Industries Frequently in Whistleblower Cases

Below, whistleblower attorney Tony Munter answers questions about which industries he has seen most frequently in whistleblower cases, and which industries may be taking positive steps against fraud.

What major industries are responsible for the biggest and most frequent whistleblower cases

Health care has turned out to be the largest area by far 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 – Medicare, 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. There are a couple of laws, and the Anti-Kickback Statute has been very helpful in this regard; the sheer amount of money that the government spends on health care. It 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 person x’s prescription as opposed to person x 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.

I don’t know that anyone saw it coming when the law was effectively reenacted in 1986 in amendments to the False Claims Act, but the health care 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.

Why do you think that is?

It’s no secret Medicare spends almost $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, I think the relationship between government and paying for healthcare is a little unusual in that while the government pays for it, it is the individual patient who uses the 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. 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.

I guess 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.

Have any industries improved over time as far as you see those practices to cut down on fraud

That’s a really good question. I have to believe the pharmaceutical industry has improved overall. I’m seeing them anecdotally. I don’t have the data to back that up but there has been so many major pharmaceutical cases and there still are but I have to believe as a whole that they may have improved. Maybe not but I’d like to think so.

I think the defense industry has also maybe improved.

Again, that’s anecdotal. I would say, 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 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 and I would like to think that therefore, it’s an aberration to begin with. I want to believe that most businesses really don’t have much to fear from the False Claims Act  because I just don’t believe most businesses engage in the type of practices that would create a really successful False Claims Act.

Everybody’s got to remember that the federal government is huge, that the state governments—there are something like thirty state governments that have a False Claims Act—also are pretty big and there’s still less than a thousand of these cases a year filed and of those, not everyone is going  to be successful.

I don’t hold to the idea that every company is out there doing this. We hear about the really, really bad examples of ripping off the government. That’s what I hear about all day, but I don’t really think that that’s what’s going on out there in the world. I think I hear about the worst and I don’t think that that’s representative of the industries involved. I hope.

Have any companies set particularly high standards for dealing with fraud internally

Well again, those would not be the ones I would hear about. I hear about the other ones. [Laughter] They are setting no standards for dealing with frauds. I’m pretty sure that if you’ll ask all companies, they would say that they do set these high standards for dealing with fraud. And that’s what I would caution, I suppose. Because even though I don’t think the majority of companies are engaged in fraudulent practices, that’s not the same thing as saying that it’s safe to be a whistleblower.

It isn’t safe to be a whistleblower. Generally, being a whistleblower is a difficult position and before somebody takes it upon themselves to do so, they should get legal advice. It’s a very difficult thing and bosses, don’t like it so that’s the other side of the coin.

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