Whistle-blowers help recoup $9.3 billion

WASHINGTON — Whistle-blowers helped authorities recover at least $9.3 billion from health-care providers accused of defrauding states and the federal government, according to an analysis of Justice Department records.

The department ramped up efforts in the 1990s to combat health-care fraud by using private citizens with inside knowledge of wrongdoing. They now initiate more than 90 percent of the department's lawsuits focusing on health-care fraud.

Whistle-blowers start cases by filing a sealed complaint in federal court. The department investigates the allegation and can intervene, assuming the lead role in the lawsuit. Whistle-blowers then get between 15 percent and 25 percent of the amount recovered.

Of the $9.3 billion recovered between 1996 and 2005, whistle-blowers got more than $1 billion, say analysts, writing for the Annals of Internal Medicine.

The analysts' findings are conservative.

Information was only available for about three-quarters of the 379 cases reviewed. Second, some of the largest recoveries have taken place after the period reviewed.

For example, the study doesn't include the single largest settlement, worth $920 million, which came against Tenet Healthcare Corp., one of the nation's largest hospital chains, in 2006.

Still, the study highlights some important trends in health-care fraud.

While the number of claims pursued has dropped in recent years, recovery amounts have soared because of a late addition to the cast of defendants — pharmaceutical manufacturers. Recoveries jumped from about $10 million a case in 2002 to $50 million by 2005.

Drugmakers are required to sell products to state Medicaid programs at the "best price" offered in the private marketplace. But the companies may artificially inflate the price, according to the report.

Another common scheme is to market drugs for uses not approved by the Food and Drug Administration.

The report's authors, Aaron S. Kesselheim of Brigham and Women's Hospital in Boston, and David M. Studdert of the University of Melbourne in Australia, said data on hundreds of whistle-blower lawsuits should be researched to identify what type of allegations turn out to be legitimate and lead to recoveries so that the department can fast-track such cases. Reports indicate the department rejects about three-quarters of the cases it gets.

The law was recently changed to require larger health-care companies to educate employees about protections for whistle-blowers. Some lawmakers also want to expand the class of people who can file whistle-blower suits, such as government employees, which the business community has opposed.

The study indicates the current system is effective in generating significant recoveries for the government, said Matthew Webb, a senior vice president at the U.S. Chamber of Commerce Institute for Legal Reform.

"Some have said the law needs significant changes to make the cases actually stick," Webb said. "If their definition of 'not sticking' is $9.3 billion, I'd hate to see what their definition of sticking is."

Officials representing the trade group for prescription drug manufacturers declined to comment on the Justice Department's greater focus on their members, but said the companies devote significant resources to internal compliance programs that complement the government's efforts to prevent misconduct.

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