dolution

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Critical Legal Thinking Case: whistleblower statute

(Cheesaman, Contemporary Business Law, 8th ed., p. 189)

united states ex. rel. estate of george couto v. bayer corporation

“Bayer employees were to obey not only ‘the letter of the law but the spirit of the law as well.’”

—Bayer Corporation’s Ethics Video

The Bayer Corporation (Bayer) is a large pharmaceutical company that produces prescription drugs, including its patented antibiotic Cipro. Bayer sold Cipro to private health providers and hospitals, including Kaiser Permanente Medical Care Program, the largest health maintenance organization in the United States. Bayer also sold Cipro to the federal government’s Medicaid program, which provides medical insurance to the poor. Federal law contains a “best price” rule that prohibits a company that sells a drug to Medicaid from charging Medicaid a price higher than the lowest price for which it sells the drug to private purchasers.

Bayer’s executives came up with a plan whereby Bayer would put a private label on its Cipro and not call it Cipro and sell the antibiotic to Kaiser at a 40 percent discount. Bayer continued to charge Medicaid the full price. One of Bayer’s executives who negotiated this deal with Kaiser was George Couto, a corporate account manager.

Everything went well for Bayer until Couto attended a mandatory ethics training class at Bayer. Later that day,

Couto attended a staff meeting at which it was disclosed that Bayer kept $97 million from Medicaid by using the discounted private labeling program for Kaiser and other health care companies.

When he received no response to his memo, Couto contacted a lawyer. Couto filed a qui tam lawsuit under the federal False Claims Act 1 —also known as the Whistleblower Statute—which permits private parties to sue companies for fraud on behalf of the government. The whistleblower can be awarded up to 25 percent of the amount recovered on behalf of the federal government, even if the informer has been a co-conspirator in perpetrating the fraud.

After the case was filed, the U.S. Department of Justice took over the case, as allowed by law, and filed criminal and civil charges against Bayer. Bayer pleaded guilty to one criminal felony and agreed to pay federal and state governments $257 million to settle the civil and criminal cases. Couto, age 39, died of pancreatic cancer three months prior to the settlement. He was awarded $34 million, which went to his three children. United States ex. rel. Estate of George Couto v. Bayer Corporation (United States District Court for the District of Massachusetts)

Questions (each question worth 25 pts. Please do not exceed one page in total):

1. Please identify the ethical issue in this case.

1. What are the considerations of the Bayer Company, George Couto, and the US Federal Government?
2. Did Couto act ethically in this case? Please explain Couto’s behavior according to Kantian Ethics.
3. Should Couto have benefited from his own alleged illegal conduct?