Experienced healthcare fraud defense attorney Ileana Hernandez of Manatt Phelps & Phillips LLP recently spoke with us about the rising trends in healthcare fraud prosecutions across the United States. In particular, she noted that the Department of Justice (DOJ) is increasing prosecutions of pharmaceutical companies – a trend that she expects to continue. Here are some highlights from our interview with her.
“In 2008, the DOJ started the Health Care Fraud Prevention and Enforcement Action Team (HEAT), which is a joint initiative by various government agencies to attack health care fraud,” Hernandez explained. “They have been very effective in making inroads in identifying fraud schemes. The DOJ’s Health Care Fraud Unit has seen that there are a number of companies that may be acting fraudulently by gaming the system, making false claims or exaggerating the efficacy of their drugs.”
Hernandez also commented on how drug manufacturers can get caught up in federal investigations. For instance, she said that if they are telling Medicaid that they are selling, for example, 100 drugs when only 70 are being sold to pharmacies, then they can get into trouble.
“The DOJ is targeting physicians who use pharmaceuticals at their practices as well,” Hernandez noted. “A physician who takes kickbacks for prescribing particular medications or one who receives rebates in exchange for prescribing a drug may be committing fraud.”
Hernandez said she expects the DOJ’s increased enforcement activity to continue. “I think it will probably reach its peak within the next two years,” Hernandez predicted. “After that, I don’t know what will happen because all of these investigations take time and manpower, so at some point, they’ll have to decrease prosecutions. Our firm has worked with the DOJ to resolve some investigations, and they are very thorough in how they conduct an investigation.”
When asked what drug manufacturers can do to avoid an investigation or prosecution, Hernandez said that she tells clients to develop compliance programs. “Developing good compliance is important because it keeps you abreast of what the government is looking for and also provides a good paper trail if an investigation does occur,” Hernandez said.
“Another thing that is important – especially in the pharmaceutical industry – is to make sure that any contracts entered with physicians are fair and reasonable,” Hernandez added. “A lot of times, they’ll try to get buy-in from a physician by offering an additional rebate, but that can raise red flags with the DOJ. So, for example, if a physician is getting $20 off of every $100 in drugs that they purchase from you, then you’re giving them a 25% discount, and it doesn’t look right.”
Hernandez concluded: “I think we’ll continue to see more investigations and prosecutions in this space and more investigations into the pharmaceutical industry. But, even though we’re seeing a boom in this area, I still think it’s important to have compliance programs and regulations in place. Be diligent in following the rules so that you don’t have to be diligent in defending against allegations of violations.”