A qui tam False Claims Act (FCA) action brought by two whistleblowers alleging violations of the Anti-Kickback Statute (AKS) has resulted in a $54-million settlement from Teva Pharmaceuticals USA, Inc. and two subsidiaries (Teva) in the case of United States ex rel. Arnstein and Senousy v. Teva Pharmaceuticals USA, Inc. Although it was alleged that the federal government and various state and local governments suffered damages as a result of Teva’s actions, they declined to intervene in the case. Teva’s settlement highlights whistleblower incentives to file costly FCA claims against government contractors.

The whistleblowers were former Teva sales representatives. Their complaint alleged that, beginning in 2003, Teva held speaking events relating to its multiple sclerosis drug, Copaxone, and Parkinson’s disease drug, Azilect. The whistleblowers contended that doctors speaking at these events gave similar speeches to the same audience members, yet received honoraria between $1,500 and $2,700 for each speaking program they attended. According to the whistleblowers, this payment was used to induce doctors to prescribe Copaxone and Azilect. Pharmacies that filled these prescriptions then submitted claims for reimbursement to government-funded healthcare programs.

The AKS, among other things, criminalizes the payment of kickbacks to prompt someone to recommend a drug covered through a healthcare program. According to the whistleblowers, Teva’s payments of speaker fees to physicians constituted such a kickback. Congress amended the AKS in 2010 to provide for potential liability under the FCA for certain AKS-related activities that implicated fraud against the government, which made it possible to bring FCA allegations against Teva.

The FCA allows a reward of up to 30% for whistleblowers who recover funds on behalf of the government through the filing of FCA litigation in which the government does not intervene. In accordance with the settlement agreement between Teva and the plaintiffs, the plaintiffs and their attorneys will receive a relator fee of almost $14.6 million.

As this case shows, the FCA is a powerful tool that even private citizens can try to enforce without government intervention. It also exemplifies the potential financial threat whistleblowers can pose to government contractors, even without a finding of FCA liability. Simply put, if a company’s actions can be construed as intentionally misleading the government, this could result in a costly FCA claim.

To assist government contractors and related companies in understanding the FCA and how to avoid FCA liability, PilieroMazza has launched “Ex Rel. Radio,” a multi-part series of our GovCon Live! podcast, which includes commentary on potential pitfalls for your company, enforcement issues, and emerging trends. Ex Rel. Radio is available on Apple PodcastsSpotifyGoogle PodcastsTuneIn, and Stitcher, or you can visit our website at www.pilieromazza.com. Please stay tuned for our last podcast in this series, “FCA: The Year-End Review,” with Matthew Feinberg.

Tim Valley, the author of this blog, is a member of the Firm’s False Claims Act Group.

Special thanks to Firm Paralegal, Emmanuel Elone, for his assistance with this post.