The California Insurance Fraud Prevention Act (“CIFPA”), Ins. Code §§ 1871, et seq., is an anti-fraud statute applicable to all types of insurance fraud. The CIFPA is a broad reaching statute designed to prevent and punish fraud, specifically insurance fraud through imposing significant penalties and provides for recovery of damages, attorneys’ fees and costs, and a share of the penalties imposed by the successful whistleblower.
Two unique pieces of the CIFPA were discussed in State ex rel. Wilson v. Super. Ct. (2014) 227 Cal. App. 4th 579: (1) what constitutes a “fraudulent claim” and (2) the prohibition on employing “runners, cappers, [or] steerers.”
In Wilson, the whistleblower was a former sales representative for Defendant Bristol-Myers Squibb (“BMS”). Wilson alleged that as part of BMS’s marketing of its drugs, BMS targeted high-prescribing physicians, members of formulary committees, and sometimes their families, to be receive lavish gifts and other benefits, including ticket to sporting events and concerts, vacations, rounds of golf, and meals, in order to induce and reward physicians for prescribing their drugs. State ex rel. Wilson v. Super. Ct., 227 Cal. App. 4th 579, 586 (2014). Wilson’s complaint alleged the scheme effectively employed the targeted physicians and others as runners and cappers, paying them for the purpose of procuring patients whose prescriptions would be covered by insurance. Ibid.
The parties submitted a stipulated motion for summary adjudication on two legal questions based on stipulate hypothetical facts: (1) whether there can be a violation of the CIFPA if there is no proof that the promised kickbacks to the physician caused the prescription; and (2) whether there can be a violation of the CIFPA if there is no misstatement in the express factual assertions on the submitted claim and the claim does not disclose the kickback promised or provided to the prescribing physician. State ex rel. Wilson v. Super. Ct. (2014) 227 Cal. App. 4th 579, 589.
Wilson alleged BMS’s scheme to provide prescribing physicians with lavish gifts effectively employed these prescribing physicians as “runners” and “cappers,”i.e., paying them kickbacks for procuring patients’ whose bills would be covered by insurance. Ibid. Such a practice is prohibited by CIFPA. Cal. Ins. Code Ann. § 1871.7(a).
Addressing whether there needs to be proof BMS’s kickbacks caused a physician to write a prescription, the Court of Appeal explained, “A substantial purpose for [the CIFPA] subdivisions (a) and (b)’s enactment is to enable the assessment of civil penalties for unlawful running and capping activities, without the practically impossible showing that a particular claim resulted from a particular violation.” State ex rel. Wilson v. Superior Court (2014) 227 Cal.App.4th 579, 601. The Court further explained, “The Legislature has found [this] conduct to be unlawful, and ‘almost always’ to be identified with fraud,” and noted:
Running and capping activities are disfavored and unlawful not just because they may often result in services that are excessive or unnecessary, but also because their purpose if to unfairly (and perhaps deceptively) obtain the benefits (clients, patients, prescriptions, claims, etc.) that otherwise might have gone to others who did not use the prohibited methods.
Turning to the question of whether a violation of CIFPA required and express misstatement, the Court of Appeal explained a fraudulent claim is any claim characterized in any way by deceit or “that result[s] from conduct that is done with an intention to gain an unfair or dishonest advantage.” Id. at 586, 602. The Court went further to explain “the ‘fraudulent claim’ requirement refers broadly to claims that are in some manner deceitful, and . . . not limited to claims that contain an express misstatement of fact.” Id. at 587.
These types of fraudulent schemes, and others, can be brought to light by whistleblowers, like Wilson, under the California Insurance Fraud Prevention Act. CPM is currently prosecuting and investigating several insurance fraud schemes on behalf of whistleblowers. If you are aware of any information about such practices, please contact us.