False Claims Act and Inflated Pricing

The False Claims Act imposes liability on any person who submits a claim to the federal government that he or she knows (or should know) is false. The FCA provides that private parties may bring an action on behalf of the United States. 31 U.S.C. 3730 (b). These private parties, known as “qui tam relators,” may share in a percentage of the proceeds from an FCA action or settlement.

The False Claims Act also imposes liability on an individual who may knowingly submit a false record in order to obtain payment from the government. An example of this may include a government contractor who submits records that he knows (or should know) is false and that indicate compliance with certain contractual or regulatory requirements. The third area of liability includes those instances in which someone may obtain money from the federal government to which he may not be entitled, and then uses false statements or records in order to retain the money.

A common scheme that pharmaceutical companies use in defrauding the federal and state government health care programs is to inflate the “Average Wholesale Price” (AWP) for their drugs. The AWP is the average price for which drug wholesalers sell a specific drug to their customers. Medicare bases its reimbursement for each drug on the AWP reported by pharmaceutical companies.

Some pharmaceutical companies inflate the reported AWP for their drugs as a means of inducing their customers (doctors, hospitals, pharmacies) to purchase their drugs over their competitors’.

The larger the difference between the AWP and the actual cost paid by a health care provider the more incentive there is for the customer to purchase the drug. This scheme creates a kickback to the health care provider who purchases the drug because of the profit that they will gain from Medicare’s reimbursement based on the inflated AWP.

Under certain circumstances, inflating the AWP can violate the Federal Anti-Kickback Statute and therefore, the Federal False Claims Act because the inflated prices cause false claims to be submitted to Medicare and state health care programs. This type of Pharmaceutical misconduct has resulted in large settlements and judgments under the False Claims Act

For a free consultation about a potential Inflated Pricing fraud case, pharmaceutical fraud, or other potential whistleblower case, please contact us.

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