Should Whistleblower Payments Have A Cap?
29 CommentsBy Ed Silverman // January 25th, 2011 // 9:21 am
Over the past few years, the feds have successfully forced numerous drugmakers to settle charges that they deliberately misreported pricing info in order to hike reimbursements from Medicare and Medicaid. And behind this string of settlements is a pharmacy called Ven-A-Care of the Florida Keys, which created a whistleblowing cottage industry of its own by simply rummaging through data.
For instance, a 2005 California suit alleged that a one-gram vial of the antibiotic vancomycin was sold to healthcare providers for $6.29, but billed to Medi-Cal for $58.37, while 50 milligram tablets of the atenolol blood pressure med were billed to pharmacies at $3.04 and to Medi-Cal at $70.30. Armed with such discrepances, Ven-A-Care filed lawsuit after lawsuit - and reaped big rewards.
Since 2000, the little pharmacy has won settlements in at least 18 such lawsuits, The Los Angeles Times notes, adding that three settlements announced just last month brought the fees awarded Ven-A-Care and its attorneys since 2000 to more than $380 million (back story here and here).
“I think Ven-A-Care has played a key role and possibly the predominant role in alerting state and federal governments about…fraud,” Nicholas Paul, a supervising deputy attorney general for the state of California, tells the paper, which adds that the state filed a 2005 lawsuit against 39 drugmakers based on Ven-A-Care allegations and has so far recovered about $95 million.
Indeed, whistleblowers have helped the US Department of Health & Human Services recover some $4 billion in taxpayer dollars last year (see the statement) and drugmakers were cited as a big part of the equation, although US Senator Chuck Grassley criticized the feds for what he called the “stagnating” number of criminal prosecutions associated with the effort.
But one former federal prosecutor - who is widely credited with forcing the pharmaceutical industry to come to grips with its errant marketing practices - believes whistleblowers get too much money. Michael Loucks, who made his bones as an assistant US Attorney in Boston, in part, by relying on whistleblowers, says payments should be capped at $2 million. “We’re spending tens of millions of dollars as a reward for information. The question is, ‘Is it necessary?’ ” Loucks tells the paper. [We should note he now works at the Skadden Arps law firm, which has a healthy pharma practice.] Even with a cap, he believes, “somebody will still blow the whistle.”
Maybe so. An average payout of $2 million can go a long way, at least for some folks. And critics say whistleblowers are generally disgruntled employees who are only in it for the money. On the other hand, a recent study noted whistleblowers endure considerable stress since the average case lasts five years. After interviewing 26 people who filed 17 cases against drugmakers from January 2001 to March 2009, whistleblowers received shares of settlements ranging from $100,000 to $42 million - an average of $3 million (look here).
Not surprisingly, there is disagreement. “The relator’s share on a $2 million case (shared between the whistleblowers, the lawyers, and the IRS) is about $300,000 total. Does anyone seriously think big and hard cases like the Ven-a-Care cases are going to be pursued to a positive resolution for taxpayers if we put a cap on relator’s awards? It’s a ridiculous idea,” says Patrick Burns of Taxpayers Against Fraud, a non-profit that supports whistleblower lawsuits. “And, of course, it comes from big pharma - a bit like the fox saying the farmer should drop the shotgun and just bang a few pots because, you know, gunpowder and lead are so wasteful.”
Of course, a smaller payout would mean less for attorneys and so perhaps fewer lawsuits would be filed. What do you think?
Should Whistleblower Payments Be Capped?
- No (69%, 99 Votes)
- Yes (32%, 46 Votes)
Total Voters: 144
Loading ...pic thx to katerha on flickr
Former Big Pharma
Whistleblower suits would not be successful if there wasn’t fraud taking place. If pharma companies would live by the rules of decency and not rip off the government, these suits wouldn’t have merit. What companies need to do is stop the bad behavior, live by common values, truly strive for compliance and listen to those who point out things that are wrong. They should not terminate employees for raising questions, make the lives of terminated employees miserable, hire private investigators to follow terminated employees,drag those terminated employees through the mud and much more. Greed rules in pharma and the government wants some of the money back!
Walk a mile in my shoes!
I would like to address this issue from the point of view of a current wb.
Every wb has different motivations on why he or she finally files a qui-tam. So, in my opinion, it doesn’t matter what moved that person to start the process.
The real issue here is what is at stake for both the wb, and the offending pharma company.
If the company followed the rules then they have nothing to fear and the wb will S.O.L.
On the other hand, if the company IS NOT following the rules, then who cares what the wb motivations are. The company is guilty, and the person who stood up should be rewarded.
I was forced out because of the questions I raised. I was making 6 figures with great benefits. Now I make 40% less with practically no benefits. My marriage is in shambles because my wife thinks what I am doing is just a big waste of time, and if I had just kept my mouth shut we wouldn’t be struggling like we are now.
I have spent countless hours, days, weeks, months, YEARS! pouring over millions of documents to try and help with the investigation, all while working my 50-60 hour work week. My kids suffer because daddy is never home.
I have trouble sleeping at night. I have lost close to 30 pounds in the past 5 years. (although I shouldn’t complain about that one)
I used to be an easy-going guy, but now I snap at everybody for the smallest of things. I get anxiety attacks for no reason whatsoever.
I never take medication for anything, but now I have family and friends telling me to get on something because I am unbearable to be around.
The icing on the cake is that the drug in question is killing people, and I can’t even say a word about it for fear I may be prosecuted myself for breaking the seal agreement.
Now you are telling me that for all that I have sacraficed, for the potential hundreds of millions that without me the govt. would have never had a chance at recovering, that you are going to cap my relator reward at 2M.(750K after taxes and lawyers)
To those of you who agree with the proposed cap, I say walk a mile in my shoes and I believe you will think diffently.
Searching2000
As I read this I was reminded of an earlier post here - which explains this kind of pushback?
http://www.pharmalot.com/2011/01/wall-street-wants-to-bet-on-pharma-whistleblowers/
I think there does have to be a middle ground between some of the “8 figures plus” payouts and the reward (if you will) not being worth the effort. Or the personal cost, with a nod to ‘Walk a Mile.’
Doc
Easy for Mr. Loucks to say. Being the attorney helping whistleblowers and being the whistleblower are two completely different things.
Let’s not take the focus off the real issue - pharma companies that are putting profits before patient well being and ripping off taxpayers in the process, including Mr. Loucks.
Whistleblowers deserve every penny they get and Mr. Loucks knows that the critical information they provided him as assistant U.S. Attorney in Boston made his cases stronger and prosecutions/settlements easier.
Thank you for pointing out his current position at the law firm of Skadden Arps, which works for pharma companies in these cases.
I would ask Mr. Loucks to waive his legal fees, if he thinks his defense of the poor, innocent, abused pharma companies is a moral and ethical dilemma.
Insider
Very good comments. It is outrageous the way whistle blowers are treated by big pharma. It can totally destroy their emotional well being.If pharma would attempt to follow the rules, the cases would disappear but that dos not seam to be happening. When managers can do anything they want and not be held accountable then one can expect the problems to continue. Grassley has a good point, the feds are not prosecuting the individuals even when they have an incredible case. So these individuals just move on and do the same thing over and over again. THe whistle blowers are ruined and do hot have a future. The feds also control who gets the money and whcih case isporsecuted which seams to be biased at times so there are a lot of risks invovled for the whistle blower. How about the interal investigations that turn all kinds of illegal activity up but reuslt in no terminations. THese lawyers are watching the fraud and sometimes leave the firm representing big pharma other times just laugh at the whistle blower who thinks these lawyers will protect him which proves to be a joke.
Walk a mile in my shoes!
Thanks Doc!
Thank you Ed!
It is blogs like yours that give me a little light at the end of the tunnel.
As for Mr. Loucks, I am sending him a pair of my shoes. Even though that leaves me with only one pair. I wonder how much he has made of the wb process and if he is willing to cap his legal fees?
Evelyn Pringle
Capping the fee at $2 million would guarantee that very few whistleblowers would enter the fray and for good reason.
As mentioned above, $750,000 after taxes and attorney fees is chickenfeed when considering what many of these people have gone through and will continue to go through for the rest of their lives.
More power to the few whistleblowers who have been able to figure out how to blow the whistle numerous times. This probably only occurred as a result of having been tied up in the system for years while the drug makers dragged out the investigation and used every trick in the book to avoid punishment and/or settlement.
Doc
Ed,
Ven-A-Care did not invent a cottage industry, they uncovered how multiple big pharma companies made a “Big Business” out of ripping off all of us taxpayers.
I have followed their cases for years and shout out a cheer every time they get another settlement!
I still maintian that until corporate executives that can be directly tied to these actions - go to jail, there is little incentive to stop.
The companies now see fines as a cost of doing business and they know that the US Govt will not bar them doing business, because of the products they have.
Tom Pliske
This issue has been discussed many times over the years. The Federal False Claims Act (qui tam) was enacted during the civil war. Over the years the reward percentage has been played with and has recently settled on 15%-30%. On December 20, 2006 the IRS tax whistleblower program was initiated with a reward of between 15% -30%. Most recently the Dodd-Frank bill was passed this summer rewarding SEC whistleblowers a reward of 15% to 30%. It appears that whistleblower laws work and that the reward percentage between 15%-30% is what is necessary to make the program work.
At first blush, one might say a reward of 30%is too much. However, if the fraud on underpayment of tax is stopped remember the reward is paid on the past benefit that is now recovered, not based upon a future benefit (the stopping of the fraud) so the government is getting a future benefit at no cost.
The bottom line is that the reward is taxable. Therefore even a maximum reward of 30% is only 20% after federal tax (assuming a 33% tax rate). If there is a state income tax for the Whistleblower, the 20% net reward is further reduced. Nearly all of these rewards are claimed by adults. The estate tax will kick in shortly and half of their “net reward” will be paid back to the government in estate/gift taxes. Hence, in the end, the reward is not a whole lot for what it ultimately accomplishes….which is simply compliance with the laws.
pharmagossip
http://blogs.forbes.com/rickungar/2011/01/24/health-care-fraud-crackdown-reveals-pharmaceutical-companies-among-americas-top-defrauders/
Pip pip!
Pharma marketing director
It may seem like there are a more qui tam cases than ever - but for every one that is filed successfully, there are probably ten that never get filed. And behind that are patients being injured and billions of dollars that the govt (that’s us, folks!) loses as a result. So, in my opinion, we should be giving greater incentives to people to report fraudulent, illegal and dangerous behaviors. The first place I would start would not necessarily be to increase the whistleblower percentage - but rather reduce the time these cases take. “Walk a mile” is correct - the whistleblowers suffer and frankly, once the case is settled, he’ll be lucky to get a job anywhere. Don’t forget that these cases extend beyond the pharma industry and so the title of “Whistleblower” is unnerving to any company that sells anything to the government.
By the way, “Walk a Mile…” - thank you for your courage and sacrifice. Sometimes, doing the right thing isn’t always the popular thing. But you’ve got “doing the right thing” nailed.
Anne PME
Does anyone know how much money is being spent to prevent health care fraud? It seems as though everyone- even Michael Louke - is acknowledging that fraud is a big problem.
Maybe the bigger problem is that we lack good fraud prevention systems and there is little or no money for anyone, including attorney Loukes in preventing WB cases? Also, I know that Pharmalot reports on the pharmaceutical industry but wanted to know if I was correct in assuming that the majority of big WB cases are all against the pharma industry?
Anne PME
I just noticed that the cap is specific to capping WB payments. Does this mean that the WB fee would be capped but the their attorney’s fees would not?
Or,
If WB fees and attorney fees are capped, then would attorneys stop representing WB’s because they cannot make enough money?
harpy
what a ridiculous argument! so sad to see Mr. Loucks turn into Peter Pitts.
Andrew Prough, CFE
@Silverman: “And behind this string of settlements is a pharmacy called Ven-A-Care of the Florida Keys, which created a whistleblowing cottage industry of its own by simply rummaging through data.”
======================
Ed - that’s a bit of an overly simplistic portrayal of Ven-A-Care’s work over the years. I don’t know them personally, but I’ve seen the Ven-A-Care guys speak about their experiences at fraud conferences. These guys were put out of business because they refused to partake in unethical deals to profit off the “spread” of Medicare payments, and have developed the ability to help the government to spot fraud in this extremely complex arena. I’m sure it costs them a significant amount of money to assist the government in this way. I doubt that if you worked on a pricing case for 10 years, that you would characterize your work as “rummaging through data”.
Ed Silverman
Hi Andrew Prough,
Thanks for the note. And I appreciate your point. I took a bit of literary license by using the phrase you found objectionable, but did not intend to disparage anyone’s efforts.
I’ve written about cases involving Ven-A-Care for some time (you can do a search on this site) and, while I’ve not met with them either, I’ve read documents and spoken with others. And so I can appreciate the extent to which they worked to generate the data.
Hope this helps,
Ed
truth
I heard loucks speak years ago and based on his comments i thought he was a defense lawyer for big pharma. He insuated that magnitude of health care fraud was grossly overestimated and that the corruption in big pharma was isolated. THe cases since then have proven otherwise.
At least now, his bias is in focus as a member of the mercenary defense team at Skadden.
Andrew Prough, CFE
Hi Ed,
I’m a regular reader and a big fan of the site and your work, so I do know that you’ve written about Ven-A-Care several times. Didn’t mean to be harsh in my response, just figured I would stick up for the whistleblowers a little.
I have worked with several whistleblowers, and I don’t think they are motivated by greed. Usually they have been fighting a desperate, losing battle to right some wrong inside their company for years, and only after they are facing termination for being the “squeaky wheel” do they finally decide to blow the whistle.
Keep up the great work! Legions of us make your website the first place for news to go with our “morning cup of stimulation”, hahaha
Sick and Tired
Loucks is an idiot and the perfect example of the revolving door, from DOJ to personal practice. He now is defending big pharma, of course he wants a cap. Trust me nobody will come forward for 2 million dollars. The attorneys get 45%, you pay Federal and State taxes so he says the final paltry amount one receives—–usually giving up a job, being retaliated against by the company, and sometimes 10 years of grief, testimony,financial ruin, and family issues. There is no assurance of anything except hell if you are a whistleblower. The gov’t gets a huge amount of money they would never have, and you pay taxes on your portion. He talked a different tune espousing his successes, and the whistleblowers sacrifice at the DOJ…only to lay the groundwork for a multi million dollar private job. There are true heroes in the government,that do a difficult job,combating fraud in the system. Some of these people stay there, not getting in the revolving door of greed and corruption like Loucks. One example would be Sara Bloom in Boston, who has been a true hero and solved cases that Loucks would be lost in. So take your multi million dollar job defending Big Pharma, Loucks and shut up…nobody wants to hear your ridiculous rants, especially whistleblowers that have sacrificed everything, for one thing - justice, while you play the revolving door game. You are the problem, and that is what needs to be addressed, the revolving door from the governnment only using it as a springboard for a high paying private job. It is your salary that should have a cap on it. You are a disgrace to the DOJ and the taxpayers.
SP Man
In my case, the best result would have been to give me my job back and fire the idiots who terminated me for daring to question them. What they were doing was clearly wrong and potentially very harmful to patients, but greed drove them to their unethical and immoral behavior.
Insider
SP MAN I am a whistle blower also. ANd I totally agree. I would prefer to have my job back and not go through all the harassment and cover-up. But these big cases, it seem like the entire company is authorized to participate in the fraud and nothing happens to them. ANd then they do it again, same thing even after signing documents they won’t do it again and the executives praise them again unless they run into aperson not willing to risk the safety of patients for their job. You don’t think these reps would do all these violations unless HR and their managers were authoirzing and directing them. It is outrageous, the whistle blowers are gone and the crooks are still running the show. No wonder nothing changes!!
tom
Ed
Thanks for generating the comments and after wehavebeen in communication I can only say that 3 years ago I blew the whistle to the the then CEO.
What happened after and is still happening seems to be just a case of the “old thing”. Afer speaking to a US attorney who tells me he hears the same story again and again.
If you report a matter internally and you are removed!!! What else are you supposed to do ?
I did not start blowing until a year later and the company small brains were bad mouthing me and destroying any chance at working again. In fact two ana half years later I am still out of work but even being threatened by the multi billion dollar company with legal action….
You want to know stress just do the right thing and be crapped on from a great height and no I have not filed any actions I just opened my mouth.
More tax will be obtained and maybe some jobs will come back to the US because of what I found but the same Directors and Senior Managers plus Auditors will still get their bonus payments as they have done while the matters I raised have been going on for the last ten years.
Ron
What could be dumber than to listen to the opinion of a lawyer about any issue in which they have a financial stake in the outcome?
income tax calculator guy
Any time there is money involved there will be people who will fraudulently do whatever it takes to capitalize on it. So yes there should be a cap
K8
This article doesn’t mention the much higher payouts which have gone recently in the hundreds of millions of dollars. A cap is definitely necessary. Perhaps 2M$ is too low if it is being shared between attorney and whistle-blower and requires years to prosecute, but 300M$ is disrespectful of the work content of all of us making good products that save lives who never could receive that kind of a payout even if our personal work saved a million lives with these products. We are talking about $ fraud not therapeutic fraud. The work of a single person should not exceed the annual compensation of the highest paid person of the company being prosecuted.
doc
K8,
The average whistleblower reward is probably about 12-15% of the whole. It makes sense to me as a taxpayer to pay a whistleblower and their attorney $45 million dollars of a $300 million dollar fine.
If the relator never stepped forward, we taxpayers would continue being soaked by these companies.
The sad part is that even these large fines do not stop this behavior, the pharma companies look at them as cost of doing business, which is passed on to patients and taxpayers.
Until we see executives jailed and fined personally, the conduct will continue.
Jana Hill
To “Walk a Mile in My Shoes”:
You risked and risk everything. You deserve as much as you can get for taking that risk on our behalf.
You not only will have saved federal dollars, you will have saved lives from some horrible ends.
You provided an open ended service, you should be compensated and not with a token $2,000,000.
When the dust settles and the legal people are paid, and your losses are totaled, how much compensation is forthcoming? You could lose more than that proposed $2,000,000.
We should thank people like you with a more certain future than this.
Jana Hill
Walk a mile in my shoes
J.H.,
Thank you very much, that post really made my day.
To the others who posted,
This process is not easy on anyone, but all I wanted was the truth to be told. I just didn’t realize how difficult a journey it would become. To me, 2m is not even close to what it has cost me and my family. Period.
The Realtor
As a former whistleblower,it took a lot courage and strength to go forward at the risk of losing my job and career. After being black balled in the industry,I realized that whistleblowers should receive a minimum of $2 million after taxes/legal fees.
Mr. Loucks is an idiot if he thinks whistleblowers will continue to come forward if there is a cap.
In our particular case,we handed the government everything a Platinum platter. We risked everything to protect people from being over billed and in some cases from death.
The day that anyone can risk everything to include friends, family, relationships,career,job,and future…that resembles a true human being with respect and honor.
If we had more whistleblowers in the Banking System, Fannie Mae, Freddie Mac,Brokerage World, and Government(city,state,and federal) We would not have Enrons,GM,Lehman Brothers, Bear Stearns,Countrywide,Worldcom,Comcast,Bernie Madoff,SEC,Stanford,AIG, and etc Americans wouldn’t lose their entire savings/retirement. America would be a financially fit and more prosperity than ever. Do you really think BP Oil Spill would have happened if the government entities weren’t taking in fees and doing inspections. How about Bernie Madoff,the SEC knew for 11 years and did nothing because everyone at the SEC was on the take…agents,investigations,judges, Federal Employees.