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DRUG COMPANY EON LABS PAYS $3.5 MILLION TO SETTLE FALSE CLAIMS ACT ALLEGATIONS CONCERNING REIMBURSEMENT CLAIMS FOR LESS THAN EFFECTIVE DRUG

FEBRUARY 22, 2010

BOSTON, MA - The Department of Justice and the U.S. Attorney’s Office in Boston announced a $3.5 million settlement today with drug manufacturer Eon Labs, Inc. (Eon), a subsidiary of Sandoz, Inc., which is in turn a subsidiary of Novartis AG, to resolve False Claims Act allegations relating to the company’s Nitroglycerin SR capsules.

In April 1999, the Food & Drug Administration (FDA) determined that Nitroglycerin SR lacked substantial evidence of effectiveness and published a notice proposing to withdraw approval of the product and giving Eon notice of an opportunity for a hearing. The Government contends that, after the FDA notice, Nitroglycerin SR no longer was legally eligible for reimbursement by government health care programs such as Medicaid. The Government further alleges that, from April 1999, and continuing through September 2008, Eon provided the government with false quarterly reports that misrepresented Nitroglycerin SR’s regulatory status and failed to advise that Nitroglycerin SR no longer qualified for Medicaid coverage. As a result, the Government contends, Eon knowingly caused false Medicaid claims to be submitted for Nitroglycerin SR.

“This is the first False Claims Act agreement with a drug company that sought to charge the Government for less than effective drugs, and it shows that the Department of Justice will pursue those who market such drugs and expect the Government to pay for them,” said U.S. Attorney Carmen M. Ortiz.

“We expect manufacturers to be truthful about the regulatory status of their drugs, and we will pursue those companies that submit false information to obtain payment for unapproved drugs that are less than effective or on the market illegally,” said Tony West, Assistant Attorney General for the Civil Division.

The settlement resolves allegations against Eon in a multi-defendant whistleblower action entitled Conrad v. Eon Labs, Inc., et al., No. 02-11738-NG (D. Mass.). The False Claims Act allows for private persons to file a qui tam or whistleblower suit on behalf of the Government. If the Government is successful in resolving or litigating its claims, the whistleblower may receive a share of the recovery. Under this settlement, the whisteblower will receive approximately $525,000.
This case was investigated by the Office of Inspector General of the Department of Health and Human Services. It is being handled by Gregg Shapiro in Ortiz’s Civil Division and Sanjay Bhambhani in the Justice Department’s Civil Division.

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