False Claims Act Cases
Specifically, there have been a significant number of recent prosecutions of scientific misconduct alleging violations of the Federal False Claims Act (or the Act). The False Claims Act prohibits a person from knowingly presenting, or causing to be presented, a false claim to the federal government to obtain funds from a government program.
The Act defines knowingly as including actual knowledge as well as deliberate ignorance or reckless disregard of the truth or falsity of the information submitted. Civil penalties can amount to $10,000 per claim, plus three times the damages incurred by the government. The Act also defines a claim very broadly, so that not only can persons or entities be found liable who directly claim funds from the government, but also subcontractors who receive federal funds via third parties.
Although agencies of the federal government may of course prosecute cases under the False Claims Act directly, the Act also allows whistleblowers (called qui tam relators under the Act) to bring suit on their own, or together with the federal government. The qui tam relator is eligible for a significant percentage of any award collected through such a suit, whether brought individually or with the government.
Of the recent scientific misconduct cases brought under the False Claims Act, several are worth noting. In March of this year, a settlement was reached in the case of U.S. v. Poehlman, which involved Eric Poehlman, an academic researcher conducting federally funded research while employed at the University of Vermont (UVM). A qui tam action was brought by an individual who was a student and then laboratory technician for UVM who worked with the researcher during the time period in question. The government alleged that, among other things, Poehlman falsified and fabricated certain information from his federally funded research and used this falsified data in grant applications to obtain further federal funding for additional research.
The government contended that reviewers of the grant applications relied on this falsified data to determine that a grant should be awarded. Since Poehlman served as the principal investigator and signed the grant applications, certifying the truth of the information submitted, the government found that he violated the False Claims Act.
On April 14, 2005, the government announced that the University of Alabama at Birmingham and two related entities were to pay the U.S. $3.39 million to settle allegations that they violated the False Claims Act in connection with claims submitted as part of the Universitys health science research activities.
This case was brought in two parallel qui tam suits. The government and the qui tam relators alleged that the University had submitted false claims for payment to federal healthcare programs, including Medicare, and to NIH and other federal agencies that sponsored research grants or that had awarded contracts to the University.
There are several measures a biotech company can take in order to safeguard against potential liability for scientific misconduct. First, ensure that the company has adequate policies and procedures in place to instruct staff involved whether directly or indirectly in clinical research regarding how government funds are to be allocated, and how services and costs are to be documented. Second, companies must make sure that they have an established process in place for promptly identifying, investigating, and reporting allegations of research misconduct.
Last, to the extent that biotech companies contract with institutions to perform sponsored research studies, or otherwise provide grant support for third-party clinical trials, include provisions in such contracts that require the contracted entity to comply with all applicable laws regarding scientific misconduct, and consider including tailored indemnification provisions as necessary.