Sen. Charles Grassley today released copies of his letters to 16 big pharmaceutical companies about their whistleblower policies. Bloomberg news service is also reporting on these inquiries. The letters review Sen. Grassley’s efforts to strengthen the False Claims Act (FCA), and ask what the companies are doing to inform employees about the FCA, and then to protect employees who come forward with information about frauds. Sen. Grassley notes that since the 1986 amendments, the government has recovered $22 billion that had been obtained by fraud. He notes that Section 6032 of the Deficit Reduction Act (DRA) required contractors receiving over $5 million a year to issue written policies to employees about their rights under the FCA. The Bush administration then determined that this Section 6032 did not apply to pharmaceutical companies. Sen. Grassley disagrees, but still wants to know if the 16 biggest pharmaceutical companies nevertheless have the policies that would be required by Section 6032. Of the $22 billion recovered, Pfizer paid $2.3 billion in one settlement. Pfizer’s Chris Lodertold Bloomberg that it is responding to the letter and “shares the senator’s desire to detect and report any false claims that may lead to unnecessary costs to our health-care system.” Pfizer, he said, has invested “substantial resources” to “create a compliance program that consists of mandatory training for every one of our employees, proactive monitoring and surveillance, and strict enforcement of all federal and state health-care laws.” I wonder if Pfizer is more highly motivated since it paid that $2.3 billion. Sen. Grassley letters are available in the continuation of this blog entry
Last week the U.S. Department of Labor’s Administrative Review Board (ARB) issued an order inviting all interested persons to submit briefs on whether employees of subsidiaries are protected by the Sarbanes-Oxley Act (SOX). The briefs are due July 15, 2010. The invitation comes in the case of Carri Johnson v. Siemens Building Technologies, Inc., ARB No. 08-032, 2005-SOX-15, but we can expect that the ARB will be deciding this issue for all cases in which subsidiary coverage is an issue. I plan to write one for the National Whistleblowers Center (NWC) to explain why it should be obvious that SOX intends to protect all employees under the umbrella of any publicly traded company, no matter how that company chooses to organize its operations into subsidiaries. If anyone else is interested, I would be happy to confer about the contents of our briefs.
The Maryland Senate yesterday passed a state version of the False Claims Act (FCA) by a vote of 37 in favor and 8 against. Before passing this bill, however, the Senate watered it down with an amendment. The Maryland False Health Claims Act of 2010, SB 279, as amended, no longer allows the state (or a whistleblower acting on behalf of the state) to obtain compensatory damages. The amendment also requires a court to dismiss the action if the State of Maryland declines to intervene. The Senate’s amendment also waters down the provision for attorney fees. It now provides that attorney’s fees and costs “may” be allowed by the court, and that the court must consider the amount of penalties and damages recovered. This last provision is contrary to prevailing law that calls on courts to award attorney fees based on market rates, without regard to any proportionality to the amount of recovery. The Senate’s bill also allows courts to reduce the amount of the whistleblower’s recovery if the court finds that the whistleblower participated in the violation. A more enlightened view would have barred recovery only if the person caused the violation through actions other than following orders of a superior. Also, I mentioned before that Maryland could gain even more if this bill covered all frauds, and not just those arising in medical care programs. Perhaps the Maryland House will consider these shortcomings when its Judiciary and Appropriations committee conducts the bill at its first hearing on April 1. The Senate bill does include an anti-retaliation provision, Section 2-607, that would allow employees to sue if they suffer retaliation for participating in a lawsuit, objecting to a violation, or refusing to participate in a violation. According to a Baltimore Sun article, the state administration estimates that between 5 and 10 percent of the state’s $6 billion in annual medical spending is lost in fraudulent claims. The article quotes a spokesperson for the hospital association as saying that the amendment would cost the state the extra 10% it would receive from federal false claims lawsuits in the state. This refers to the Grassley Amendment to the federal FCA which increases a state’s share if the state’s law meets certain minimum requirements. Apparently, making hospital administrators happy is more important to Maryland’s Senators than protecting taxpayer dollars.
The United States Government, along with the governments of 15 states and the District of Columbia, have joined with two whistleblowers who allege that drug manufacturer Wyeth bilked US taxpayers out of hundreds of millions of dollars. As reported in the Wall Street Journal and the FierceHealthcare website, Wyeth is accused of overcharging Medicare and Medicaid programs nationwide for purchases of it’s acid-reflux drug Protonix. Under federal law, drug companies are required to offer prescriptions to federal aid programs at the lowest possible price. Wyeth, however, the suit alleges, was offering Protonix at a 90% discount to private hospitals, while charging the federal government much higher rates.
The lawsuit was filed under the False Claims Act, which has its roots in the civil war era, and remains the United States’ most powerful tool for rooting out fraudulent government contracts. President Obama’s administration has recently expressed its support for strengthening the law, and legislation to do so is currently pending in Congress.
Senator Barack Obama won the presidential election this week running as the candidate for change. The change he promised included bringing transparency and accountability back into the federal government.
During the past year, we have watched President-Elect Obama use his persuasive oratory to change the American political landscape. His oratory included strong public commitments to ensure effective government oversight and whistleblower protection. Workers desperately need a strong national whistleblower protection act. The recent authorization of 700 billion dollars to bail out Wall Street made the need to protect whistleblowers even more urgent.
As President-Elect Obama prepares to announce his appointees, he has the chance to make immediate meaningful change a reality. There are many presidential appointments that have a direct impact on workers who blow the whistle on fraud and corruption. Such positions include key appointees within the Department of Justice who oversee billions of dollars worth of contractor fraud cases.
There are also relatively unknown positions that have tremendous impact on the lives and careers of thousands of whistleblowers. For example, the Department of Labor’s Administrative Review Board decides federal environmental, consumer safety and Sarbanes-Oxley Act whistleblower cases. Likewise, the Special Counsel has responsibility for protecting federal employees who expose waste fraud and corruption within the federal bureaucracy.
Both the Administrative Review Board and the Office of Special Counsel lost credibility and failed in their missions because of poor appointments by the previous administration. For example, mismanagement by the Bush-appointed Special Counsel Scott J. Bloch was so appalling that the FBI raided his home and office. Even President Bush was forced to fire him two weeks before the election.
The Office of Special Counsel is supposed to protect the public trust by shielding whistleblowers. President-Elect Obama must ensure that an experienced and competent advocate for whistleblowers is appointed as Special Counsel. He must force the Office of Special Counsel to fulfill its mandate to protect whistleblowers.
President-Elect Obama has a unique opportunity to bring change in these crucial areas that will protect workers with the courage and integrity to tell the truth. That’s the change we believe in. That is the change we hope and expect President-Elect Obama will bring to the federal government.
To view President-Elect Obama’s survey responses please click here.