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.

Guidant Charged in Failure to Report Defibrillator Safety Problems to FDA

by Nolan and Auerbach on March 1, 2010

Medical device manufacturer Guidant LLC, a wholly-owned subsidiary of Boston Scientific Corporation, was charged Feb. 25, 2010 with criminal violations of the Federal Food, Drug, and Cosmetic Act related to safety problems with some of its implantable defibrillators, according to a U.S. Department of Justice (DOJ) press release.

DOJ filed the criminal information in connection with an agreement with Guidant to resolve the charges. A formal guilty plea agreement is expected to be filed with the court at a later date. Boston Scientific previously announced in a November 2009 press release that the company would pay $296 million on behalf of Guidant in connection with these charges, according to the release.

According to the information filed Feb. 25 in federal district court in St. Paul, Minn., Guidant concealed information from the U.S. Food and Drug Administration (FDA) regarding catastrophic failures in some of its lifesaving devices. The charges were filed following a four-year investigation into Guidant’s handling of short-circuiting failures of three models of implantable cardioverter defibrillators (ICDs): the Ventak Prizm 2 DR (Model 1861) and the Contak Renewal (Models H135 and H155). Guidant issued safety advisories regarding the failures in June 2005.

Failure to report adverse events regarding medical devices or pharmaceutical products, as required by law, may be the basis of a False Claims Act case. 

For the full release, go to: http://www.justice.gov/opa/pr/2010/February/10-civ-202.html. For more information about qui tam law and health care fraud, contact us.

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U.S. Files Suit against Johnson & Johnson for Paying Kickbacks to Nation’s Largest Nursing Home Pharmacy

by Nolan and Auerbach on January 19, 2010

The United States has filed a civil False Claims Act complaint against drug manufacturer Johnson & Johnson (J&J) of New Brunswick, N.J., and two of its subsidiaries, Ortho-McNeil-Janssen Pharmaceuticals Inc. and Johnson & Johnson Health Care Systems Inc., the Justice Department announced in a press release January 15, 2010. The complaint alleges that these companies paid millions of dollars in kickbacks to Omnicare Inc., the nation’s largest pharmacy that specializes in dispensing drugs to nursing home patients.

The United States alleges that J&J paid kickbacks to Omnicare to induce the nursing home pharmacy company to purchase and recommend J&J drugs, including the anti-psychotic drug Risperdal, for use in nursing homes. According to the complaint, J&J understood that Omnicare’s pharmacists reviewed nursing home patients’ charts at least monthly and made recommendations to physicians on what drugs should be prescribed for those patients. The government further alleges that J&J knew that physicians accepted the Omnicare pharmacists’ recommendations more than 80 percent of the time, and that J&J viewed such pharmacists as an “extension of [J&J's] sales force.”

The United States alleges that, in order to induce Omnicare and its pharmacists to recommend J&J drugs, the company paid kickbacks to Omnicare in numerous ways. First, the complaint alleges that J&J entered into agreements with Omnicare by which Omnicare was entitled to increasing levels of rebates from Johnson & Johnson so long as Omnicare implemented specific programs to increase the prescriptions of J&J drugs. Second, the complaint alleges that J&J paid Omnicare millions of dollars for “data,” much of which Omnicare never provided. According to the complaint, the true purpose of these payments was to induce Omnicare to recommend J&J drugs. Third, the complaint alleges that J&J made various other substantial kickback payments to Omnicare, calling the payments “grants” and “educational funding,” even though their true purpose was to induce Omnicare to recommend J&J drugs, according to the release.

For the full release, go to: http://www.justice.gov/opa/pr/2010/January/10-civ-042.html.

For more information about qui tam law and health care fraud, contact Nolan and Auerbach, PA.

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Attorney General Announces $21.3 Million Medi-Cal Fraud Settlement with Schering-Plough

by Nolan and Auerbach on December 17, 2009

Attorney General Edmund G. Brown Jr. announced December 17, 2009 a $21.3 million settlement with Schering-Plough Corporation, resolving allegations the company deliberately inflated the price of Albuterol and other drugs, causing California’s Medicaid (Medi-Cal) program to overpay millions of dollars in pharmacy reimbursement.

Today’s settlement stems from a lawsuit filed by a whistleblower against several pharmaceutical companies accused of Medicaid fraud. The case is still proceeding against Dey, Inc., Mylan Pharmaceuticals, Inc., Sandoz, Inc. and their parent companies. Schering-Plough recently merged with Merck, and is now known as Merck & Co.

The settlement resolves allegations that Warrick Pharmaceuticals, a subsidiary of Schering-Plough, deliberately inflated the Average Wholesale Prices (AWPs) it reported to California for Albuterol.

For the full press release, go to: http://ag.ca.gov/newsalerts/release.php?id=1842.

For more information about qui tam law and health care fraud, contact Nolan and Auerbach, PA.

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Texas Hospital Group Pays $27.5 Million for False Claims Act Allegations

by Nolan and Auerbach on November 4, 2009

South Texas Health System, a McAllen, Texas-based hospital group, has agreed to pay the United States $27.5 million to settle claims that it violated the False Claims Act, the Anti-Kickback Statute and the Stark Statute between 1999 and 2006. The hospital group, owned by Pennsylvania-based Universal Health Services Inc., allegedly paid illegal compensation to doctors in order to induce them to refer patients to hospitals within the group, the U.S. Department of Justice (DOJ) announced October 30, 2009.

The settlement involved allegations that the defendants had entered into financial relationships with several doctors in McAllen in order to induce them to refer patients to the defendants’ hospitals. The government alleged that these payments were disguised through a series of sham contracts, including medical directorships and lease agreements.

The settlement resolves allegations raised against both the parent and the subsidiary in a qui tam or whistleblower lawsuit, according to the DOJ.

For the full press release, go to: http://www.justice.gov/opa/pr/2009/October/09-civ-1175.html.

For more information about qui tam law and health care fraud, contact Nolan and Auerbach, PA

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FDA’s Postmarketing Studies and Clinical Trials Draft Guidance Gets Supported By Public Citizen

by Nolan and Auerbach on November 2, 2009

In an October 13 letter to the FDA, the well respected consumer advocacy organization Public Citizen, gave a strong endorsement to the FDA Draft Guidance on Postmarketing Studies and Clinical Trials. In letter, Public Citizen’s Deputy Director Peter Lurie MD, MPH, and Sidney M. Wolfe, MD, wrote: “Public Citizen has reviewed the draft guidance in detail and supports its purpose and approach. The guidance makes a sensible distinction between studies that are for efficacy purposes only (“postmarketing commitments….”) and those that have any significant safety element (“postmarketing requirements….”). The categories of studies that can fall under postmarketing requirements (observational studies, clinical trials, animal studies, in vitro studies, pharmacokinetic studies, and interaction/bioavailability studies) are appropriately broad. We urge you to resist any efforts to weaken the draft guidance.” (Emphasis supplied)

To review the draft guidance, go to: http://www.regulations.gov/search/Regs/home.html#documentDetail?R=09000064809f1ed1.

For more information about qui tam law and health care fraud, contact Nolan and Auerbach, PA.

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FDA’s Postmarketing Studies and Clinical Trials Draft Guidance Gets Supported By Public Citizen

by Nolan and Auerbach on November 2, 2009

In an October 13 letter to the FDA, the well respected consumer advocacy organization Public Citizen, gave a strong endorsement to the FDA Draft Guidance on Postmarketing Studies and Clinical Trials. In letter, Public Citizen’s Deputy Director Peter Lurie MD, MPH, and Sidney M. Wolfe, MD, wrote: “Public Citizen has reviewed the draft guidance in detail and supports its purpose and approach. The guidance makes a sensible distinction between studies that are for efficacy purposes only (“postmarketing commitments….”) and those that have any significant safety element (“postmarketing requirements….”). The categories of studies that can fall under postmarketing requirements (observational studies, clinical trials, animal studies, in vitro studies, pharmacokinetic studies, and interaction/bioavailability studies) are appropriately broad. We urge you to resist any efforts to weaken the draft guidance.” (Emphasis supplied)

To review the draft guidance, go to: http://www.regulations.gov/search/Regs/home.html#documentDetail?R=09000064809f1ed1.

For more information about qui tam law and health care fraud, contact Nolan and Auerbach, PA.

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Biotech Company and Its Top Management Indicted for Illegal Promotion, Making False Statements to the FDA

by Nolan and Auerbach on October 30, 2009

The Federal Bureau of Investigation (FBI) Boston announced October 28, 2009, that Stryker Biotech and its top management had been indicted for illegal promotion of medical devices used in surgery. The Hopkinton, Mass.-based biotech and some of its employees were charged in federal court with participating in a fraudulent marketing scheme of medical devices used during invasive spinal and long bone surgeries, as well as with making false statements to the United States Food and Drug Administration (FDA).

According to the FBI’s press release, the allegations are that all the defendants participated in an illegal, off-label marketing scheme to promote medical devices used during invasive surgeries. In particular, the defendants are alleged to have promoted devices used to stimulate bone growth in long bones and the spine, which have highly restrictive FDA approval, for off-label, more widespread uses.

For the full press release, go to: http://boston.fbi.gov/dojpressrel/pressrel09/bs102809.htm.

For more information about qui tam law and health care fraud, contact Nolan and Auerbach, PA.

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Four Pharmaceutical Companies Pay $124 Million for False Claims Act Violations

by Nolan and Auerbach on October 26, 2009

Mylan Pharmaceuticals, UDL Laboratories, AstraZeneca Pharmaceuticals and Ortho McNeil Pharmaceutical have entered into settlement agreements for a total of $124 million to resolve claims that they violated the False Claims Act by failing to pay appropriate rebates to state Medicaid programs for “authorized generics” paid for by those programs, the U.S. Department of Justice announced October 19, 2009.

By agreeing to participate in the Medicaid Rebate Program and signing these rebate agreements, the four companies agreed to pay quarterly rebates to Medicaid that were based upon the amount of money that health care program paid for each company’s drugs. The precise amount of a rebate is determined in part by whether a drug is considered an “innovator” drug or a “non-innovator” drug. The rebate that must be paid for innovator drugs is higher than the rebate for non-innovator drugs.

Each of the companies agreed to pay a settlement to resolve allegations that it had sold innovator drugs that were manufactured by other companies and had classified those drugs as non-innovator drugs for Medicaid rebate purposes. As a result of the improper classification of these drugs, the companies underpaid their rebate obligations under the Medicaid Rebate Program. The drugs include Mylan’s nifedipine extended release tablets, UDL’s Selegiline HCL, AstraZeneca’s Albuterol, Ortho McNeil’s Dermatop and others.

For the full release, go to: http://www.usdoj.gov/opa/pr/2009/October/09-civ-1120.html.

For more information about qui tam law and health care fraud, contact Nolan and Auerbach, PA.

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New GAO Report Uncovers Massive Pharmaceutical Fraud

by Nolan and Auerbach on September 30, 2009

The U.S. Government Accountability Office (GAO) released a report in September 2009 looking at fraud and abuse related to controlled substances paid for by Medicaid.

According to GAO’s summary of the report, the government agency found tens of thousands of Medicaid beneficiaries and providers involved in potential fraudulent purchases of controlled substances, abusive purchases of controlled substances, or both through the Medicaid program. The report looked specifically at California, Illinois, New York, North Carolina, and Texas.

Key findings include:

  • About 65,000 Medicaid beneficiaries in the five selected states acquired the same type of controlled substances from six or more different medical practitioners during fiscal years 2006 and 2007 with the majority of beneficiaries visiting from 6 to 10 medical practitioners. Such activities, known as doctor shopping, resulted in about $63 million in Medicaid payments and do not include medical costs (e.g., office visits) related to getting the prescriptions.
  • Medicaid paid over $2 million in controlled substance prescriptions during fiscal years 2006 and 2007 that were written or filled by 65 medical practitioners and pharmacies barred, excluded, or both from federal health care programs, including Medicaid, for such offenses as illegally selling controlled substances.
  • Pharmacies filled controlled substance prescriptions of over 1,800 beneficiaries who were dead at that time.

For the full report and GAO recommendations, go to http://www.gao.gov/new.items/d09957.pdf.

For more information about qui tam law and health care fraud, contact Nolan and Auerbach, PA.

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Pharma Co. to pay more than $24 million for kickback, conspiracy charges

by Nolan and Auerbach on September 15, 2009

Biovail Pharmaceuticals, LLC, has pled guilty to conspiracy and kickback charges and has been sentenced to pay a criminal fine of more than $22 million. These charges concern various actions by the New Jersey-based pharmaceutical company and its employees to carry out a program in which Biovaile paid or cause to be paid up to $1,000 to thousands of physicians and others in order to induce them to prescribe or recommend the drug Cardizem, L.A.

BioVail Pharmaceuticals will also pay more than $2.4 million to the United States to resolve allegations that this conduct caused false claims to be submitted to the United States, according to a September 14, 2009 press release by the Massachusetts Department of Justice.

For the full press release, go to: http://www.usdoj.gov/usao/ma/Press%20Office%20-%20Press%20Release%20Files/Sept2009/BiovailPlea.html.

For more information about qui tam law and health care fraud, contact Nolan and Auerbach, PA .

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