Consumer Fraud

Amid newer whistleblower laws, False Claims Act remains top fraud fighter

osha whistle Amid newer whistleblower laws, False Claims Act remains top fraud fighterEarlier this month, health care conglomerate Johnson & Johnson agreed to pay the U.S. government more than $2.2 billion in criminal and civil fines to resolve whistleblower accusations that it illegally promoted its antipsychotic drug Risperdal to children, the elderly, and people with developmental disorders. The settlement, one of the largest in U.S. history involving health care fraud, demonstrates that the federal False Claims Act remains the government’s most powerful tool in recovering taxpayer funds taken from government-subsidized programs through fraudulent practices.

On November 4, the U.S. Justice Department announced it had reached an agreement with Johnson & Johnson to settle allegations that it had aggressively marketed Risperdal as a way to control dementia patients in nursing homes and children with certain behavioral disabilities despite knowing that the drug posed serious health risks. The drug was not approved for either use by the U.S. Food and Drug Administration (FDA). The agreement also settles allegations that Johnson & Johnson paid kickbacks to doctors and pharmacies as an incentive to write more prescriptions for the drug.

The settlement was the third-largest with a drug company in U.S history. Last year, GlaxoSmithKline agreed to settle whistleblower allegations brought under the False Claims Act for $3 billion. In 2009, Pfizer Inc. agreed to pay the U.S. $2.3 billion for fraudulent marketing practices. In addition to those settlements, there have been numerous other multimillion-dollar resolutions.

Other whistleblower laws, such as those designed for the financial sector, can help the federal government recover millions of dollars, but none of them are as old and effective as the False Claims Act.

For instance, in 2011, the Dodd-Frank Act created an Office of the Whistleblower within the U.S. Securities and Exchange Commission (SEC) to help avert another financial crisis like the one that spawned a deep recession in the late 2000s. But even the highest award paid to a whistleblower under the SEC law to date was $14 million.

The Financial Institutions Reform, Recovery and Enforcement Act, a 1989 anti-fraud law that has brought many financial-sector companies to justice, caps whistleblower rewards at $1.6 million no matter how large the recovery.

The False Claims Act, however, was signed into law during the Civil War. It was rarely used until 1986, when lawmakers first amended the statute to boost both whistleblower rewards and U.S. government’s recovery.

“Since then, more than $35 billion has been recovered through the law, and the number of lawsuits filed each year has more than doubled. Unlike Dodd-Frank, the FCA has been in existence long enough for supportive lawmakers to have recognize(d) its holes and patched them up,” Law 360 reported, quoting whistleblower lawyers.

Because the False Claims Act has been strengthened over time, the U.S. government is able to recoup $20 for every $1 it spends policing health care fraud.


Law 360
New York Times
Securities and Exchange Commission