There are numerous industries frequently in whistleblower cases. Healthcare has turned out to be the largest area by far when it comes to whistleblower cases, and within that the pharmaceutical industry over the last 10 or 15 years has paid out huge clients for several technical reasons. The first technical reason is that the pharmaceutical industry is huge.
Drugs are in just about every corner of the country and they sell them through government-paid plans of one kind or another including Medicare, and Medicaid, which gives rise to the possibility of the government being defrauded. Then it turned out that the marketing practices in some pharmaceutical companies gave rise to actions. A lot of cases have been successful on illegal marketing of drugs. Other laws including the Anti-Kickback Statute have been very helpful in this regard. Of course, the sheer amount of money that the government spends on health care means that there doesn’t have to be a huge percentage of fraud to create large cases.
There is also something about the fact that the person who uses the service isn’t the government directly. The government is paying for a person’s prescription as opposed to that person paying the government directly for the service. That makes it a more obvious case where the government has been defrauded because there is no back and forth about ‘fixing the bridge’ and altering the contract.
It may have been unexpected when the law was effectively reenacted in 1986 in amendments to the False Claims Act, but the healthcare industry has become the focus of the law. There have also been some cases with regard to substandard care, medical devices, nursing homes, all manner of health care is the largest area. Defense contracting has seen quite a bit of major cases as well. Similarly to health care, they’re big cases. It’s hard to find a small defense contract, so those tend to be somewhat larger cases.
The Reasons for These Changes
It’s no secret Medicare spends $600 billion on healthcare a year so the government has a huge stake in healthcare. Medicaid as well spends money on healthcare, The military spends money on healthcare so do all government agencies. So as the government spends more and more money on healthcare, there’s more and more of an opportunity for that money to be lost in fraud.
Also, the relationship between government and paying for healthcare is perhaps a little unusual in that while the government pays for it, it is the individual patient who uses healthcare. So that tends to make the potential for ripping off the government a little bit more possible or easier. They’re smaller individual claims multiplied by a lot.
It’s a different kind of a case than if the government has an ongoing contractual relationship and somebody with the government is paying attention to that and it can be a little bit more difficult for a contractor to engage in fraud but not always. Sometimes they can do that. But the number one area would be healthcare by a long way.
There’s been a lot of litigation with pharmaceuticals, making them one of the industries most frequently involved in whistleblower cases. Obviously, the effects of a pharmaceutical on a human being is a serious matter and therefore, a pretty well-regulated and therefore, if a company engages in illegal tactics to market pharmaceuticals, they can find themselves under great liability. The next biggest area is likely defense. Again, big business involving also a lot of different kinds of contracts and different kinds of issues, probably the second biggest area of fraud committed against the government. And then after that, it’s anything that you could think of because the government’s involved in almost every kind of business you can think of.
Improvements in Industry Behavior Over Time
It certainly seems like the pharmaceutical industry and defense industry have both improved overall, at least anecdotally. It’s important to note, though, that a really good False Claims Act case is a really, really bad practice. It’s not a marginally bad practice. It’s not negligence. It’s not a failure to just live up to this or that contractual arrangement. To be a really good False Claims Act case, it has to be horrible, which hopefully means it’s an aberration to begin with and most businesses don’t engage in that type of practice.
People should also remember that the federal government is huge, as are the state governments, and there are something like thirty state governments that have a False Claims Act. And yet there are still less than a thousand of these cases a year filed, and of those, not every case is going to be successful.
It’s not realistic to think that every company is out there doing this. The public hears about the really, really bad examples of ripping off the government, as do DC lawyers working in the field, but that’s not what’s going on out there in the world. The worst-case scenarios hopefully aren’t representative of the industries frequently involved in whistleblower cases.