Health Law Scan

Legal Insights and Perspectives for the Healthcare Industry

The Health Care Fraud and Abuse Control Program (HCFAC), an annual report jointly issued by the US Department of Justice (DOJ) and Department of Health and Human Services (HHS), can be helpful in predicting DOJ and HHS priorities for the coming year. In the FY 2022 HCFAC, DOJ and HHS not only highlighted a series of fraud and abuse enforcement wins, but also indicated increased activity by and with the US Food and Drug Administration (FDA) and the DOJ Consumer Protection Branch (CPB). This increase in activity from these regulatory agencies should be of interest to stakeholders in the pharmaceutical and medical device sectors.

HCFAC Background and Purpose

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) established the HCFAC in an effort to coordinate federal, state, and local law enforcement with respect to healthcare fraud and abuse enforcement activities. The HCFAC provides a SportsCenter Top 10–esque list of DOJ and HHS’s enforcement highlights over the previous fiscal year. It also lays out the total recoveries and expenditures undertaken as part of the US government’s ongoing efforts fighting healthcare fraud and abuse.

The enforcement accomplishments highlighted by DOJ and HHS were expected: COVID-19–related fraud, opioids, and telehealth (with an unsurprising deep dive into Operation “Brace Yourself”) are all heavily featured, mirroring the public enforcement priorities touted by DOJ and HHS representatives now for years post-pandemic.

The report lays bare, however, the impact of the pandemic on not only healthcare-related enforcement activities but also the targets of such enforcement efforts. Specifically, the HCFAC’s return-on-investment metrics indicate that DOJ and HHS are looking at lower-dollar targets.

DOJ and HHS’s return on investment for enforcement-related expenditures dropped from $4 to $2 for every dollar spent, reflecting the lingering financial impacts still affecting the healthcare and life science industries and suggesting that DOJ is undertaking enforcement actions against a higher variety of providers.

HCFAC Identifies Uptick in FDA Enforcement Funding

Beyond these highlights, the HCFAC also noted certain seemingly strategic increases in funding from FY 2021 to 2022 for various HHS agencies. A funding increase that should pique the interest of stakeholders in the pharmaceutical and medical device sectors, specifically, is for the FDA’s Pharmaceutical Fraud Program (PFP).

Led by the FDA’s Office of Criminal Investigations and Office of the General Counsel Food and Drug Division, the PFP’s purpose is to investigate, prosecute, and prevent pharmaceutical, biologic, and medical device fraud under the Federal Food, Drug, and Cosmetic Act (FFDCA) and other statutes. In FY 2022, the PFP opened 16 investigations involving allegations of fraudulent new drug applications, violations of current good manufacturing practices, clinical trial fraud, and fraudulent marketing schemes.

From FY 2021 to 2022, the mandatory allocation of HCFAC funding to the PFP nearly doubled to just under $12 million. While the number of investigations opened by the PFP did not experience a corresponding increase (16 compared to 15 in FY 2021), the increased funding shows strong support for rigorous and thorough PFP enforcement efforts. It is likely that this additional funding will result in increased scrutiny and investigations in FY 2023.

Evolving Enforcement Avenues

The increased funding for the PFP may signal that the HCFAC is beginning to widen the government’s avenues to prosecute healthcare fraud and abuse matters. Traditional enforcement methods have seen a drastic decrease in recoveries post-pandemic, specifically a decrease of more than $3 billion in False Claims Act (FCA) recoveries from FY 2021 to 2022.

Another section of the HCFAC suggests that the CPB is becoming a driving force behind similar FFDCA-related and other consumer fraud investigations and prosecutions. The report provides that the CPB nearly tripled its efforts in response to consumer fraud–related enforcement from 23,000 hours in FY 2021 to nearly 65,000 hours in FY 2022. While DOJ enforcement under the FCA may always be the “Batman” of healthcare fraud and abuse enforcement, the PFP and CPB appear to be positioned as formidable “Robins,” specifically to those companies in the pharmaceutical and medical device sectors.

Coupled with OIG’s ongoing fraud and abuse investigational and auditing activity, federal agency enforcement remains robust. The invigorated CPB enforcement activity dovetails with Deputy Assistant Attorney General for the CPB Arun Rao’s recent comments announcing the CPB’s own M&A safe harbor policy.

Key Takeaways

The HCFAC report demonstrates that DOJ and FDA may be broadening their enforcement avenues given the recent decline in historically robust fraud and abuse tools such as the FCA. Healthcare stakeholders should note the bolstered funding for the PFP and CPB’s increased efforts related to public health and safety and consider taking proactive steps to ensure regulatory compliance. Providers, suppliers, and manufacturers should heed the indications of the FY 2022 HCFAC report when undertaking compliance-related activities.

For any questions on the HCFAC, healthcare enforcement trends in 2024, or responding to an FCA, CPB, or PFP matter, please contact the authors.