WASHINGTON – The United States has intervened in a whistleblower suit filed in the District of Massachusetts against Dey, Inc. alleging that the company violated the False Claims Act, the Justice Department announced today. In its complaint, the government alleges that Dey engaged in a scheme to report fraudulent and inflated prices for several pharmaceutical products, knowing that federal healthcare programs established reimbursement rates based on those reported prices.
The government’s complaint alleges that the pharmaceutical manufacturer from at least on or before January 1, 1993 reported prices that were more than five times (500 percent) the actual sales prices on many of the drugs it manufactures. The United States alleges that Medicare and Medicaid have reimbursed Dey’s customers in excess of $500 million for the drugs which are the subject of the complaint. Dey sells generic drugs that are reimbursed by the two federal health care programs.
The difference between the inflated government reimbursement rates and the actual price paid by healthcare providers for a drug is referred to as the “spread.” The larger the spread on a drug, the larger the profit or return on investment for the provider. The government alleges that Dey used artificially inflated spreads to market, promote and sell the drugs to existing and potential customers. Because reimbursement from federal programs was based on the fraudulent inflated prices, the United States contends that Dey caused false and fraudulent claims to be submitted to federal healthcare programs.
The investigation began after the filing of a civil False Claims Act suit by a Florida home-infusion company, Ven-A-Care of the Florida Keys Inc. and its principals. The False Claims Act allows for private persons to file whistleblower suits to provide the government information about wrongdoing. Under the statute, if it is established that a person has submitted or caused others to submit false or fraudulent claims to the United States, the government can recover treble damages and $5,500 to $11,000 for each false or fraudulent claim filed. If the government is successful in resolving or litigating its claims, the whistleblower who initiated the action can receive a share of between 15 percent to 25 percent of the amount recovered.
The law suit, called a qui tam action, was filed in the U.S. District Court for the District of Massachusetts, and includes additional claims originally filed in the Southern District of Florida and transferred to the District of Massachusetts. The consolidated matter was assigned to U.S. District Court Judge Morris E. Lasker in Boston. This investigation was conducted by the U.S. Department of Justice, the U.S. Attorney's Offices for the District of Massachusetts and the Southern District of Florida and the Office of Inspector General of the Department of Health and Human Services.