Insight into the Department of Justice False Claims Act GFY 2012 Settlement

In October the Department of Justice released its FY 2012 data on civil FCA settlements. The data shows a surprising uptick in civil FCA settlements from prior years. In Government Fiscal Year (GFY) 2012, civil FCA settlements totaled $4.9 billion, which represented an overall increase of 62 percent from GFY 2011.  As in prior years, many of the 2012 settlements continue to be related to healthcare matters involving the Department of Health and Human Services (HHS). In fact, of the total settlements in the year, roughly 62 percent involved HHS settlements. In GFY 2012, HHS Settlements rose 25 percent as compared to the prior year.

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Some of the more pertinent HHS settlements in GFY 2012 included:

  • GlaxoSmithKline’s July 2012 $2-billion civil settlement related to alleged off-label promotion of certain drugs and alleged payment of kickbacks to healthcare providers
  • Abbott Laboratories Inc.’s May 2012 $800-million civil settlement related to allegations that it promoted a prescription drug, Depakote, for off-label use
  • Amgen, Inc.’s December 2012 $612-million settlement related to allegations of false Medicare and Medicate claims for promotion of drugs for off-label use and unapproved doses as well as alleged kickbacks to healthcare providers
  • McKesson Corporation’s April 2012 $190-million civil settlement regarding alleged inflated prices resulting in Medicaid overpayments

Despite representing roughly 70 percent of the Government’s procurement spending, the Department of Defense (DoD) civil FCA settlements represented only 3 percent or $166.8 million of all settlements in GFY 2012.

Perhaps the most surprising fact regarding the GFY 2012 civil FCA settlement data relates to settlements not involving either HHS or DoD. In GFY 2012, $1.7 billion of all civil FCA settlements involved agencies other than the HHS or DoD. This is a remarkable 268-percent increase in settlements compared to the prior year and represents 35 percent of all civil settlements in GFY 2012.

Much of the uptick in non-DoD and non-HHS settlements is related to mortgage settlements with the Department of Housing and Urban Development.

Other significant non-DOD and non-HHS civil FCA settlements during the year included:

  • W.W. Grainger’s $70-million settlement in December 2012 related to alleged price reductions and defective pricing on its GSA Schedule contract and failure to provide “most-favored customer” pricing on two of its contracts with the U.S. Postal Service
  • Harbert Corporation’s $47-million settlement in March 2012 related to alleged-bid fixing on a U.S. Agency for International Development contract for construction of a sewer system in Egypt

As evident by the FCA settlement data for the DoD, there is no necessary correlation between an agency’s procurement spend and FCA settlements. However, prior history has shown that trends in FCA settlements can often be identified based on the nature of the referrals, investigations, and qui tam actions. For this reason, we recommend that our industry partners and clients keep abreast of FCA settlements.

Note: The data in the DoJ’s report includes civil settlements only and excludes matters ultimately referred to U.S. Attorneys for criminal investigation.

The views expressed in this article are those of the authors and do not necessarily reflect the position or policy of Berkeley Research Group, LLC.