On January 15, 2025, the Department of Justice (DOJ) released its annual fraud statistics report (Annual Report) detailing settlements and judgments obtained under the False Claims Act (FCA) and other fraud matters during Fiscal Year 2024 (FY 2024), which ended September 30, 2024. During FY 2024, the government recovered $2,920,738,612, a 4.8% increase compared to FY 2023. 2024 also saw a landmark ruling from a federal trial court that the qui tam provisions of the FCA are unconstitutional. Below are key takeaways from 2024, including the Annual Report, and what government contractors facing FCA claims should expect in 2025 and beyond. For more details on this important topic, visit this link to register for our webinar, “PilieroMazza Annual Review: What DOJ’s 2024 FCA Report Means for Government Contractors,” and remember to check out our podcast Ex Rel. Radio for quick FCA updates.
New FCA Matters Continue to Increase
In FY 2023, we witnessed a record number of FCA matters initiated (1,218); however, FY 2024 beat that record with 1,402 new FCA matters: 423 brought by the government and 979 by whistleblowers (known as “relators” in the FCA context). Although the number of government-initiated matters decreased by 16% compared to FY 2023, the number of relator-initiated matters (known as “qui tam” suits) saw an increase of 37%, which is the highest number of new qui tam matters in history.
Key Takeaways: The government’s primary vehicle for recovering federal funds obtained by fraud or misrepresentation is the FCA. These matters are rarely resolved in the same fiscal year they are initiated. As such, we expect the raw number of settlements and judgments obtained by DOJ to increase over the next several years. DOJ does not publish statistics regarding the claimed value of the FCA matters initiated each year, but given the substantial increase in qui tam actions in FY 2024, larger financial recoveries are also likely on the horizon.
In relator-initiated matters, whistleblowers are entitled to recover between 15% and 30% of the government’s financial recovery in the matter, plus attorneys’ fees. The ability to share in the government’s recovery creates a substantial incentive for relators to initiate new matters. With a record number of new qui tam matters in FY 2024, expect relator-initiated matters to continue to increase year over year.
The Number of Overall Settlements and Judgments Remains High
FY 2024 saw 558 total settlements and judgments in fraud and FCA matters. That number is only marginally shy of the 566 settlements and judgments entered in FY 2023, and the FY 2024 numbers are the second highest in history.
Key Takeaways: The total number of newly initiated FCA matters was somewhat consistent between 2015 and 2022, with new matters ranging from 768 to 963. There was a stark increase in 2023 (1,218) and another significant jump in FY 2024 (1,402). FCA matters typically take years to resolve. We expect the number of overall settlements and judgments to increase substantially in the next three to five years as the FY 2023 and FY 2024 new matters begin to reach the settlement and litigation stage.
The Most Significant Settlements Involved Alleged Healthcare Fraud and Procurement Fraud
As in prior years, the Annual Report underscores a continuing emphasis on healthcare fraud and procurement fraud. DOJ reported 85 new government-initiated Health and Human Services (HHS) matters (down from 95 in FY 2023) and 370 qui tam matters (up from 349 in FY 2023). Overall, settlements and judgments for alleged HHS fraud totaled approximately $1.676 Billion, nearly $200 Million less than the last fiscal year. That said, overall healthcare fraud recoveries were at their lowest levels since FY 2009.
The Annual Report notes that the DOJ continued its focus on the opioid epidemic, pursuing healthcare providers, pharmaceutical companies, and pharmacies that contributed to and exacerbated the opioid crisis. For instance, one of the largest settlements mentioned in the Annual Report involves a settlement of $475.6 Million to resolve allegations relating to losses to federal healthcare programs that paid for Opana ER, an opioid drug sold and marketed by the company. DOJ alleged the company used an aggressive scheme that marketed Opana ER to high-volume prescribers of opioids, including prescribers that the company knew were prescribing the drug or other opioids for non-medically accepted indications.
The Annual Report also highlights a number of settlements resolving alleged unlawful kickbacks and Stark Law violations. For instance, a company and two of its senior executives agreed to pay $12 million to resolve allegations that they paid kickbacks to spine surgeons in the form of consulting fees, intellectual property acquisition, and licensing fees, registry payments, performance shares in the company, travel to a luxury ski resort, and lavish dinners and holiday parties to induce use of the company’s spinal implants, devices, and other equipment in medical procedures performed on Medicare beneficiaries.
While the Annual Report does not provide specific data on procurement fraud matters, DOJ’s press release accompanying the Annual Report noted the government’s continuing pursuit of fraud matters involving the purchase of goods and services by the military services and listed a number of related settlements. One such settlement involved payment of over $800,000 to resolve allegations that the contractor knowingly supplied valves that did not meet military specifications. Another settlement resulted in payment of $70 Million to resolve allegations that two entities, which were owned by the same parent company, entered into an improper subcontract that resulted in the Navy paying inflated costs for spare parts needed to repair and maintain the primary aircraft used to train naval aviators.
Two significant settlements were not included in DOJ’s report because they occurred just after the end of the fiscal year. The first, which settled on October 10, 2024, involved a large generic drug manufacturer who was alleged to have committed Medicare fraud and price fixing. By paying co-pays and steadily raising the price of the drug while also conspiring with other manufacturers and receiving illegal kickbacks, the pharmaceutical company is alleged to have violated the FCA and agreed to settle for approximately $450 Million.
The second involved a Department of Defense (DOD) contractor allegedly providing false cost and pricing data during contract negotiations. The DOD contractor also allegedly double-billed on a contract, which resulted in the contractor receiving more than the negotiated price of the contract. The recovery of $428 Million is the second largest procurement-related fraud recovery in FCA history.
Key Takeaways: Despite the drop in healthcare fraud recoveries in FY 2024 and a slow decrease in newly-initiated healthcare matters over the last several years, healthcare fraud remains a central focus for the government’s FCA pursuits. We expect to continue to see a slow decline in the number and value of healthcare fraud recoveries, consistent with recent trends. On the other hand, as noted in PilieroMazza’s blog last year, we expect to see continued increases in recoveries and new matters related to procurement fraud.
Pandemic Fraud and Cybersecurity Recovery
In response to the COVID-19 pandemic, Congress authorized emergency funding to provide assistance to individuals and entities impacted by the pandemic. As part of the relief efforts, the Small Business Administration (SBA) administered the Paycheck Protection Program (PPP) in 2020, which provided loans to small businesses meeting certain criteria. DOJ’s intent is to continue to crack down on improper payments under PPP and false certifications of eligibility under the program. During FY 2024, DOJ reported to have obtained more than 250 settlements and judgments totaling more than $250 Million related to pandemic fraud.
Key Takeaways: While an exact number of PPP loan fraud recovery is not provided, the number of pandemic-related settlements and judgments decreased from FY 2023. Given the time that has passed since the program was implemented, we can expect a continued decline in PPP fraud matters and recoveries.
In 2024, DOJ created a Civil Cyber-Fraud Initiative to utilize the FCA to enforce cybersecurity compliance for government contractors. The government has recovered settlements against contractors failing to develop, implement, maintain, or meet cybersecurity requirements as required by their contracts.
Key Takeaways: In light of DOJ’s Civil Cyber-Fraud Initiative, expect more cybersecurity actions to be initiated in 2025 and beyond. Contractors must stay abreast of those requirements and review their internal policies to ensure they remain in compliance and avoid an FCA action.
If you have questions about the Annual Report and potential impacts on your business or other FCA-related matters, please contact Matt Feinberg, Jackie Unger, or another member of PilieroMazza’s False Claims Act or Audits & Investigations practice groups. Visit this link to register for our webinar, “PilieroMazza Annual Review: What DOJ’s 2024 FCA Report Means for Government Contractors,” and check out our podcast Ex Rel. Radio.
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