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Whistleblowers under the Insurance Code

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Insurance Code section 1871.7 is a little-used statute containing whistleblower provisions that can greatly help in combating insurance fraud. One important issue currently being litigated is whether doctors and other health-care providers engage in illegal conduct under this section when they prescribe medication. They may be if they accept any kind of payment by a pharmaceutical company in exchange for prescribing that company’s products. The commercial lawyer will help you in company issues within California law.

It is common practice for pharmaceutical companies to attempt to influence physicians to write prescriptions for their drugs. The pharmaceutical companies have often made money payments or other benefits directly to the physicians in return for the prescribing of their drugs. Such quid pro quo (or even attempting to fraudulently induce physicians to write more prescriptions) is illegal under the federal Anti-Kick Statute.

As will be discussed below, this issue is currently being litigated in California State Court in the case of The People ex rel. Wilson v. Bristol Myers Squibb, BC 367873 under the little- used section of the Insurance Code.

Section 1871.7

Unknown to many practitioners is that in addition to the California False Claims Act , there are false claims and whistleblower provisions under the California Insurance Code. Section 1871.7 was enacted in 1993 to help combat fraud against insurance companies. (Assem. Bill No. 1300 (1993-1994 Reg. Sess.) The statute was original-ly enacted to fight workers’ compensation fraud. However, section 1871.7 was subsequently amended to include all forms of insurance fraud. 

Under section 1871.7(a), “it is unlawful to knowingly employ runners, cappers, steerers, or other persons to procure clients or patients to perform or obtain services or benefits pursuant to Division 4 (commencing with Section 3200) of the Labor Code or to procure clients or patients to perform or obtain services or benefits under a contract of insurance or that will be the basis for a claim against an insured individual or his or her insurer.” Section 1871.7, subdivi-sions (e)-(h) contain the whistleblower provisions of the statute.

A civil action for a violation of sec-tion 1871.7 can be brought by the district attorney or by the insurance commission-er. (§ 1871.7, subd. (d).) Also, “[a]ny interested persons, including an insurer, may bring a civil action for a violation of this section for the person and for the State of California. The action shall be brought in the name of the state." 

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