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This article was originally published in The Tan Sheet

Executive Summary

RICO PROSECUTIONS OF FD&C ACT VIOLATIONS COULD INCREASE UNDER CRIME BILL if Senate language of the legislation is enacted into law, John Fleder of the D.C. firm Olsson, Frank and Weeda said in a Dec. 10 analysis of the bill. Fleder pointed out that the Senate version of HR 3355 includes Sec. 3801, the "National Health Care Anti-Fraud and Abuse Act of 1993." One effect of the proposal, Fleder maintained, is that "the federal government would likely bring more RICO prosecutions of firms for violating the FD&C Act, if the RICO statute is amended (as proposed) to include the FD&C Act as a basis for a RICO prosecution." The RICO anti-racketeering statute already has been used as a basis for prosecution of FD&C Act violations, Fleder noted. For example, the Justice Department charged several Bard execs with racketeering as part of its prosecution of that company relating to its USCI angioplasty business. Fleder believes that the proposed amendment to RICO to include health care fraud would make prosecutors "more likely to initiate criminal prosecutions in the health care area." The substantially shorter House version of the crime bill does not include the health care fraud sections. A conference committee will convene, probably early next year, to reconcile the two bills. Fleder identified four other health care fraud provisions in the Senate hill: "a new criminal provision modeled after the so- called mail fraud statute"; "a 'forfeiture' provision that would permit a court that is sentencing someone for certain 'health care offenses' to order the defendant to forfeit to the government real and personal property used in the offense"; "an amendment to the current civil mail fraud injunction provision that would permit the Justice Department to seek injunctions when it believes someone is about to commit a health care offense"; and "the False Claims Act would be amended to cover requests or demands for money or property made or presented to a 'health care plan.'" The False Claims Act was also invoked in the Bard case. The amendment presumably would make it easier for the government to recover Medicare/Medicaid or other payments for health care products found to have been adulterated or otherwise in violation of the FD&C Act. The False Claims Act includes a "whistleblower" provision that allows a private citizen to bring a suit in exchange for up to 30% of the recovery, Fleder noted. "Enactment of the Senate's health care fraud provisions would almost surely dramatically increase the recent flood of False Claims Act cases, thereby increasing the exposure of companies to judgments of almost limitless amounts," Fleder concluded.

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