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Whistleblower Claims – Corporate Land Mines

From that delicate balance between preserving the public good and the right of private action has emerged that most persuasive, and potent, moderator – the whistleblower claim.  In our laws, the purpose of whistleblower provisions has been to enable employees, representatives and even business partners to report behavior that has harmed or could potentially cause harm to the interests of the government or the public it serves.  The underlying rationale is that reporting this behavior removes the potential harm,  punishes the offenders and makes an example of their behavior as a deterrent against future bad acts, therefore “blowing the whistle” should be encouraged and the person or persons who do it should be rewarded.  Over the years, several well-recognized statutory programs based on federal law have included whistleblower provisions. These include the Occupational Health and Safety Act, the Internal Revenue Service Code and the Fair Labor Standards Act.  State laws are also armed to respond to whistleblower complaints.

For example, a $327 million judgment against drugmaker, Johnson & Johnson, under the South Carolina Unfair Trade Practices Act was just reported to have been upheld.  A whistleblower claim triggered this case, which has so far led to lawsuits by multiple states alleging that their Medicare and Medicaid programs have been defrauded.  The South Carolina  fine was calculated by assessing $4,000 for every “Dear Doctor” letter the company sent to physicians claiming that the drug was better than the competition and $300 for every sample it gave away to healthcare professionals.

But it’s not just big pharmaceutical companies that have been caught in the dragnet of a whistleblower complaint.  In the healthcare arena, the threat is very real for distributors of durable medical equipment and for physicians, physician assistants and nurse practitioners who participate in treating patients and reporting the services provided.  Outside of healthcare, recent whistleblower claims were filed by Alcohol, Tobacco and Firearms (ATF) agents (click link for story), to report violations of the Occupational Health and Safety Act, the Internal Revenue Service Code and the Fair Labor Standards Act.

Here are some useful tips for handling whistleblower scenarios.  For employers:

  • Develop and communicate a procedure for reporting potential compliance violations that is confidential, responsive and can be accessed by employees outside the regular chain of command. Maintain confidentiality as much as possible, and inform the employee of the outcome of your investigation.
  • Carefully address any complaints raised by employees that involve potential violations of federal or state law, and document the resolution.
  • Often, companies do not know the identity of the whistleblower until the indictment as been unsealed.  Even if you receive this information, do not take any personnel action against an employee or business partner because they filed a whistleblower complaint.

For employees:

  • If possible, discuss your concerns with your managers, or if you feel uncomfortable about doing so, with your company’s compliance officer.
  • Continue to observe the rules and requirements of which you are aware while the investigation is progressing, and to do your job.
  • You may choose not to raise the issue internally and report it directly to the government, usually with the assistance of a qui tam lawyer. Supporting facts are very important to substantiate a whistleblower complaint, so be prepared to present information that would adequately support your case in court.

Federal and state whistleblower cases may request civil and/or criminal penalties and often disqualify companies or persons found guilty from participating in government fee-for-service or procurement programs.  The fines are usually high and are a significant source of revenue for cash-strapped government agencies as well.   The number of these cases, especially in the healthcare field, has been increasing and the trend is expected to continue.

Additional links: http://www.whistleblowers.gov/, http://bit.ly/sxFL6V , http://www.irs.gov/compliance/article/0,,id=180171,00.html,

Baxam Law Group, LLC advises clients on business, intellectual property and healthcare law matters. Visit us on FacebookFollow us on Twitter.

FDA To Further Study Standardized Risk/Benefit Labeling for Drugs

The Patient Protection and Affordable Care Act requires the Food and Drug Administration (FDA) to determine whether adding quantitative summaries of the risks and benefits of a prescription drug medication in a standardized format would help healthcare providers and consumers make better decisions about using the drug.  For the better part of the last decade, FDA has been discussing whether the types of information now provided are sufficient to advise these decisions.  Currently, a patient package insert (PPI) is required for some classes of drugs, or if there is a risk evaluation and mitigation strategy (REMS) in place for a high-risk drug; otherwise it is voluntarily submitted by manufacturers for other products.  A medication guide is usually required to be distributed with the drug if there is a REMS in place.

While the PPI and the Medication Guide are often required to be distributed, consumers may also be given consumer medication information (CMI). CMI is developed by drug manufacturers according to general guidelines provided by FDA, but is not subject to the same distribution requirements or oversight when used in association with products.

For most of the last decade, FDA has been evaluating the effectiveness of these types of written prescription drug information, and the agency has held several public meanings to discuss the matter with the industry.  Among the issues being looked at is the report that most patients prefer written information rather than numerical data; and numbers, percentages and statistics might be difficult for the consumer to understand unless they are presented in a simple, straightforward organization.  Patients most prefer verbal communication about a drug’s risks and benefits, but relying on this as a primary means of communication could increase the risk of inaccurate medication compliance. 

At the last meeting in 2009, FDA concluded that there are too many forms of written patient information, and that more study is needed to come up with a user-friendly format that would be sufficiently educational to the patient.  The healthcare reform statute supports this conclusion. Section 3507 of the statute directs FDA to continue studying whether providing quantitative summaries of the risks and benefits of each prescription drug in a standard format would be helpful to the process of making individual healthcare decisions.

Baxam Law Group, LLC