Pharmaceutical Kickbacks

Right now the pharmaceutical industry is in the middle of its biggest challenge in history. Whistleblowers have exposed and continue to expose fraudulent practices ranging from pricing issues to sales and marketing practices at a rate never anticipated by either the pharmaceutical industry or the Department of Justice. Settlements and jury verdicts have been headline grabbing and large, attracting the attention of pharma, regulators, Congress and taxpayers. The qui tam pharmaceutical fraud cases settled since 2000 alone have amounted to over 3.5 billion dollars, representing various patterns of fraud. We expect to see some new patterns as time goes by, especially with the new Medicare prescription drug benefit. Pharmaceutical fraud is still abundant and this blog is intended to keep readers up to date with all pharmaceutical fraud related news and to provide commentary when warranted. This blog also contains an array of laws and regulations concerning the Federal Food, Drug and Cosmetic Act set out in an easy to read format.

KV Pharmaceutical Whistleblower Case Settles for $17 Million

by Nolan and Auerbach on December 16, 2011

The federal government has announced a $17 million settlement of a False Claims Act qui tam action with KV Pharmaceutical Company, the parent company of now-defunct Ethex Corporation. This is the latest settlement from a decade-old qui tam action by national whistleblower law firm Nolan & Auerbach, P.A. The qui tam lawsuit alleged that dozens of small and mid-sized pharmaceutical companies have been allowed (and some continue to be allowed) to sidestep the FDA drug approval process and manufacture and distribute unapproved drugs, ultimately prescribed to Medicaid patients, jeopardizing the safety of millions of Americans and thwarting federal law. This multi-defendant lawsuit has led to the recovery of hundreds of millions of dollars for Government Health Care Programs.

According to the qui tam complaint, several pharmaceutical companies, including Ethex Corporation, had, time and time again, deceived the government by falsely certifying that their unapproved drugs had passed the requisite FDA tests for safety and effectiveness, or otherwise met with the statutory definition of a Covered Outpatient Drug. These false certifications allowed the drug companies to peddle their unapproved products to physicians of Medicaid patients and to wrongfully receive payments from Government Health Care Programs.

This settlement quieted allegations that Ethex continued to market and receive government health care dollars for two medications that had lost FDA approval. The two medications, Nitroglycerin Extended Release Capsules and Hyoscyamine Sulfate Extended Release Capsules, lost their approvals in April of 1999 and March of 1997, respectively. The company is alleged to have intentionally failed to notify the Centers for Medicare & Medicaid Services(CMS) that these medications were no longer a covered outpatient drug.

Under the federal Food, Drug & Cosmetic Act, 21 U.S.C. § 301 et seq., every drug must be approved by the FDA for safety and effectiveness before it can be marketed to the public. These drugs were not. Ultimately, the FDA determines whether the drug is safe and effective in its proposed use(s), whether the benefits of the drug outweigh the risks, and whether the methods used in manufacturing the drug and the controls used to maintain the drug’s quality are adequate to preserve the drug’s identity, strength, quality, and purity.

Nolan & Auerbach, P.A. has taken on the responsibility of prosecuting the remaining defendants identified in this qui tam action under the civil False Claims Act.

For more information about qui tam law and pharmaceutical fraud, contact Nolan and Auerbach, P.A.

{ 0 comments }

Kickbacks to Providers from Pharmaceutical Companies Still Going Strong

by Nolan and Auerbach on November 18, 2011

Kickbacks from pharmaceutical companies cloud the medical judgment of health care providers and run afoul of federal and state anti-kickback laws. Most prominently, the federal Anti-kickback Act (AKS) was specifically designed to ensure that physicians prescribe drugs based on patient need, not personal greed.

In recent years, however, pharma companies have become increasingly clever in disguising illegal kickbacks. Most prominent are massive speaker bureaus, speaker programs, and advisory boards, all in an attempt to disguise excessive payments as fees for “speaking engagements,” “consulting services” or “training sessions.” Typically, instead of recruiting speakers and consultants based on their experience or credentials, dishonest companies will target physicians based on their potential prescription-writing volume. Furthermore, once physicians are accepted into their programs, the companies will unofficially require speakers to meet minimum prescription levels.  Payment for “Research” and the collection of data are other techniques still used by wayward pharmaceutical companies.

The AKA is violated when a person or entity makes or accepts payment for referring, recommending or arranging for federally-funded medical items or services, including items or services provided under the Medicare, Medicaid, and TRICARE programs. Violations of the AKA are per se violations of the federal False Claims Act, the government’s primary pharmaceutical fraud-fighting weapon.

Pharmaceutical companies conduct extensive return-on-investment analysis in devising and implementing sophisticated marketing schemes and programs. Dishonest pharmaceutical companies will skirt the AKA, knowing their bribes will influence prescribing habits and, in turn, result in the provision of goods and services that are more expensive and/or medically unnecessary or even harmful to a vulnerable patient population.  Over the last fifteen years, dozens of pharmaceutical companies have shelled out multimillion dollar settlement checks to quiet allegations that they showered doctors with illegal kickbacks. Up to several years ago many kickbacks were blatant bribes, including outright “grants,” tickets to sporting events, and other gifts and benefits.

Most illegal kickbacks to doctors are thinly-veiled incentives for off-label prescriptions, for uses that do not work. These business practices cause federal and state government health care programs to pay millions of dollars for prescriptions which are ineligible for payment. Notably, while a physician may prescribe a drug off-label, the law prohibits the provider from inking a kickback-tainted prescription for a Government Health Care Program beneficiary.

The government simply doesn’t have the resources to unravel these schemes, unless pharmaceutical employees and health care providers courageously provide the necessary inside information. For those who do take this stand, the rewards are potentially worth millions.

For more information about qui tam law and pharmaceutical fraud, contact Nolan and Auerbach, P.A.

{ 0 comments }

FDA-Approved Targeted Drugs Are Ripe for Off-Label Marketing

by Nolan and Auerbach on September 13, 2011

The FDA at times gives its stamp of approval to drugs that only work in small subset of the patient population. For example, a few days ago, the FDA approved Pfizer’s lung cancer drug Xalkori, which was only proven effective in less than 7% of the lung cancer patient population. However, because the efficacy was tied to a recognizable and testable gene mutation, the FDA only approved the drug as a treatment for lung cancer patients with this specific mutation.

“There’s been a change of paradigm,” Pfizer scientist James Christensen told the Wall Street Journal. “The new school of thought is, ‘If you find the patients that the drug will work in, and if you see enough benefit, we will find a way to get this to market.’”

These “targeted drugs” or “niche drugs” are oftentimes accompanied by a hefty price tag. For example, in the case of Xalkori, a year’s supply will run over $115,000. Similar sticker shock is tied to Roche’s melanoma drug Zelboraf (vemurafenib), which is priced at $56,400 for 6 months of treatment.

While there is nothing nefarious about a drug company reaping the monetary benefits of the economic supply and demand curve, there is heightened potential for fraud with hyper-specific FDA drug labels. Specifically, a narrow FDA-approved label provides drug companies with the proverbial “camel’s nose in the tent.” In other words, once a drug has been blessed by the FDA for a subset of the patient population, wayward drug companies will, inevitably and illegally, expand their marketing efforts to capture the rest of the patient population. This scenario has multiple off-label case recoveries over the past decade.

For more information about qui tam law and pharmaceutical fraud, contact Nolan and Auerbach, P.A.

{ 0 comments }

Are Pharma Companies Using Foreign Research Studies to Boost Off-label Sales?

by admin on August 2, 2011

In this era of mega international pharmaceutical mergers, pending False Claims Act lawsuits oftentimes bubble to the surface at the closing table. Recently, as Teva Pharmaceuticals looked to wrap up its acquisition of Cephalon, Inc., it was revealed that the United States government was, once again, examining Cephalon’s marketing practices. Specifically, Cephalon disclosed that it had recently received a government subpoena requesting documents related to the alleged off-label promotions of its Treanda medication.  While Trenda is only FDA approved for the treatment of chronic lymphocytic leukemia, allegations are swirling that Cephalon pushed the medication as a suitable first-line treatment of non-hodgkin’s lymphoma.

According to one news source, government investigators are especially interested in “uncompleted clinical studies that may be used to support off-label use,” and, in particular, “documents pertaining to a clinical study being conducted by to Mathias Rummel, who is the head of hematology at the University Hospital in Giessen, Germany.” This comes on the heels of recent announcements that the U.S. Justice Department is looking to expand its investigations into overseas pharmaceutical research studies, in order to uncover clinical trial fraud.

“Oftentimes enticed by lowered regulatory hurdles, pharmaceutical companies are increasingly flocking to foreign researchers to study the unapproved uses of their products,” said Nolan & Auerbach partner and former Taxpayers Against Fraud president Jeb White. “When beneficial preliminary data emerges from these studies, the results seep their way into paid speaker presentations and the promotional arsenals of pharmaceutical sales representatives. The end result is that off-label data is promoted to health care providers, outside the watchful eye of the U.S. Food & Drug Administration.”

Only time will tell if Cephalon was engaged in this international end run around the FDA. However, the message should be clear to the pharmaceutical industry that illegal off-label promotions, wherever their origin, will not be tolerated in the United States. Nolan & Auerbach, P.A. partner Ken Nolan wrote about Pharmaceutical Research Subcontractors in the October 2003 issue of Contract Pharma.

For more information about qui tam law and pharmaceutical fraud, contact Nolan and Auerbach, P.A.

{ 0 comments }

The Hefty Medicare Price Tag for the Off-Label Prescriptions

by Nolan and Auerbach on June 27, 2011

Recently,  the US Department of Health & Human Services Office of Inspector General found that, in the six-month period from January through June 2007, an astounding 51 percent of Medicare claims for atypical antipsychotics were off-label. This amounted to over $116 million in Medicare funds.

Further focusing on the off-label use of antipsychotics in nursing homes, the OIG determined that 83 percent of Medicare claims for atypical antipsychotics for these residents were associated with off-label use; 88 percent were associated with the condition specified in the FDA boxed warning.

So why are so many nursing homes turning a blind eye to the antipsychotics’ black box warnings? What is pumping this water uphill? Could it be companies marketing off-label? This OIG report comes on the heels of Congressional scrutiny and a chorus of legal actions from State Attorney Generals, accusing the drugmakers of improperly marketing antipsychotics.

Some off-label marketing schemes regularly influence the prescribing habits of physicians. While the coffers of pharma companies fill with tainted funds, patient safety and government healthcare programs suffer.

For more information about qui tam law and pharmaceutical fraud, contact Nolan and Auerbach, P.A.

{ 0 comments }

Off-Label Bonanza Detected by Hospital Records

by Nolan and Auerbach on May 26, 2011

Anyone interested in off-label cases should review the retrospective analysis recently published by researchers funded by the Agency for Healthcare Research and Quality. In the study, “Off-Label Use of Recombinant Factor VIIa in U.S. Hospitals: Analysis of Hospital Records,” Aaron C. Logan et al., Ann Intern Med, April 19, 2011, 154:516-522;  investigators examined 12,644 discharge records of patients who received rFVIIa at U.S. hospitals from 2000-2008. Investigators concluded that off-label use of rFVIIa increased more than 140-fold during this time, whereas use for hemophilia increased less than 4-fold. Worse, in 2008, 97% of the in-hospital use of rFVIIa was for off-label indications, including cardiovascular surgery, trauma, and intracranial hemorrhage. This, despite the concern about the application of rFVIIa to conditions that lack strong supporting evidence. As costs for certain biologicals are sometimes baked into the inpatient DRG reimbursement system, this type of off-label use without appropriate supporting evidence can cost taxpayers hundreds of millions, and worse…

For more information about qui tam law and pharmaceutical fraud, contact Nolan and Auerbach, P.A.

{ 0 comments }

J&J Fined $70 Million for International Kickbacks

by Nolan and Auerbach on May 19, 2011

Pharmaceutical giant Johnson and Johnson has agreed to pay $48.6 million in disgorgement charges, and another $21.4 million in criminal charges as part of a settlement agreement. These fines are in response to allegations brought forward by the Securities and Exchange Commission contending J&J paid out kickbacks to foreign doctors, hospitals, and governments to gain drug prescriptions, use of medical equipment, and even government contracts.

Some of the kickbacks were not in the form of direct cash, but rather indirectly paid, such as inappropriate travel with lavish dinners and gifts, and the use of fake civil contracts, slush funds, and off-shore companies.

The methods used to break the law are great and will always vary. When the bottom line takes greater precedence than the care of the patient, companies will always seek a way to circumvent the system. Nolan & Auerbach, P.A. encourages individuals that may have witnessed fraud, and have evidence of this fraud to step forward. The actions of these brave individuals keep our healthcare system safe and honest.

For more information about qui tam law and pharmaceutical fraud, contact Nolan and Auerbach, P.A.

{ 0 comments }

Whistleblowers Offered Substantial Rewards for Uncovering Pharmaceutical Manufacturing Problems

by Nolan and Auerbach on April 27, 2011

Increasingly, federal investigators have been turning their attention to manufacturing deficiencies at some of the world’s largest drug makers. According to one industry report, the number of FDA inspection reports has skyrocketed to an all-time high. This focused attention comes on the heels of a recent report from the US General Accountability Office, which found that the FDA failed to adequately inspect a number of manufacturing facilities around the globe.

The added governmental exposure has shed the light on a number of problems, likely encouraging a weekly parade of drug recalls from pharmaceutical companies. For some companies, they have led the parade of FDA warnings and recalls on a number of occasions. For example, Johnson & Johnson has repeatedly tangled with the FDA, most recently when it was warned by the FDA about problems at its Cordis stent facility. Last year, this same company temporarily closed a large Pennsylvania facility and recalled an estimated 136 million bottles of liquid children’s Tylenol and other pediatric products, after quality controls failed.

However, the real driving force behind this surge of pharmaceutical mea culpas probably has less to do with federal investigators and more to do with pharmaceutical industry’s concerns about potential False Claims Act qui tam actions. The simple fact is that drug makers are now on notice that employees can bring successful whistleblower suits involving current Good Manufacturing Practices (cGMP) violations.

The extended reach of whistleblowers was made crystal clear last year, when the U.S. Department of Justice joined in a whistleblower action against GlaxoSmithKline, exposing systemic manufacturing deficiencies at the company’s Puerto Rico facility. Ultimately, the company settled the action for $750 million, and the whistleblower was handsomely rewarded to the tune of $96 million.

In a very real sense, the GlaxoSmithKline settlement has encouraged other potential whistleblowers to step forward and uncover other instances of cGMP violations. More importantly, because the False Claims Act provides incentives and protections for these whistleblowers, drug companies cannot simply disregard their concerns. The lasting impact is that, whether through recalls or False Claims Act settlements, drug companies are forced to fess up to fraud and unsafe manufacturing practices.

For more information about qui tam law and pharmaceutical fraud, contact Nolan and Auerbach, P.A.

{ 0 comments }

Drug ‘Xenaderm’ Under Fraud Microscope

by admin on April 22, 2011

The Department of Justice (DOJ) has intervened in a Nolan & Auerbach, P.A. qui tam suit against Xenaderm maker, DFB Pharmaceuticals, alleging the marketing company Healthpoint (owned by DFB) knowingly promoted and sold the drug under the premise that it could be billed to Medicare and Medicaid. Xenaderm, a drug used for burns and wounds in the removal of dead tissue, was found in a 1972 DESI review to be ineffective.

That allegedly didn’t stop Healthpoint from continuing to manufacture and market Xenaderm. The DOJ claims the total cost to Medicaid from this fraud exceeds $90 million.

For more information about qui tam law and pharmaceutical fraud, contact Nolan and Auerbach, P.A.

{ 0 comments }

When it Comes to Off-Label Marketing, the Intended Audience Matters

by Nolan and Auerbach on April 7, 2011

In recent years, a number of drug companies have settled False Claims Act cases, alleging that the companies off-label marketed their products to children. Oftentimes, the offending marketing materials did not specifically mention the use of the products in the pediatric population. However, the companies still ran afoul of the FCA, for their marketing efforts aggressively targeted pediatric specialists.

These successful actions dispelled the misconception that off-label marketing only occurs when marketing materials explicitly promote an unapproved use.

When a drug company details pediatricians or it corrals pediatricians into a room to tout the benefits of its drugs, it is implicitly stating that its products are approved for the doctors’ patient population. If, however, the products have not been approved for use in children and the company fails to share this information with the audience, there is likely a violation of the False Claims Act. In other words, half truths are considered “false” when it comes to off-label marketing.

For more information about qui tam law and pharmaceutical fraud, contact Nolan and Auerbach, P.A.

{ 0 comments }

← Previous Entries