Expect health care enforcement actions from the US Department of Justice to cool down a notch under the incoming administration of President Donald Trump, Gibson Dunn attorneys said during a 7 November webinar.
Gibson Dunn partner John Partridge said that may be especially true for enforcement of cybersecurity-related claims. In 2021, the Biden administration launched an initiative that used the False Claims Act against firms that violated federal cybersecurity initiatives, but Partridge believes that policy is likely to be dropped.
“We’ve seen Civil Frauds and US Attorneys’ Offices pursue novel, aggressive theories in these types of cases, likely operating under the marching orders of the front office,” Partridge said. “We expect this to moderate somewhat. The old cases will continue on, no doubt, but there may be more opportunities for defendants to persuade DOJ on the margins not to pursue these types of cases, not to intervene in them.”
However, he predicts another key area of enforcement – fraud related to COVID-19 policy, such as the Paycheck Protection Program – will continue almost unchanged. The DOJ has taken enforcement action against small businesses, loan processors, and companies that started during the pandemic to provide diagnostic services.
“We doubt the new administration will shift stances on these types of cases all that much,” Partridge said.
“We see some escalation in the periods in which a Democratic president was in charge, but we certainly don’t see any significant drop-off thereafter under a new Republican administration.”
John Partridge
A final Biden administration priority, health care fraud, will remain at the forefront but may swerve away from proposed checks on investors who may push companies they own to file fraudulent claims, Partridge said. He expects the Department of Health and Human Services to remain skeptical about the role of private equity in the health care market but thinks the DOJ will be less likely to investigate potential False Claims Act liability in these cases.
Overall, he noted, Republican and Democratic administrations have been similar in the types and volume of FCA actions they pursued.
“We see some escalation in the periods in which a Democratic president was in charge, but we certainly don’t see any significant drop-off thereafter under a new Republican administration,” Partridge said.
Chevron Remains Open Question
It’s still unclear how False Claims Act enforcement will be affected by last spring’s US Supreme Court decision in Loper Bright Enterprises et al. v. Raimondo et al., which overturned the longstanding Chevron doctrine and gave the courts final say over the interpretation of ambiguous legislation.
Jim Zelenay, an attorney in Gibson Dunn’s Los Angeles office, pointed out that there have been already disagreements between circuit courts around how to determine a defendant’s knowledge of a potential violation when considering a motion to dismiss. The greater discretion given to the courts could undermine plaintiff arguments, he pointed out – for example, if the Department of Justice says that a defendant should have known their behavior violated the False Claims Act because of guidance from federal agencies.
“That agency guidance now, under Loper Bright, it’s not something that courts should really rely upon,” Zelenay said. “It’s something that’ll present some interesting arguments as the cases develop on this issue.”
Also of note, Zelenay said, is a case argued before the Supreme Court in early November.
The case, Wisconsin Bell v. US, asked the court to determine whether a certain kind of reimbursement request, submitted to the Federal Communications Commission, was a “claim” under the FCA. The court’s ruling could provide guidance on “what’s considered an actual claim under the False Claims Act,” he said.
Also brewing is a potential review of qui tam (whistleblower) provisions under the False Claims Act. There have been arguments that the provisions were unconstitutional over the years, Zelaney explained. While the courts have generally dismissed those positions, Supreme Court Justices Clarence Thomas, Brett Kavanaugh, and Amy Coney Barrett expressed concerns about the constitutionality of qui tam provisions in recent rulings.
“Three justices of the court have indicated that there are questions as to the constitutionality of the qui tam provisions,” Zelenay said. “So as you would expect, defendants have now been asserting these arguments in the district courts fairly consistently.”
In September, one Florida court ruled that the provisions were unconstitutional, while another ruled that they were not. An appeal to the 11th circuit – and perhaps eventually the Supreme Court – appears imminent, Zelenay said.
Another ongoing debate revolves around whether claims filed after an illicit kickback automatically violate the False Claims Act, even if the people filing the claim were unaware of the kickback. That too is the subject of a circuit split, Gibson Dunn partner Partridge said. He believes that the current uncertainty should spur plaintiffs to collect as much proof as possible that the defendant was or should have been aware of the kickback.
Medical Necessity, Speaker Programs Among Most Common Causes
Some common causes of FCA actions, Gibson Dunn partner Jonathan Phillips said, include lack of medical necessity; off-label promotion; the submission of misleading data to the FDA that contributed to a product’s regulatory authorization; and all types of Medicare pricing and billing. Speaker programs in which a manufacturer pays health care professionals to educate peers, often over lunch or dinner, also may fall subject to DOJ scrutiny.
Many expect these programs to be exempt from enforcement under a safe harbor protecting payments to health care professionals as long as they are consistent with fair market value and appropriately documented, among other requirements. But that’s not the case, Phillips said.
“The government in recent years and relators have alleged a variety of different ways in which speaker programs allegedly fall out of that rubric,” he said. “In 2020, the HHS Office of Inspector General issued a special fraud alert, which folks may know is something that they do on an ad hoc basis but not particularly commonly when they identify a business practice or an area of enforcement that they are seeing and want to provide particularized guidance.”
The 2020 alert identified a number of warning signs that a speaker program may be out of compliance, such as repeat attendance by the same individuals, attendance by non-clinical staff, or “aspects of the meal or the venue that call into question whether the purpose of the program is to actually do educational exchange,” Phillips said. These allegations have led to large FCA settlements, including $33m in one case in which Medtronic hosted purported educational sessions at a restaurant owned by a neurosurgeon and his wife.
“The allegation is that is a benefit, financial benefit or payment to the physician that goes outside of the four corners of the safe harbor,” Phillips said.