Those that operate within the health care marketplace need to abide by many different rules and regulations. The False Claims Act (FCA) is one of those rules. This federal law makes it illegal for any person to submit a false claim for payment to the government. Although the goal of the law is a good one, the damages tied to a violation can get excessive. A violation, according to the language of the law, can result in triple the government’s damages plus an additional penalty of $10,000 for each false claim.
Needless to say, these damages can quickly add up to extremely high penalties.
And by high, we mean the hundreds of millions of dollars plus additional costs into the future. The government reports that during 2020’s fiscal year they got more than $2 billion in settlement and judgements based on FCA cases. In a recent example, the United States Department of Justice (DOJ) announced a settlement with three generic pharmaceutical companies for allegations of violating the FCA. The final agreed upon settlement: $447.2 million.
The feds claim the pharmaceutical companies erred when they entered contracts that were based on “price, supply, and allocation of customers with other pharmaceutical manufacturers.”
It is also important to point out that the cost of a violation goes beyond the initial financial penalty — the “future” costs noted above. In this example, the companies are also each required to enter a five-year corporate entity agreement with the feds that include internal monitoring and pricy transparency provisions. The pharmaceutical companies must bear the expense of the additional administrative burden that comes with these agreements.