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Pa. can avert penalty with antifraud law

As of January 2007, the federal government began penalizing states that had not enacted false-claims laws to combat fraud against their treasuries. The penalty is a 20-percent loss of reimbursements from Medicaid-fraud prosecutions under the federal False Claims Act.

Because Pennsylvania does not have a state false-claims act, it gets a smaller share of fraud-prosecution proceeds than states that have such laws, potentially costing Pennsylvanians millions of dollars.

Not surprising, many more responsible state legislatures have passed false-claims acts. New Jersey, Delaware, New York and 17 other states have adopted such laws, avoiding the 20-percent penalty.

State false-claims acts protect state tax dollars. They allow states to intervene in health-care fraud lawsuits, have their interests recognized, reward deserving whistle-blowers, and recover tax dollars. The recent $425-million Cephalon settlement is just one example of a successful false-claims case in which whistle-blowers who worked for the company were able to initiate false-claims prosecutions and expose hundreds of millions of dollars in continuing fraud.

Cephalon, a biotech drug manufacturer in Frazer, flouted federal regulations on a massive scale for years through off-label marketing of prescription drugs. Because whistle-blowers came forward to file claims under the federal False Claims Act, states and the federal government recouped their shares of Cephalon's illegally gotten dollars.

But Pennsylvania will receive 20 percent less from the case because it lacks a false-claims law. Neighboring states, meanwhile, will not be penalized.

State false-claims acts are cost-effective. Texas, which has had such a law for years, recovers $15 for every $1 invested in false-claims investigations. Texas Attorney General Greg Abbott has dramatically expanded the state's Medicaid-fraud units since taking office. As a result, Texas has recovered more than $200 million.

Gov. Rendell, a former prosecutor, knows an effective fraud-fighting tool when he sees one. He also knows that the financially responsible thing for Pennsylvania is to pass a false-claims act, and he has endorsed the idea. But the legislature, responding to undisclosed influences, has refused to act.

One reason for the legislature's inaction may be that the person who should be leading the efforts to enact a Pennsylvania false-claims act, Attorney General Tom Corbett, has been silent on the issue.

Why would Corbett and the legislature stand idly by while Texas, California, Florida, New York and others use state false-claims acts to recover tens of millions of dollars from those who have defrauded their treasuries? They should take steps to give Pennsylvanians the same protection and reimbursement as residents of other states.


Brian Kenney and his firm have represented whistle-blowers across the country under federal and state false-claims acts, including in the Cephalon case. Kenney can be reached at bkenney@kemy-law.com.
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