Multimillion-dollar medical scams stopped by whistleblowers

By Naveed Saleh, MD, MS, for MDLinx
Published October 23, 2019

Key Takeaways

In theory, whistleblowing should be patently protected at every level. In reality, whistleblowing is advocated for via a complex web of US statutes, protections, and agencies. For instance, OSHA enforces more than 20 federal laws—such as the Affordable Care Act and Occupational Safety and Health Act—that protect workplace safety in a variety of industries, including healthcare, consumer goods, financial reform, nuclear energy and power, and transportation services. However, with the exception of US Postal Service workers, OSHA does not protect federal employees. Instead, whistleblowing involving federal government employees is handled by the Office of Special Counsel.

As can be imagined, the road of a whistleblower is a tough row to hoe. The immediate consequences can be downright scary. Retaliation can take the form of blacklisting, demoting, disciplining, reassigning, firing, threats, suspension, cut in pay, and more. If done in a timely manner, a complaint about retaliation can be filed with OSHA. With this in mind, here are some of the most notable medical whistleblowing cases in recent US history.

Medicare Advantage

In total, there are about 18 whistleblowing lawsuits levied against Medicare Advantage, a private alternative to Medicare that tempts with dental and vision coverage but limits provider choice. This program is particularly popular, with just over one in three Medicare-eligible individuals signing up.

Whistleblowers have claimed that Medicare Advantage is bilking the government out of large sums of money by exaggerating the severity of patients’ illnesses. To date, five lawsuits have recouped nearly $360 million in overpayment.

Acthar Gel

Two whistleblowers have alleged that Questcor Pharmaceuticals—now called Mallinckrodt—bribed healthcare providers to overprescribe H.P. Acthar Gel in an effort to increase sales, defrauding Medicare for millions of dollars. This corticotrophin injection is indicated for the treatment of a wide variety of health conditions, including infantile spasms, multiple sclerosis in adults, dermatomyositis, lupus, sarcoidosis, and nephrotic syndrome. The price skyrocketed from $40 a vial in 2000 to nearly $39,000 currently—a 97,000% increase! By analogy, imagine the price of a gallon of whole milk rising to about $3,200.

‘Operation Spinal Cap’

Michael Drobot, the former owner of Pacific Hospital in Long Beach and mastermind behind the largest fraudulent scheme in California history, is now serving over 5 years in prison. According to the Department of Justice, Drobot’s con involved surgeons and other healthcare professionals receiving more than $40 million in illicit kickbacks for treatment referrals to his hospital. Unnecessary spinal surgeries were conducted at the hospital using counterfeit spinal hardware, with many patients suffering postoperative complications. The fraud ran all the way up to a prominent state senator, Ron Calderon, who served as a legislative enabler by keeping a loophole open, allowing for excessive hardware billing. In total, fraudulent claims related to this case amount to more than $950 million during a 15-year period. The scam was revealed by two whistleblowers, Mark Sersansie, who was employed by one of Drobot’s associates, and by William Reynolds, an insurance fraud investigator.

Avanir Pharmaceuticals

California-based Avanir Pharmaceuticals agreed to pay more than $95 million to settle civil allegations under the False Claims Act after two whistleblowing complaints alleged a scheme involving kickbacks paid to physicians who increased their prescription volume of Nuedexta, which is approved to treat pseudobulbar affect. The whistleblowers also described the company’s aggressive, misleading marketing of the drug to healthcare providers in long-term care facilities, where it was reportedly used off-label to “narcotize” patients exhibiting behaviors commonly associated with dementia.

Manchester VA Medical Center

William “Ed” Kois, MD, along with 11 other staff physicians and medical employees, brought whistleblowing complaints of substandard care and neglect against the Manchester VA Medical Center in New Hampshire to the US Office of Special Counsel, which launched an extensive investigation and prompted scrutiny of other VA hospitals nationwide. Dr. Kois, head of the Medical Center’s spinal care unit, and colleagues reported that nearly 100 veterans had become disabled or paralyzed due to substandard care, and that many of these patients could have benefited from surgery. The whistleblowers also reported unsanitary conditions, including fly-infested operating rooms and non-sterilized surgical instruments, and the use of outdated equipment.

After a 2-year fight that resulted in the removal of two top administrators at Manchester VA Medical Center in 2017, the Department of Veterans Affairs agreed to invest $30 million in the medical center for the improvement of clinical care. On a sad note, whistleblower Dr. Kois died in a car accident in July 2019.

Recently, VA physicians who were whistleblowers complained to Congress about retaliation in the form of marginalization of job opportunities and firing. Unfortunately, the VA’s Office of Accountability and Whistleblower Protection, which was created to protect VA employees who report misconduct, is now itself is being investigated for allegedly retaliating against whistleblowers.

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