Insurance Commissioner Dave Jones broke new legal ground last week by relying on an obscure section of the state insurance code to go after a big pharmaceutical company for wooing doctors with cognac, cigars and golf outings to prescribe its drugs.
Jones, an attorney who worked for Janet Reno in the Clinton White House, announced on Friday that he joined a whistleblower lawsuit against the drug maker Bristol-Myers Squibb.
The case was brought forward by three former Bristol-Myers Squibb sales staff members who claim that the company “unlawfully provided high-prescribing doctors with lavish gifts, expensive meals, speaking honoraria … both in order to induce them to prescribe (Bristol-Myers Squibb) drugs and in order to reward them for doing so.”
In turn, Jones claims, California health insurers spent $3.5 billion on Bristol-Myers drugs.
"This sort of fraud has long plagued our health insurance system, leading to billions of dollars annually in added healthcare costs nationally," Jones said in a press statement.
Bristol-Myers Squibb said in a statement Friday that the lawsuit has no merit and that it will defend itself vigorously.
Such allegations against a big pharmaceutical company are not new and have resulted in multimillion dollar settlements. What’s new here is that a state insurance commissioner is joining a “qui tam,” or whistleblower lawsuit, on behalf of health insurance companies.
Typically, such cases are filed by state or federal attorneys general and seek to recoup funds for government-funded programs such as Medicare or Medicaid.
Here, Jones is waging a battle on behalf of health insurers, and, in turn, consumers and companies that buy health coverage.
"This is the first time the insurance commissioner's office has ever intervened in a healthcare fraud case against a large pharmaceutical company for these types of practices. It's groundbreaking," Loren Jacobson, an attorney with Waters & Kraus, said in a press statement. That Los Angeles firm initially brought the case forward.
Jones is relying on an insurance code section that outlaws the use of “runners, cappers, steerers or other persons to procure clients or patients” in a manner that will run up premiums for people who buy insurance.
The code section says that the state insurance commissioner must bring such a case before a district attorney, who could prosecute it. However, if the district attorney declines to pursue the matter "due to insufficient resources," the insurance commissioner can take on the case. The case was filed in Los Angeles Superior Court.
Jacobson said in an interview that she only knows of one other state, Illinois, that has a similar law allowing insurance commissioners to recover funds for health plans. She said if the case succeeds, "the insurance commissioner will be able to use the statute to reign in this kind of activity."
The lawsuit alleges that Bristol-Myers Squibb sales representatives gave cognac, cigars, and access to a Los Angeles Lakers “dream camp” to doctors to encourage them to prescribe BMS drugs. The case also says sales staff arranged golf outings, a Universal Studios family day and “samba” dance events for Hispanic doctors.
In an effort to induce doctors to prescribe more of a Bristol-Myers diabetes drug, the sales team sent four doctors and their wives to the Los Angeles Philharmonic at a cost of nearly $1,000 in 2001, the lawsuit claims.
The lawsuit alleges that health insurers knew nothing of this “fraudulent kickback scheme.” If they had, “they would not have provided reimbursement for these prescriptions, because to do so would be to condone illegal behavior.”