Health Care Investors Beware: U.S. Attorney Sues Private Equity Firm For Portfolio Company’s Alleged Billing Fraud

The U.S. Attorney for the Southern District of Florida recently intervened in a whistleblower lawsuit brought under the federal False Claims Act, alleging fraudulent billing by a pharmacy reimbursed by the federal government. (U.S. ex rel. Medrano v. Diabetic Care Rx, LLC, No. 15-cv-62617, S.D. Fla.) What makes this case significant is that the U.S. Attorney has also named a private equity (PE) firm as a defendant. This attempted extension of False Claims Act liability to a PE firm should serve as a cautionary tale about the risks to private equity invested in the health care space, for a portfolio company’s management decisions and business operations implicating the fraud and abuse statutes applicable to the Medicare, Medicaid and TRICARE programs. Read more.

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