Updated: Whistleblower Helps Texas Settle $20M Fraud Case

Update, Oct. 30, 2012:

The Texas Attorney General’s office and federal government settled a $19.9 million Medicaid fraud case on Tuesday against a Swiss pharmaceutical company accused of deceptively marketing a skin cream with cancer risks to toddlers.

The state’s investigation revealed that Novartis, the Swiss-based pharmaceutical company, had unlawfully urged physicians to prescribe Elidel, a topical skin cream used to treat eczema to toddlers under age 2, “while failing to disclose known harmful side effects – including cancer related risks,” according to a statement from the AG’s office. The effect of the unlawful marketing resulted in the Texas Medicaid program overpaying for Elidel prescriptions.

Texas will receive more than $6.6 million directly from the settlement. A portion will also go to the federal government, which also funds the Texas Medicaid program, and the whistleblower who helped the government uncover the deceptive marketing practices and reported it to authorities. The identity of the whistleblower was not disclosed.

Original story, Sept. 27, 2012:

With the help of private whistleblowers, Texas has reaped more in Medicaid fraud settlements with pharmaceutical companies than any other state, according to a report released in September by Public Citizen, a nonpartisan consumer advocacy organization. 

“When I’ve spoken with a couple of other states, they definitely recognize Texas as a leader in enforcing pharmaceutical fraud,” said Dr. Sammy Almashat, one of the report's authors.

Texas has recovered at least $354 million in Medicaid fraud settlements from pharmaceutical companies since 1991 with the help of private whistleblowers, according to the report. Almashat said that’s because under Texas law, whistleblowers can receive between 15 to 25 percent of the financial penalties of a Medicaid fraud settlement for bringing the case forward.

Although 13 states have similar laws, “Texas is a unique case, because other states haven’t been nearly as active as Texas in taking advantage of whistleblower revelations in prosecuting,” civil Medicaid fraud, Almashat said.

“A whistleblower brings unique underlying knowledge about the fraud that was perpetrated by the defendant in the case,” said Daniel Hodge, first assistant attorney general. In all civil Medicaid fraud cases — including those against pharmaceutical companies and many others — in the last 10 years, Texas has recovered $880 million, said Hodge, and $373 million of that went to the state treasury. 

The whistleblower cases are entirely responsible for that $880 million, Hodge said, explaining that although the inspector general at the Texas Health and Human Services Commission referred 12,000 criminal Medicaid fraud cases to the AG's office since 2002, during that same time, that agency only referred three civil Medicaid fraud cases.

Currently, a top priority at the AG’s office is to pursue orthodontic and dental fraud in the Medicaid Program, Hodge said. The office has assembled the Orthodontic and Dental Fraud Task Force to combine resources at various agencies, including the Office of Inspector General at the HHSC. At least one case being pursued by the task force was referred by a whistleblower. 

Given the significant portion of the state budget that goes to Medicaid, “it’s more critical than ever for the taxpayers that we aggressively pursue any actors that defraud the taxpayers and recover those dollars,” Hodge said. “We’re thrilled that Texas has been recognized for [Attorney] General Abbott’s efforts to prioritize uncovering and recovering waste, fraud and abuse in the Medicaid program.”