Medicating Children: A “Whistleblower’s” Lawsuit Raises a Novel Legal Question

In the past few years, a number of pharmaceutical companies have admitted to federal charges that they illegally marketed psychiatric medications for non-approved uses, with the companies paying large sums to settle the cases. Now, a legal complaint filed by the Law Project for Psychiatric Rights in an Alaskan federal court is raising a related question. When healthcare providers bill Medicaid for prescriptions of psychiatric drugs to children for non-approved uses, are they committing Medicaid fraud?

The case, United States ex-rel Law Project for Psychiatric Rights v. Matsutani, was unsealed earlier this year, and legal papers were recently filed that have brought this novel question -- which obviously has profound implications for the prescribing of psychiatric medications to poor children and adolescents -- into sharp focus.

The Law Project for Psychiatric Rights (PsychRights), which is headed by Alaskan attorney James Gottstein, filed its whistleblower complaint in April 2009. Known as a qui tam lawsuit, PsychRights sued on behalf of the federal government under the False Claims Act, which allows private individuals to pursue legal complaints against individuals or companies that are allegedly defrauding the government. In December, the federal government declined to join PsychRights in the case.

PsychRights named Alaskan state officials, hospitals, mental health agencies, psychiatrists, and pharmacies as defendants. In its complaint, PsychRights argues that the federal government has agreed to provide Medicaid reimbursement only for those outpatient drugs that are prescribed for an FDA-approved use or for a use supported by a medical compendium (such as the DRUGDEX Information System.) PsychRights maintains that the defendants defrauded the federal government when they billed Medicaid (or the federal Children's Health Insurance Program) for outpatient drugs that didn't meet this standard.

As part of its complaint, PsychRights identified 16 commonly prescribed psychiatric medications that have no "medically accepted indication" for youth under 18 years old, and it also identified the limited number of "medically accepted indications" that exist for 32 other psychiatric drugs. PsychRights compiled this list of "approved" uses by methodically going through the drug compendiums, and it serves as the evidential heart of the complaint, for it reveals that psychiatric medications are regularly prescribed to poor children for non-approved uses. PsychRights is asking the federal court to stop this practice (which it argues is harmful), and to pay hefty financial penalties for the fraudulent claims made to date. 

In early April, the defendants petitioned the court to dismiss the complaint, arguing that it was "fatally flawed" for a number of reasons, including several technical ones. For example, the defendants maintain that PsychRights has not "disclosed" private information that is required of "whistleblowers" in qui tam suits. But the defendants also argued --and this goes to the core legal issue of interest to healthcare providers -- that PsychRights has misinterpreted the applicable Medicaid law. Medicaid is a joint state-federal program, with each state establishing a Medicaid plan that must be approved by the federal government, and the defendants argue that a state may in fact choose to provide Medicaid reimbursement for outpatient drugs that are not FDA approved or "medically indicated" by drug compendia. The defendants argue that Alaska implicitly made that choice in regard to off-label use of psychiatric medications in children, and thus no fraud was committed.

The U.S. District Court in Alaska will likely take months to rule on the defendants' motions to dismiss the complaints. If the court rules on the central issue, it will help define whether Medicaid law supports off-label, non-compendia-approved use of psychiatric medications in children, or deems this commonplace practice to be medically unjustified.