Pharma Lobby Backchannels A Shutdown Of Essential FCA Judicial Amendments


At 5:30pm on Thursday the 5th, pharmaceutical lobbyists launched a backchannel blitzkrieg against the False Claims Amendments Act, an amendment that had already gone through multiple stages of committee comment and approval. Over the next few days, pharma lobbyists and organizations funded by the pharma lobby broke customary legislative procedure to sow confusion and misinformation through legislative and constituent healthcare networks in a successful attempt to have key “materiality” updates thrown out of the 2021 Infrastructure Bill.

A recent August 6 opinion article in Forbes argued that the Grassley-Leahy amendment was inserted into the infrastructure bill “at the 11th hour” and that its sponsors want it to “pass in secret.” Although the bill was not publicly available while still in committee, committee members and legislators had access to it in evolving states for more than a year. Hill staffers say that no pharmaceutical lobbyists approached them before last Thursday. “In a year, no one approached us, even though there was good publicity.”

According to WNN sources, the American Hospital Association (AHA) led the last minute attack. The AHA would benefit directly from keeping the FCA’s current definition of “materiality,” allowing their constituents to continue to get away with healthcare fraud. The current interpretation of the materiality clause has cleared new avenues for corporations that have violated the False Claims Act to escape liability.

At the end of July, a bipartisan group of senators led by Senator Chuck Grassley (R-IA) and Patrick Leahy (D-VT) introduced long-awaited legislation that would update a False Claims Act technicality caused by the 2016 Supreme Court case, Health Services v. United States ex rel. Escobar</span. This decision allowed the dismissal of multiple otherwise strong healthcare fraud cases and discouraged the prosecution of many more. The case created a precedent for fraudsters to escape prosecution simply by claiming that someone, somewhere in the government, had knowledge of the false claims submitted by the organization. Defendants have successfully argued that having this knowledge and the failure of the government to halt payments immediately inoculated the defendants from liability.

The Forbes article misrepresented the proposed amendments by saying that the bill would move full presumption of guilt entirely to the defendant. Instead, the bill gives the defendant a chance to have the case thrown out if they can show “clear and convincing evidence,” after the government/whistleblower has proven the violation was material by a preponderance of the evidence, that they had submitted and received payment for false claims. The bill would still give the defendants a chance to have the case dismissed even after it was proven that fraud was committed.

The piece also claims that because the False Claims Act has recovered $64 billion since Grassley brought it back to life in 1986, it will automatically continue to function to the same high degree. However, Escobar fundamentally changed the face of the False Claims Act, making it much more difficult for the government to successfully prosecute obviously fraudulent cases. The precedent has also produced a chilling effect on the government’s ability to pick up new cases.

While healthcare fraud is prosecutable under the False Claims Act based on every bill submitted to the government, other types of contracting fraud are even more difficult to prove. Defense contracts, for example, play out over months or even years, and Escobar shifted the burden of proof on the government to prove that the product they receive at the end of the contract isn’t what they ordered. While those who called for the amendments to be canned framed it exclusively as an issue with healthcare ramifications, the amendments would have solved problems with False Claims Act cases in many different departments of the federal government.

Grassley’s 2021 amendments would have solved the problem by shifting the burden of proof to the defendants. In other words, the defendant would have “to prove by clear and convincing evidence that the government’s conduct, such as continued payment, was material.” This shift of burden would mean that the defendants would have to show that the government’s decision to continue payment essentially meant that the government didn’t care about the differences between the contract and the actuation of the contract. Qui tam and whistleblower experts were involved in creating this solution to the problem of materiality from the beginning and overwhelmingly approved of it. 

When government healthcare funding is at the highest point in decades in response to the COVID-19 crisis, sources say that Pharma lobbyists engaged in a “hit job” to stop needed reforms on the single most important healthcare anti-fraud law. In a January report from the Department of Justice (DOJ), the government announced that out of the $2.2 billion recovered from False Claims Act actions in 2020, $1.8 billion came from healthcare fraud.

The procedure of passing amendments to bills is well known to legislators and lobbyists. The amendments passed through the Senate Judiciary Committee, the Senate Committee on Environment and Public Works and then passed to leadership.

Of course, healthcare fraud is not a victimless crime. When healthcare fraud is committed, it puts patients’ lives at risk by incentivizing substandard care and encouraging further fraud by the lack of widely visible punishment.

Stephen M. Kohn, a whistleblower attorney and Chairman of the National Whistleblower Center, was blunt: “Every taxpayer should be concerned that the key anti-fraud amendment that should have been part of the infrastructure bill was blocked by unethical lobbyists whose sponsors profit from defrauding the government. The False Claims Act is the most successful anti-fraud law. Congress cannot buckle under pressure from Big Pharma and its allies. The Grassley-Leahy amendment must be reintroduced and passed this term.”

Read more about Grassley’s amendments here.

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