Sep. 3, 2013 – A Sheboygan doctor who says a child psychiatrist caused unlawful Medicaid reimbursements through off-label prescriptions can press on with his whistleblower suit under the federal False Claims Act, a federal appeals court has ruled.

Dr. Toby Watson filed a lawsuit against Dr. Jennifer King-Vassel, claiming she knowingly wrote off-label prescriptions to a minor patient who received Medicaid assistance. Off-label prescriptions, commonly and legally prescribed by physicians, are written for purposes not approved by the Food and Drug Administration (FDA).

Doctors can write off-label prescriptions once a drug has FDA-approval for one use, but the doctor finds it useful for another purpose. Whether such off-label prescriptions are medically reasonable is generally a question for medical malpractice suits.

But Dr. Watson argues that medications prescribed for non-FDA approved uses are not eligible for reimbursement. Thus, Watson alleges that King-Vassel caused false Medicaid claims to be submitted, because she knew her patient was on Medicaid.

Watson obtained medical records from King-Vassel through the minor’s mother, who answered Watson’s ad in a Sheboygan newspaper. The ad solicited participation from minor Medicaid patients in a possible Medicaid fraud suit, with recovery potential.

Under the federal False Claims Act, it is unlawful for a person to “knowingly” make false claims for reimbursement to the federal government. States or private citizens can enforce the False Claims Act. In this case, Dr. Watson proceeded in his capacity as “private attorney general.” The U.S. Department of Justice declined to intervene.

Relators, private citizens who bring qui tam suits alleging fraud, can receive substantial awards for successfully winning a False Claim Act suit on behalf of the U.S. government. Civil penalties range from $5,000 to $10,000, plus triple damages.

A federal district court in Wisconsin halted the suit when it granted summary judgment to King-Vassel. The district court ruled that the Watson failed to use an expert that could explain the Medicaid reimbursement system with regard to prescription drugs, and without an expert, the plaintiff doctor lacked sufficient evidence to prove his claims.

But in Watson v. King-Vassel, No. 12.3671 (Aug. 28, 2013), a three-judge panel for the U.S. Court of Appeals for the Seventh Circuit reversed. Without deciding the merits of the case, the panel ruled that summary judgment was not warranted.

“Watson need only show that King-Vassel had reason to know of facts that would lead a reasonable person to realize that she was causing the submission of a false claim … or that King-Vassel failed to make a reasonable and prudent inquiry into that possibility,” wrote Judge Michael Kanne, noting that an expert witness was not necessary.

“A reasonable jury could plausibly interpret the evidence Watson assembled to show that King-Vassel recklessly disregarded the fact that [her patient] received Medicaid assistance, and that claims for payment for his prescriptions would be submitted to Medicaid.”

The panel rejected the “proximate cause” problem identified by the district court – that writing a prescription does not “cause” a false claim to be submitted.

“In short, we do not think a jury needs expert testimony to understand that writing a prescription to a person insured by Medicaid will likely cause a claim to be filed with Medicaid,” Judge Kanne wrote.

The panel’s opinion did not end without scolding Watson and his trial counsel, noting that the district court imposed sanctions on both of them.

The panel said they “dragged blameless parties into court unnecessarily” and suggested that Watson obtained the minor patient’s medical records by fraud.

That is, Watson caused the medical records to be released to the minor patient’s mother for purposes of further treatment, but Watson used them for litigation. “Despite ruling in Watson’s favor today, we hope that the district court’s sanctions will dissuade professionals from stooping to such unsavory tactics in the future,” wrote Judge Kanne.