The DOJ has released its Fiscal Year (“FY”) 2013 totals for civil settlements and judgments recovered under the federal False Claims Act (“FCA”).  To say that the Department had a successful year in prosecuting fraud against the government would be putting it mildly.  According to the DOJ release, the government recovered $3.8 billion under the FCA in FY 2013.  That total is second only to the approximately $5 billion recovered under the FCA in FY 2012; and it marks the fourth time in as many years that the government’s recoveries under the Act exceeded $3 billion.

Whistleblowers also enjoyed a successful FY 2013.  The government paid them over $345 million during that period (although the release points out that bounties are not always paid in the same year that their underlying cases are resolved).  Further, the government reports that $2.9 billion (or 76%) of the $3.8 billion recovered in FY 2013 “related to lawsuits filed under the qui tam provisions under the [FCA].”  The number of whistleblower lawsuits filed in 2013 reached 752 – up significantly from the 433 recorded in 2009.

These annual totals suggest that enforcement of the FCA is and will remain a top government priority.  Enforcement revenue is too strong a source of “scarce taxpayer dollars.”  There is likewise no signal of diminished whistleblower activity.  As the release points out, the government’s framework for rewarding whistleblowers is robust, and has been frequently reinforced by, for example, the passage of the Fraud Enforcement and Recovery Act (2009) and the Affordable Care Act (2010).

Because aggressive FCA enforcement appears to be high on the government’s to do list, it bears taking a closer look at how and where the government is focusing its enforcement resources.  It appears that in FY 2013 government prosecutors trained their sights on blockbuster cases.  The lion’s share of the government’s recovery came from just a handful of prosecutions in the areas of health care and procurement fraud.

The largest share of the government’s FY 2013 FCA recovery came from health care fraud cases.  The government reports that $2.6 billion (or 68%) of its total 2013 FCA recovery was related to health care fraud, and that its annual recoveries for this class of FCA cases has surpassed $2 billion for four consecutive years.  These figures, according to the release, demonstrate the Obama Administration’s commitment to combatting fraudulent claims against federally insured health programs, i.e., Medicaid, Medicare, and TRICARE.  “The government’s success in these cases is also a strong deterrent to others who would misuse public funds, which means government programs designed to keep us safer, healthier, and economically more prosperous can do so without the corrosive effects of fraud and false claims,” Assistant Attorney General Stuart F. Delery says in the release.

The majority of the $2.6 billion recovered by the government in this area came from cases challenging the practice of “off-label marketing,” in which pharmaceutical manufacturers allegedly promote their drugs to federal health care recipients (among others) for uses not approved by the Food and Drug Administration.  According to the release, the government collected over $2 billion from just 2 such cases.  In addition, the government secured major victories in cases involving the alleged manufacture and distribution of adulterated and improperly labeled drugs and participation in illegal kickback arrangements.

FCA recoveries in the area of procurement fraud totaled just under $900 million in FY 2013.  Over two-thirds of that amount came from a case alleging that a government contractor had made false statements to the Air Force during contract negotiations.  If it stands, the $664 million judgment will be the largest procurement recovery in history.  It is under appeal.

The government also obtained settlements totaling over $130 million from two government contractors that allegedly failed to disclose discounts given to their commercial customers.  These discounts, the government argued, meant that the defendants charged the government higher prices for the same goods and services – in violation of their obligations to the General Services Administration under the Multiple Award Schedule program.

Heightened FCA enforcement, coupled with increasing whistleblower activity, should sound the alarm for all companies that do business with the government.  The government’s focus on health care and procurement ought not prompt other industries to become lax in their compliance activity.  To the contrary, the experience of the defendants contributing to the government’s FCA haul in FY 2013 should provide a cautionary tale for all.