The New Model

The way this Government investigation was coordinated is one of the more distinctive features of this case. This coordinated federal-state investigation model may signal a new era in government Medicaid fraud enforcement activity, where state prosecutors work hand in hand with federal prosecutors from the U.S. Department of Justice and U.S. Attorney Offices. In some instances state prosecutors may even take the lead.

Historically, government enforcement of fraud has been left largely to federal prosecutors. In the past, the federal Government has had both the resources and the expertise in ferreting out the complex fraudulent schemes employed by Medicaid providers. Private attorneys representing whistleblowers with inside information employed the qui tam provisions of the False Claims Act ("FCA") to alert federal prosecutors about the ways providers have cheated the Medicaid program. As a result since 1986, the federal FCA has become the federal Government's most powerful anti-fraud enforcement tool.

However, as illustrated by this case, the states are now showing that they have both the resources — and the drive — to share the enforcement burden. State enforcement activity is only expected to increase in the future. Many areas of Medicaid fraud, such as the pharmaceutical price reporting abuses highlighted in this case, are of particular interest to the states. More states will pass False Claims Acts modeled after the federal FCA due to Deficit Reduction Act ("DRA") amendments Congress passed in 2005. More money will get returned to state Medicaid coffers as a result of the current crop of enforcement recoveries such as this one. States will increase enforcement budgets leading State Attorneys General Offices to dedicate greater resources to anti-fraud enforcement.

Also, private whistleblower attorneys are bringing to light more FCA cases involving nationwide frauds, especially in the pharmaceutical arena. Qui tam attorneys recognize that the states are uniquely equipped to obtain the utilization data necessary to understand the magnitude of the impact of the frauds to government health care programs like Medicaid. As more state FCA laws are enacted providing the same incentive to private whistleblowers as the federal FCA, qui tam attorneys are now working with state prosecutors simultaneously with federal government prosecutors.

At the same time, the states are getting organized internally. The National Association of Medicaid Fraud Control Units ("NAMFCU") is making it possible for the state Medicaid Fraud Control Units (MFCU's) to investigate these cases in a coordinated and unified way. State teams are forming early on in an investigation, sharing information, resources, strategies and personnel. Relators counsel and state teams are working together soon after the qui tam case is filed under seal.

The states' new muscle is not being lost on the federal government. Since 9/11, as resources at the federal level became more precious, the federal Government started looking more and more to the states to help. In the recent past state help generally was not utilized until the settlement stage, where the states played the important role of providing utilization and damages data. Now, as states show more interest, the federal Government is welcoming and encouraging states to play an earlier and more active role in the investigation phase.

This case stands as the model for this new era of jointly coordinated, collaborative government anti-fraud enforcement. As shown in our timeline the enforcement activity in this case accelerated in late 2004, when the states became involved in the case. Led by Nevada's Chief Deputy Attorney General, Tim Terry, the states assumed the burden of litigating a then-untested statutory construction legal theory through the Nevada qui tam filed by the whistleblower. The Nevada-run litigation was a perfect complement to the ongoing federal marketing practices investigation being overseen by the Eastern District of Pennsylvania ("EDPA") U.S. Attorney's Office in Philadelphia. Similarly, when the Nevada-Relator "best price" litigation gained traction, EDPA Assistant U.S. Attorney ("AUSA") Viveca Parker coordinated the federal investigation with Nevada and the qui tam attorneys.

The collaborative effort also extended to the whistleblower's private attorneys. At the urging of AUSA Parker and Deputy A.G. Terry, the qui tam attorneys provided the needed "facilitation" resources. They set up communication lines, acted as the conduit for sharing information about the Nevada litigation, and developed a model for coordinating legal strategies being employed in both the Nevada litigation and the federal investigation so as to make sure they were consistent and complementary. The whistleblower lawyers worked with AUSA Parker to put together a presentation of the best price case to interested state MFCU representatives in a first-of-its-kind meeting sponsored by the NAMFCU.