CA Health System to Pay $46 Million to Resolve Whistleblower Suit


Sutter Health, a Sacramento, CA-based health system, announced the resolution of a whistleblower lawsuit regarding unbundling and over-billing schemes for anesthesia services provided.  The 2009 lawsuit was brought against Sutter by billing auditor, Rockville Recovery Associates. The commissioner joined suit in 2011. A trial in Sacramento Superior Court was scheduled to commence later this month.

According to California Insurance Commissioner, Dave Jones, “Sutter patients or their insurers received three separate charges relating to anesthesia including a charge by an outside anesthesiologist, a charge for the operating room and a charge under an obscure code…” “Unbundling” is the practice of submitting bills piecemeal or in a fragmented fashion to maximize the reimbursement for various tests or procedures that are required, pursuant to Medicare and Medicaid guidelines, to be billed together and therefore at a reduced cost.  According to the suit, the services billed were allegedly already captured in an operating room charge.

In touting the settlement, Commissioner Jones stated, “this settlement represents a groundbreaking step in opening up hospital billing to public scrutiny.” “The settlement requires Sutter to disclose on its Website every component of its anesthesia billing and what those services cost Sutter. Patients, insurers and the public will now be able to compare Sutter’s costs to what it charges for anesthesia. They will see any mark-ups. I commend Sutter for agreeing to these reforms and this settlement. This new transparency should lead to lower prices and point the way to similar billing reforms for all types of hospital services.”  California’s complete press release may be viewed in its entirety here.

“Unbundling” is a frequently utilized tactic by government health care fraud offenders.  An unbundling scheme simply allows a health care provider, or in this case, a health care system, to fraudulently maximize its reimbursement amount by billing the tests and/or procedures separately rather than properly accounting for the test and/or procedures under the single group billing code.

If you are aware of an unbundling scheme, or believe you are a victim of unbundling, contact Young Law Group for a free confidential consultation.

Young Law Group is a nationwide leader in whistleblower representation and has successfully represented individuals in countless qui tam cases for over a decade.  Young Law Group attorneys represented whistleblowers in two of the largest False Claims Act settlements in history.  Our firm takes every inquiry seriously and considers confidentiality a top priority.    For a free confidential consultation, please call Eric L. Young, Esquire at (215) 367-5151 or email to



Facing charges from the U.S. Securities and Exchange Commission (“SEC”), Major hedge fund, SAC Capital Advisors, announced its intent, this week, to plead guilty to allegations that the company profited handsomely from illegal insider trading.  As part of the guilty plea SAC has agreed to pay $1.8 billion, the largest financial penalty ever to result from insider trading claims.  Additionally, the company will no longer operate as an investment adviser or invest third-party funds.  Government officials described the penalties as “steep but fair” and “commensurate with the breadth and duration of the charged criminal conduct.”

The federal government alleges that SAC managers and analysts illegally executed trades, based on inside information, between 1999 and 2010 to the tune of hundreds of millions of dollars.  According to the lead prosecutor, U.S. Attorney for the Southern District of New York, Preet Bharara, the company “trafficked in inside information on a scale without any known precedent in the history of hedge funds.”  The funds managed by SAC were a roughly equal mix of client and employee money.

SAC’s plea will not resolve a pending case, brought by the SEC, against the company’s founder Steven A. Cohen.  According the SEC’s civil suit, Cohen, a billionaire and financial rock star, failed to prevent the insider trading that was so rampant throughout his company.  For his part, Cohen flatly denies the SEC’s allegations.

It is unknown at this time whether a whistleblower’s tip played a role in the SEC’s investigation.  However, if that was indeed the case, that individual or group of individuals may receive up to ten to thirty percent of the government’s total recovery, pursuant to the SEC’s Whistleblower program under Dodd-Frank.

McEldrew Young Purtell Merritt is a law firm representing SEC whistleblowers reporting securities fraud such as insider trading to the U.S. Government.  For a free confidential consultation, please call Eric L. Young, Esquire at (800) 590-4116 or complete ou online form to contact us.

The DNA of Medicare Fraud & the False Claims Act

False Claims Act

Genetic Testing Laboratory Pays $2 Million to Settle Allegations of Medicare Fraud

The Justice Department announced a settlement last month with GenomeDx Biosciences Corp. (“GenomeDx”), a genetic testing laboratory based in Vancouver, British Columbia with offices in San Diego. GenomeDx agreed to pay nearly $2 million to resolve alleged violations of the False Claims Act. According to the complaint, GenomeDx committed Medicare fraud by submitting false claims for its “Decipher” post-operative genetic test. The Decipher test measures the activity of genes in prostate tumors to evaluate the risk of cancer recurrence.

UK Contemplates Qui Tam Provision


It has recently been reported that the British government is contemplating the creation of a reward system, with qui tam provisions similar to the False Claims Act, to encourage whistleblowers to come forward with necessary information to root out government fraud and other white-collar crime.

The U.K. Home Office, acting in concert with other British agencies, are examining the qui tam provisions contained in the False Claims Act, as well as the IRS and SEC Whistleblower programs. As of now, the British government does not financially reward individuals for revealing original information used by the government to thwart fraud. Due to the recognized potential and actual hardships associated with the courageous act of blowing the whistle, as a seasoned False Claims Act attorney, I feel the addition of a qui tam provision will greatly assist our allies across the pond in its fight against government fraud.

As reported in the New York Times here, Britain’s government will “consider the case for incentivizing whistleblowing, including the provision of financial incentives, to support whistleblowing in cases of fraud, bribery and corruption,” the Home Office said as part of a document announcing the new National Crime Agency (“NCA”) in Britain. The NCA is Britain’s closest equivalent to the FBI. Although discussions concerning a qui tam provision have commenced, there is no deadline regarding a decision on the same.

Since 1986, the Department of Justice’s civil fraud section has recovered more than $20 billion in settlements and judgments, including whistleblower actions.  It is well-recognized that the qui tam provisions of the FCA provide strong incentive for citizens to assist the government in preventing and deterring fraud.

In 2011, the SEC established its own whistleblower program pursuant to the Dodd-Frank Act, the financial industry reform bill passed in response to the financial crisis. Under the SEC’s program, whistleblowers who supply original information that results in sanctions exceeding $1 million can receive rewards representing up to 30 percent of those sanctions. The SEC on numerous occasions has praised the legislatures’ inclusive of a qui tam provision which, according to Mary Jo White, SEC Chairwoman, “has had a big impact on our investigations by providing us with high quality, meaningful tips.”

I am hopeful that the British government will recognize and appreciate the importance of our qui tam provisions and establish its own incentives to reward courageous whistleblowers for their vital information.

Young Law Group is a nationwide leader in whistleblower representation and has successfully represented numerous clients in some of the nation’s largest qui tam cases for over a decade.  For a free confidential consultation, please call Eric L. Young, Esquire at (800) 590-4116 or complete the online form here.




U.S. District Court for the District of Massachusetts Refuses to Adopt Narrow Definition of SEC Whistleblower Under Dodd-Frank


On October 16, 2013, a federal court in Massachusetts issued a ruling widely applauded by whistleblower attorneys and advocates.  See Ellington v. Giacoumakis, No. 13-11791-RGS, 2013 WL 5631046 (D. Mass. Oct. 16, 2013).  The primary issue in the decision is the applicability of Dodd-Frank’s anti-retaliation provisions to whistleblowers that experience retaliatory action, prior to bringing their concerns to the Securities and Exchange Commission (“SEC”).  As explained below, this issue is of grave concern to the whistleblower community and has been litigated to differing results throughout the country.

In denying the defendants’ motion for judgment on the pleadings, the court in Ellington addressed the specific issue of whether the plaintiff qualified for the whistleblower protections of Dodd-Frank, in light of the fact that he brought his concerns to the SEC only after his termination.  In Ellington the defendants terminated the plaintiff’s employment after he reported his concerns regarding defendants’ securities violations internally to the company’s compliance officer.  After his firing, the plaintiff subsequently reported to the SEC.  The defendants moved for dismissal arguing that the plaintiff did not qualify as a “whistleblower” as defined by Dodd-Frank and, hence, was not entitled to its protections.

The defendants premised their arguments on Asadi v. G.E. Energy (USA) LLC, a July decision by the Fifth Circuit Court of Appeals which is highly problematic for SEC whistleblowers.  720 F.3d 620 (5th Cir. 2013).  In rendering its decision, on analogous facts, the Fifth Circuit held that congressional intent was clear, in enacting Dodd-Frank, that SEC whistleblowers were limited by statutory definition to individuals who brought their information to the SEC.  The theory is premised on the definitions section of the statute which states, “[t]he term ‘whistleblower’ means any individual who provides… information relating to a violation of the securities laws to the Commission.”  15 U.S.C. § 78u-6(a)(6).  The Asadi ruling was certainly ground-breaking, albeit in an alarming manner.

Prior to the Asadi decision, several federal courts, ruling on the same issue, found that competing statutory language and congressional intent required the term “whistleblower” be construed more liberally for purposes of Dodd-Frank.  See Egan v. Tradingscreen, Inc., No. 10-8202, 2011 WL 1672066, at *4 (S.D.N.Y. May 4, 2011); Kramer v. Trans-Lux Corp., No. 11-1424, 2012 WL 4444820, *4 (D. Conn. Sept. 25, 2012); Genberg v. Porter, No. 11-02434, 2013 WL 1222056, *10 (D. Colo. Mar. 25, 2013); Murray v. UBS Securities, LLC, No. 12-5914, 2013 WL 2190084, at *6-7 (S.D.N.Y. May 21, 2013); see also Nollner v. S. Baptist Convention, Inc., 852 F. Supp. 2d 986 (M.D. Tenn. 2012).  These courts determined, contrary to the Asadi ruling, that reporting to the SEC is not a prerequisite for protection under Dodd-Frank’s anti-retaliation provisions.  However, two days after the Fifth Circuit rendered its decision in Asadi, a federal court in Colorado followed suit and adopted its reasoning, demonstrating an alarming development in the law.  Wagner v. Bank of America Corp., No. 12-00381, 2013 WL 3786643 (D. Colo. July 19, 2013).

Ellington is a critical case, as it is the first district court, post-Asadi, to rule on this issue in a manner favorable to whistleblowers.  Moreover, it signals the willingness of federal courts, outside the Fifth Circuit, to refuse to adopt the dangerous precedent set by Asadi.  To some, it seems this issue is destined for Supreme Court adjudication.  But until that time, at least outside of the Fifth Circuit, it seems securities whistleblowers can avail themselves upon the anti-retaliation provisions of Dodd-Frank, regardless of whether their concerns reach the SEC prior to experiencing retaliatory action.

Young Law Group is a nationwide leader in whistleblower representation and has successfully represented numerous clients in some of the nation’s largest qui tam cases for over a decade.  For a free confidential consultation with one of our SEC whistleblower lawyers, please call Eric L. Young, Esquire at (800) 590-4116 or complete the online form here.



Southern District of New York Federal Court Greenlights McEldrew Young Purtell Merritt’s False Claim Act Case Against Teva Pharmaceuticals for Trial Involving Allegations of Nationwide Kickback Scheme


Chief U.S. District Judge Colleen McMahon ruled on February 27th that a False Claims Act suit brought by two former employees of Teva Pharmaceuticals USA, Inc. will proceed to a trial on the merits.  In a detailed seventy-page opinion, the Court rejected numerous arguments asserted by Teva Pharmaceuticals USA, Inc. and two of its subsidiaries (“Teva”) in its motion for summary judgment.  The ruling preserves all of the relators’ claims asserted against Teva under the federal False Claims Act.




Today a federal jury in the Central District of California unanimously found JM Eagle liable for defrauding the United States and several individual states.  The trial was the first step in the culmination of seven years of contentious litigation.  In order to facilitate a smoother proceeding, U.S. District Judge George H. Wu separated the trial into liability and damages phases.  The second half of the bifurcated trial will soon commence to determine damages, and ultimately the amount owed by JM Eagle.

JM Eagle, the world’s largest manufacturer of PE and PVC piping, is headquartered in Los Angeles, CA.  Given its preeminence in its field, JM Eagle has supplied considerable amounts of PE and PVC piping to the federal government, as well as, state and local governments throughout the nation.

The qui tam suit, filed under the False Claims Act, was brought by former JE Eagle employee John Hendrix.  Mr. Hendrix formerly worked as an engineer in the company’s product assurance division, located in New Jersey.  Mr. Hendrix claimed that JE Eagle deliberately manufactured and sold substandard piping, which was utilized throughout the country in water and sewer lines to disastrous effect.  The jury agreed with Mr. Hendrix and found JE Eagle knowingly manufactured and sold an inferior, albeit cheaper to produce, product to increase its profit margins.

Young Law Group is a nationwide leader in whistleblower representation and has successfully represented numerous clients in some of the nation’s largest qui tam cases for over a decade.  For a free confidential consultation, please call Eric L. Young, Esquire at (800) 590-4116 or complete the online form.

Retina Institute Settles with Government for $6.65 Million Over Allegations of False Claims Act Violations


On October 2, 2019, Retina Institute of California Medical Group (RIC), along with its former CEO and several physicians, agreed to pay $6.65 million to resolve allegations of False Claims Act violations. RIC is a medical partnership of ophthalmologists with multiple locations in California. The medical group was alleged to have defrauded government health care programs by billing for unnecessary exams, improperly waiving Medicare copayments, and other regulatory violations. Eric Young, managing partner of McEldrew Young Purtell Merritt’s whistleblower practice, worked on the case with attorneys from the law firm of Berger Montague.

The case, United States ex rel. Smith and Rogers v. Chang, No. 13-CV-3772-DMG (C.D. Cal.), was filed in May 2013. The complaint was unsealed in July 2016 after the government elected not to intervene in the case. The two Relators were both former employees of RIC who provided substantial documentation to support allegations in the complaint. Bobette Smith was the CEO of the practice group from June 2012 to January 2013, and Susan Rogers worked as the manager of the billing department over the same six month period. The allegations in the complaint were based on information discovered by the Relators during the course of their employment, as well as their personal observations and investigation into what they believed to be fraud against the federal government and the State of California.

Routine Waiver of Medicare Deductibles and Copayments Can Result in False Claims Act Violations

Medical service providers are required to collect copayments and deductibles from all Medicare beneficiaries, except in specific cases of financial hardship. Any incentive that generates improper referrals, particularly where a medical service provider offers free or discounted items or services to Medicare beneficiaries, or promotes overutilization of medical services can constitute the submission of false claims to the federal government. Thus, a service provider that routinely waives cost-sharing amounts for Medicare beneficiaries, but bills Medicare for the full allowable amount, can be face substantial penalties under the False Claims Act.

The Office of Inspector General for the Department of Health and Human Services set forth detailed guidance on this issue back in 1994:

“Routine waiver of deductibles and copayments by charge-based providers, practitioners or suppliers is unlawful because it results in (1) false claims, (2) violations of the anti-kickback statute, and (3) excessive utilization of items and services paid for by Medicare.

*  *  *  *

A provider, practitioner or supplier who routinely waives Medicare copayments or deductibles is misstating its actual charge. For example, if a supplier claims that its charge for a piece of equipment is $100, but routinely waives the copayment, the actual charge is $80. Medicare should be paying 80 percent of $80 (or $64), rather than 80 percent of $100 (or $80). As a result of the supplier’s misrepresentation, the Medicare program is paying $16 more than it should for this item.

In certain cases, a provider, practitioner or supplier who routinely waives Medicare copayments or deductibles also could be held liable under the Medicare and Medicaid anti-kickback statute . . . When providers, practitioners or suppliers forgive financial obligations for reasons other than genuine financial hardship of the particular patient, they may be unlawfully inducing that patient to purchase items or services from them.

One important exception to the prohibition against waiving copayments and deductibles is that providers, practitioners or suppliers may forgive the copayment in consideration of a particular patient’s financial hardship. This hardship exception, however, must not be used routinely; it should be used occasionally to address the special financial needs of a particular patient. Except in such special cases, a good faith effort to collect deductibles and copayments must be made. Otherwise, claims submitted to Medicare may violate the statutes discussed above and other provisions of the law.”

Retina Institute’s Alleged Systematic Waiver of Medicare Copayments and Deductibles

According the allegations in the complaint, the defendants attempted to induce referrals by routinely waiving Medicare copayments and deductibles for patients without properly investigating or documenting their financial status. In order to disguise the practice, the defendants sometimes allegedly had patients complete a financial hardship form; however, most deductible and copayment waivers were allegedly granted without the completed form. On those limited occasions when the form was used, patients often signed the forms, allegedly without providing any information regarding their financial status.

A ophthalmologist who maintained a general practice near one of RIC’s locations allegedly told an RIC ophthalmologist he expected that copays for Medicare patients to be waived, and that he would not refer patients if copays were not waived. The Relators had records which identified the patients who were referred to RIC by this particular ophthalmologist. The documents showed the receipts for those patients amounted to only 80% of the Medicare allowable amount. Without consideration of financial hardship or any documents to verify such designations, the copayments for these patients were allegedly waived as a matter of course.

Relators independently investigated several patients whose records indicated a financial hardship waiver. They discovered that some of those patients lived in expensive homes, including one residence valued in the millions of dollars.

The Relators each separately explained to Dr. Tom Chang, one of RIC’s physician/owners, that the policy and practice of routinely waiving Medicare copays and deductibles did not comply with Medicare regulations. Dr. Chang allegedly responded, on more than one occasion, that he would prefer to continue using the financial hardship waivers to ensure that RCI did not lose any referrals or patients. Dr. Chang allegedly said he would simply pay the fines if Medicare ever learned about the practice. In light of his former position as a Medicare compliance officer for the Department of Ophthalmology at the University of Southern California School of Medicine, Dr. Chang’s alleged comments and lack of concern are quite noteworthy.

Relator Smith made several attempts to advise RIC’s partners about changing the manner in which financial hardship cases were handled. She even made a presentation to the RIC senior management team and Executive Committee warning of the potential adverse consequences of continuing with the current practice. During the presentation, Dr. Chang allegedly repeated that he would pay the fines if Medicare ever discovered the way in which RCI handled the waivers.

The History and Purpose of the Anti-Kickback Statute

The Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b) (“AKS”), prohibits any person or entity from offering, making, soliciting, or accepting remuneration, in cash or in kind, directly or indirectly, to induce or reward any person for purchasing, ordering, or recommending or arranging for the purchasing or ordering of federally-funded medical goods or services. The statute was enacted in 1972 to address concerns that remuneration provided to those who influence health care decisions would result in services that were medically unnecessary, of poor quality, or harmful to a vulnerable patient population. Congress therefore passed the AKS to prohibit the payment of kickbacks in any form. The statute was amended in 1977, and again in 1987, to ensure that kickbacks could not be disguised as legitimate transactions to circumvent the law.

Retina Institute’s Alleged Violations of the Anti-Kickback Statute

A physician who refers a patient for medical services to an entity in which the physician has a financial interest violates the AKS unless the referral falls within the “safe harbor” regulations.

The physician defendants named in the complaint had financial ownership interests in an ambulatory surgery center known as the San Gabriel Surgery Center. Those physician defendants, as well as other RIC physicians, routinely referred RIC patients in need of surgery to the San Gabriel Surgery Center.  Such referrals would only be covered by the safe harbor regulations if the physician’s investment interest was fully disclosed to the patient.

According to the allegations in the complaint, RIC physicians did not advise their patients that RIC principals had an investment interest in the San Gabriel Surgery Center.  Patients were allegedly given a brochure instead that stated, “The ownership for San Gabriel Ambulatory Surgery Center may be obtained by contacting the center at (626) 300 – [XXXX].”

In order to ascertain whether accurate information was disseminated, Relator Smith asked the scheduling agent at RIC to call the phone number on the brochure to learn who owned the surgery center. The scheduling agent allegedly reported to Relator Smith that the individuals who responded to the call could not provide any information about the ownership of the center nor could they find anyone who could answer the question.

The Government Relies on the Assistance of Whistleblowers

This case illustrates the important role that whistleblowers play in identifying and reporting fraud.  Due to the enormity of claims processed under government-funded health care programs, it is impossible for every instance of fraud to be detected.  Employees are often in the best position to observe fraud and gather evidence to corroborate their observations. The government depends on such individuals to come forward and report what they reasonably believe to be fraud.

The False Claims Act permits a private individual to sue on behalf of the United States and share in any recovery. The government may intervene in the action, in which case a Relator may receive a reward of 15 percent to 25 percent of any monetary recovery.  In cases such as this one, where the government declines to intervene, the whistleblower may pursue the action on their own and can receive a reward of 25 percent to 30 percent of any monetary recovery.

If you have evidence of fraud being committed against the government by an employer, business competitor or contractor, call the experienced whistleblower attorneys McEldrew Young Purtell Merritt at (215) 367-5151 for a free, no-obligation consultation.

U.S. Recovered Over $2 Billion from Health Care Fraud in 2012 Alone


The premier whistleblower advocacy group, Taxpayers Against Fraud (“TAF”), recently released a report detailing that Whistleblower lawsuits brought under the qui tam provisions of the False Claims Act have generated over $3 billion in settlements and judgments in civil cases in 2012 alone. Cases involving pharmaceutical and medical device sales and marketing fraud comprised the largest portion of these recoveries or approximately $2 billion. The TAF report concluded that every dollar invested by the U.S. government to investigate and prosecute health care fraud generates about $16.4 dollars. The report further details that between 2008 and 2012, the U.S. government expended approximately $575 million in cases that recovered approximately $10 Billion.

As noted in the TAF report, the U.S. Department of Justice has embraced cases being brought under the qui tam provisions of the False Claims Act and, in fact, in 2009 created the Health Care Fraud Prevention and Enforcement Action Team (HEAT) which is aimed at enabling closer collaboration between the Department of Justice and the U.S. Department of Health and Human Services. The TAF report emphasized some recent significant recoveries in the pharmaceutical industry under the False Claims Act including cases involving GlaxoSmithKline, Merck, and other Pharma heavyweights.

GSK paid approximately $1.5 Billion to resolve False Claims Act cases involving a number of drugs marketed and sold for uses not approved by the FDA, payment of kick-backs to prescribers, and other false and misleading statements about drug safety and efficacy. Likewise, Merck paid over $300 million for false and misleading claims about some of its drugs.

As noted in the TAF report, the positive impact that False Claims Act qui tam cases have for U.S. taxpayers cannot be fully accounted for. The reported settlement amounts do not include the amount of money saved by government health care programs due to the deterrent effect of False Claims Act cases. These major settlements undoubtedly cause some pharmaceutical companies and others in the healthcare arena to think twice before engaging in widespread sales and marketing fraud at the expense of federal and state health care programs. At the end of the day, whistleblower programs such as those provided for under the qui tam provisions of the False Claims Act are a critical component to our healthcare system self-correcting such  that wide spread fraud and other misconduct can be ferreted out.

Young Law Group is a nationwide leader in whistleblower representation and has successfully represented numerous clients in some of the nation’s largest qui tam cases for over a decade.  For a free confidential consultation, please call Eric L. Young, Esquire at (800) 590-4116 or complete the online form here.

TEVA Agrees to Pay $54 Million to Settle McEldrew Young False Claims Act Qui Tam Whistleblower Lawsuit


Attorney Eric. L. Young announced today that Teva Pharmaceuticals USA, Inc., Teva Neuroscience, Inc., and Teva Sales and Marketing, Inc. (hereinafter collectively referred to as “TEVA”) have settled allegations in a qui tam complaint filed by McEldrew Young, Attorneys-at-Law, and co-counsel, Shepherd, Finkelman, Miller & Shah, LLP (“SFMS”), on behalf of two relators, Charles Arnstein and Hossam Senousy, both of whom previously worked as sales representatives for TEVA.

The allegations in the qui tam complaint focused on a scheme to induce physicians to write prescriptions for the drugs Copaxone and Azilect by paying them as “speakers” or “consultants,” when, in reality, many of the programs at issue were sham events. As a result of TEVA’s allegedly illegal payments, the physicians prescribed Copaxone, which treats relapsing-remitting multiple sclerosis, and Azilect, which treats symptoms of Parkinson’s disease, and influenced other prescribers to do the same.

According to the complaint, physicians who participated in the alleged sham speaker programs wrote prescriptions for the two drugs that were filled at pharmacies across the country.  After filling and dispensing the prescriptions, the pharmacies then submitted claims for reimbursement to various government-funded health care programs.  The pharmacies’ claims resulted in payments by the government for prescriptions that were allegedly induced through fraud, i.e., TEVA’s alleged illegal payments to physicians who wrote the prescriptions.  Since TEVA’s actions allegedly caused the submission of false claims to the government via the dispensing pharmacies, those actions constituted violations of the False Claims Act (“FCA”), 31 U.S.C. §§ 3729-3733.

The complaint also alleged violations of the Anti-Kickback Statute (“AKS”), 42 U.S.C. § 1320a -7b, which, among other things, criminalizes “knowingly or willingly” offering or paying a person “remuneration,” in the form of  kickbacks, bribes, or rebates, to “induce” that person to “recommend” the purchase of a drug covered by a “Federal health care program.” 42 U.S.C. § 1320a-7b(b)(2).  Simply stated, the AKS prohibits a pharmaceutical manufacturer from offering, directly or indirectly, any remuneration to induce a physician to prescribe, or a Medicare patient to purchase, that manufacturer’s drugs.

The AKS was amended in 2010 to explicitly state that “a claim that includes items and services resulting from a violation of [the AKS] constitutes a false or fraudulent claim for purposes of [the FCA].”  42 U.S.C. § 1320a-7b(g). Thus, a claim submitted to a government-funded health care program for a prescription drug in violation of the AKS also constitutes a violation of the FCA.  The 2010 amendments also reduced the standard for “intent” under the AKS, such that “a person need not have actual knowledge of [the AKS] or specific intent to commit a violation of [the AKS].”  42 U.S.C. § 1320a-7b(h).


McEldrew Young and SFMS filed the original qui tam complaint on behalf of the relators in May 2013.  The complaint alleged that, beginning in 2003, TEVA provided bogus honoraria or speaking fees to physicians for participation in numerous sham speaker programs in connection with the drugs Azilect and Copaxone.

On November 18, 2014, the United States, along with the various state and municipal governments that were also named as plaintiffs in the complaint, notified the Court of their decision to decline intervention in the case.  On March 12, 2015, the Court issued an Order unsealing the complaint while confirming that the various governments had declined to intervene in the action.

Despite the governments’ decision against intervention, McEldrew Young and SFMS were not deterred in prosecuting the case on behalf of their clients, as well as the federal, state and municipal governments that suffered damages as a result of TEVA’s allegedly illegal practices. “Although we were faced with an adversary of disproportionate size and considerably greater resources, we remained steadfast and aggressively prosecuted the case based on our belief in our clients and the correctness of our position,” said Eric Young, managing partner of McEldrew Young’s whistleblower practice. McEldrew Young and SFMS were assisted during litigation by co-counsel David J. Caputo and Joseph Trautwein of Youman & Caputo, LLC, and Heidi A. Wendel of Heidi Wendel Law.

Summary Judgment Motion

On February 27, 2019, Chief U.S. District Judge Colleen McMahon issued a Memorandum Decision and Order denying TEVA’s motion for summary judgment in its entirety.  In a detailed, seventy-page opinion, Judge McMahon rejected numerous arguments asserted by TEVA and ruled that all allegations of TEVA’s FCA violations would proceed to trial on the merits, which was scheduled to start on August 19, 2019.

In dismissing TEVA’s assertion that the AKS required evidence of a quid pro quo arrangement, the Court found that the relators’ complaint raised a genuine issue of material fact as to whether TEVA had violated the AKS.  The Court also ruled that there was a genuine issue of material fact regarding the efficacy of TEVA’s compliance program.  Although TEVA’s written compliance polices had “all of the right language,” the Court noted that the existence of those policies had no bearing on whether TEVA actually adhered to them.

Settlement of Complaint Allegations

“This settlement helps ensure that when a physician chooses a prescription drug for his or her patient, that choice will be motivated solely by the best interests of the patient and not tainted by any improper financial considerations,” said Eric Young.  Mr. Young added, “We were inspired by the level of our clients’ commitment to hold TEVA accountable for its alleged misconduct.  Today’s result is also a victory for American taxpayers who are the ultimate victims when unscrupulous individuals and companies defraud the government, oftentimes with impunity.”

As the managing partner of McEldrew Young’s whistleblower practice, Eric Young has a distinguished track record of success.  Mr. Young has recovered more than $2 billion dollars for the government on behalf of his whistleblower clients. McEldrew Young represents whistleblowers from across the country and abroad.  Many whistleblower cases are brought under the False Claims Act, which allows a private individual, known as a relator, to file a lawsuit on behalf of the United States government against an individual or company that has perpetrated a fraud against the government.  If a relator successfully recovers funds on behalf of the government, he or she may receive a reward of up to twenty-five percent (25%) of the civil monetary recovery if the government intervenes, and up to thirty percent (30%) if the government declines to intervene, such as in this case.

Case citation: United States ex rel. Arnstein and Senousy v. Teva Pharmaceuticals USA, Inc., No. 1:13-cv-03702-CM-OTW (S.D.N.Y.)

Call Now ButtonCall Now