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KV Pharmaceutical to Pay $17 Million to Settle False Claims Allegations Concerning Reimbursement Claims for Unapproved Drugs
December 6, 2011

BOSTON - KV Pharmaceutical Company, which was the parent of now-defunct Ethex Corporation, will pay $17 million to resolve False Claims Act allegations that Ethex failed to advise the Centers for Medicare and Medicaid Services (CMS) that two unapproved products did not qualify for coverage under federal health care programs. Ethex is alleged to have submitted false quarterly reports to the government related to a pair of drugs, Nitroglycerin Extended Release Capsules (Nitroglycerin ER) and Hyoscyamine Sulfate Extended Release Capsules (Hyoscyamine ER).

Nitroglycerin ER is a single entity coronary vasodilator containing controlled release nitroglycerin that was used for treating angina pectoris (chest pain due to lack of oxygen supply to the heart muscle). Hyoscyamine Sulfate ER is an antispasmodic medication that has been used to treat various stomach, intestinal and urinary tract disorders that involve cramps, colic or other painful muscle contractions. While the active ingredients in Nitroglycerin ER and Hyoscyamine Sulfate ER had been in products on the market for many years, the Food and Drug Administration (FDA) made determinations in the late 1990s that resulted in the drugs being ineligible for reimbursement by government health care programs such as Medicaid. In 1997, the FDA declared extended release products, including Nitroglycerin ER and Hyoscyamine Sulfate ER, to be “new drugs” requiring full FDA approval for safety and effectiveness. In addition, the FDA found in 1999 that Nitroglycerin ER was less than effective and proposed to withdraw that product from the market.

The United States alleges that Ethex misrepresented the regulatory status of both drugs and failed to advise CMS that these unapproved drugs did not qualify for coverage under federal health care programs. As a result, the government contends, Ethex knowingly caused false claims to be submitted for Nitroglycerin ER and Hyoscyamine Sulfate ER. Ultimately, neither drug ever received full regulatory approval for safety and effectiveness, and neither product is currently on the market.

“This False Claims Act agreement shows that the Department of Justice will not allow manufacturers to evade the drug approval process and expect the government to pay for less than effective drugs,” said Carmen Ortiz, U.S. Attorney for the District of Massachusetts.

“Today’s settlement underscores our commitment to pursuing pharmaceutical companies that allegedly provide false information to obtain taxpayer dollars for unapproved and ineffective drugs,” said Tony West, Assistant Attorney General for the Justice Department’s Civil Division.

“This settlement sends a strong message to those who seek to put the health of American patients at risk by distributing and promoting drugs which have not been approved by the FDA,” said Ilisa Bernstein, Acting Director of the Office of Compliance in FDA’s Center for Drug Evaluation and Research.

The settlement resolves allegations against Ethex in a multi-defendant whistleblower action captioned United States ex rel. Constance Conrad v. Ethex Corp., et al., No. 02-11738-RWZ (D. Mass.). The federal share of the settlement is $10,158,695, and the state Medicaid share of the settlement is $6,841,3054. The lawsuits were brought under the qui tam or whistleblower provisions of the False Claims Act, which allow private parties with knowledge of fraud to sue on behalf of the United States and share in any recovery. Under the settlement, the whistleblower will receive a total of $1,523,804 from the federal share and additional amounts from the state share.

This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover nearly $6.5 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 are over $8.5 billion.

The District of Massachusetts 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, with assistance from Wendy Vicente in the FDA Office of General Counsel, Food and Drug Division.


 

 

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