Pharmaceutical Manufacturers to Pay $421.2 Million to Settle False Claims Act Cases
In Past Two Years, Civil Division & U.S. Attorneys Have Recovered More Than $9 Billion in Cases Alleging False Claims and Fraud Against the Government
WASHINGTON — Abbott Laboratories Inc., B. Braun Medical Inc. and Roxane Laboratories Inc. n/k/a Boehringer Ingelheim Roxane Inc. and affiliated entities have agreed to pay $421 million to settle False Claims Act allegations, the Justice Department announced today. These settlements resolve claims by the United States that the defendants engaged in a scheme to report false and inflated prices for numerous pharmaceutical products knowing that federal healthcare programs relied on those reported prices to set payment rates. The actual sales prices for the products were far less than what defendants reported.
The difference between the resulting inflated government payments 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 for the health care provider or pharmacist who gets reimbursed by the government. The government alleges that Abbott, Roxane and Braun created artificially inflated spreads to market, promote and sell the drugs to existing and potential customers. Because payment from the Medicare and Medicaid programs was based on the false inflated prices, the government alleged that the defendants caused false claims to be submitted to federal healthcare programs, and as a result, the government paid millions of claims for far greater amounts than it would have if Abbott, B. Braun and Roxane had reported truthful prices.
These significant settlements are a part of the Attorney General’s aggressive effort to combat fraud on the federal treasury, said Assistant Attorney General for the Civil Division Tony West. Since January of 2009, the Justice Department’s Civil Division and the U.S. Attorneys around the nation have recovered more than $9 billion in cases alleging false claims, fraud against the government, and violations of the Food, Drug and Cosmetic Act. Cases alleging fraud or false claims against government health care programs are the largest portion of these recoveries, and during this period the Justice Department has opened more health care fraud cases, secured larger fines and judgments, and recovered more dollars lost to health care fraud than in any other period: more than $5 billion. Criminal fines, forfeitures, restitution and disgorgement under the Food, Drug and Cosmetic Act have yielded another $3 billion, again a record number.
Roxane is paying $280 million to resolve claims against it and related entities (Roxane Laboratories Inc., Boehringer Ingelheim Corp. and Boehringer Ingelheim Pharmaceuticals Inc.). The United States intervened and filed suit against Roxane on Jan. 18, 2007. The United States alleged that Roxane reported false prices for the following drugs: Azathioprine, Diclofenac Sodium, Furosemide, Hydromorphone, Ipratropium Bromide, Oramorph SR, Roxanol, Roxicodone and Sodium Polystyrene Sulfonate.
Abbott is paying $126.5 million to resolve the claims against it in two qui tam cases. In the first, the United States intervened and filed suit against Abbott in May 2006. This case initially was filed in the Southern District of Florida before being transferred for pre-trial proceedings to pending multi-district litigation in the District of Massachusetts. In this case, the United States alleged violations by Abbott of the False Claims Act with respect to its pricing of dextrose solutions, sodium chloride solutions, sterile water and vancomycin. Dextrose solutions, sodium chloride solutions and sterile water are generic, water-based solutions primarily used to facilitate the intravenous infusion or injection of other drugs. Vancomycin is a powerful, intravenous antibiotic. The second lawsuit was filed by a whistleblower, and involved Abbott’s pricing of the drug erythromycin, an oral antibiotic.
B. Braun Medical Inc., a U.S. subsidiary of German pharmaceutical company, B. Braun Melsungen AG, has agreed to pay $14,744,000 to resolve allegations that it caused the Medicaid program to pay inflated amounts for 49 of its drug products. These products included water-based solutions used to facilitate the intravenous infusion of other drugs and for fluid replacement, including dextrose solutions, sodium chloride solutions, sterile water and lactated ringers solution. They also included intravenously administered nutritional solutions and a variety of other intravenously administered drugs.
“With these settlements, the Department of Justice has now recovered more than $1.8 billion from pharmaceutical manufacturers arising from similar unlawful drug pricing schemes. By offering their customers one price and then falsely reporting a greatly inflated price to the lists the government uses when determining how much to pay for the drugs, we believe pharmaceutical companies created an incentive for the purchase of their drugs, since buyers could obtain government payment at the inflated price and pocket the difference,” said Tony West, Assistant Attorney General for the Justice Department’s Civil Division. “Taxpayer-funded kickback schemes like this not only cost federal healthcare programs millions of dollars, they threaten to undermine the integrity of the choices health care providers make for their patients.”
“Some pharmaceutical manufacturers have asserted that a culture within the industry gave them license to manipulate the system to suit their interests. This is not the case,” said Carmen M. Ortiz, U.S. Attorney for the District of Massachusetts. “When manufacturers report drug pricing information that they know will be relied upon by government health care programs, they are obliged to report honest prices. It is unlawful to do otherwise.”
“Abbott, B. Braun and Roxane have agreed to pay more than $421 million to the United States to settle allegations that they engaged in a scheme to artificially inflate prices for numerous pharmaceutical products,” said Wifredo A. Ferrer, U.S. Attorney for the Southern District of Florida. “This practice came to light thanks to an alert South Florida whistleblower. As a result, hundreds of millions of dollars that were being siphoned off have now been recovered and will be used to provide services as intended – to the sick and elderly who need them. We encourage other whistleblowers who have information about potential wrongdoing to come forward and help us stop fraud and abuse in our health care industries.”
“The Office of Inspector General (OIG) has played a significant role in identifying the shortcomings of reported drug prices including ‘Average Wholesale Price’. In dozens of reports over many years, OIG has monitored drug price reporting practices and identified excessive Medicare and Medicaid payments resulting from these practices,” said Daniel R. Levinson, Inspector General of the Department of Health and Human Services. “These settlements with Abbott, B. Braun and Roxane underscore OIG’s longstanding commitment to protect patients and taxpayers against artificially inflated drug prices.”
The settlements resolve allegations brought by a whistleblower under the qui tam provisions of the False Claims Act. The False Claims Act suits were filed 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 suits to provide the government information about wrongdoing. Under the statute, if it is established that a person has knowingly 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 violation of the statute. If the government is successful in resolving or litigating its claims, the whistle blower who initiated the action can receive a share of between 15 percent to 25 percent of the amount recovered. As part of these settlements, the Ven-A-Care whistleblowers will receive approximately $88.4 million.
The cases were handled by the Justice Department’s Civil Division, the U.S. Attorneys’ 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.
These settlements are part of the government’s emphasis on combating health care fraud. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover approximately $4.6 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 have topped $5.8 billion.