

That hypothetical became a reality in U.S. v. UCB, Inc. In that case, the relator, CIMZNHCA, LLC, filed a complaint alleging that UCB illegally paid physicians for prescribing a drug that UCB manufactured to treat Crohn’s disease. CIMZNHCA, is a subsidiary of Venari Partners LLC. Venari Partners formed 10 other daughter companies, each for the purpose of filing a separate qui tam action. All eleven qui tam actions allege virtually identical FCA violations against defendants in pharmaceutical and related industries. 

The DOJ moved to dismiss the qui tam complaint because, after investigating the Venari companies’ claims, including CIMZNHCA’s, it found the claims “to lack sufficient merit to justify the cost of investigation and prosecution and otherwise to be contrary to the public interest.” After grappling with jurisdictional, statutory construction, and constitutional issues, the Seventh Circuit Court of Appeals sided with the DOJ and ruled that the qui tam complaint must be dismissed. In so doing, the court agreed with the government that the FCA was used as a guise for a business opportunity rather than an effort to protect against government fraud and abuse. “These relators, created as investment vehicles for financial speculators, should not be permitted to indiscriminately advance claims on behalf of the government against an entire industry that would undermine practices the federal government has determined are appropriate and beneficial to federal healthcare programs and their beneficiaries.” 

Although the DOJ relies heavily on relators to enforce the FCA, UCB provides insights to the government’s and the courts’ tolerance for whistleblowers who seek to convert the FCA into a profit-making endeavor.

The attorneys at Chilivis Grubman have extensive experience with the False Claims Act.  If you need assistance with such a matter, please contact us today.