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January 24, 2014

Department of Justice

United States Attorney William C. Killian Eastern District of Tennessee


Tennessee And Appalachian Orthopedic Clinics To Pay Combined $1.85 Million To Settle False Claims Act Allegations That They Billed Medicare For Reimported Products

KNOXVILLE, Tenn. – Two orthopedic clinics have agreed to pay a combined $1.85 million to resolve state and federal False Claims Act allegations that they knowingly billed state and federal health care programs for reimported osteoarthritis medications, known as viscosupplements. Tennessee Orthopaedic Clinics, P.C., headquartered in Knoxville, Tennessee, will pay $1.3 million and Appalachian Orthopaedic Clinics, P.C., headquartered in Kingsport, Tennessee, will pay $550,000.

Viscosupplements, such as Synvisc® and Orthovisc®, are injections approved by the Food and Drug Administration for the treatment of osteoarthritis pain in the knee. Viscosupplements are reimbursed by Medicare, Medicaid, and other federal health care programs at a set rate based on the average sales price of the domestic product. The government contended that the clinics knowingly purchased deeply discounted viscosupplements that were reimported from foreign countries and billed them to state and federal health care programs in order to profit from the reimbursement system, when such reimported viscosupplements were not reimbursable by those programs. Allegedly, the reimported product included labeling in foreign languages and in English for additional uses not approved in the United States, which demonstrated that the product was reimported. Moreover, because the product was reimported, the government alleged there was no manufacturer assurance that it had not been tampered with or that it was stored appropriately.

As U.S. Attorney Bill Killian explained, “This scheme is yet another example of illegal actions by healthcare providers to profit from drugs imported into the United States. Medicare and FDA requirements are designed to prevent potential harm to patients. Noncompliance with the law to increase profit at the risk of patients will be pursued by the Department of Justice.”

“Attempts to increase profits by circumventing the law will not be tolerated,” said Derrick L. Jackson, Special Agent in Charge of the U.S. Department of Health and Human Services, Office of Inspector General in Atlanta. “Health care providers buying cut-rate, cheap drugs from foreign sources will end up paying a steep price.”

The allegations resolved by the settlement were first raised in a lawsuit filed against the clinics under the qui tam, or whistleblower, provisions of the False Claims Act by Douglas Estey who was a speaker for Genzyme Corporation, which manufactured Synvisc and sold it in the United States. The Act allows private citizens with knowledge of fraud to bring civil actions on behalf of the government and to share in any recovery. Mr. Estey will receive $323,750.

Mr. Killian further noted that this settlement resulted from a comprehensive investigation which began as a result of a qui tam or whistleblower complaint filed in 2012. The investigative team whose efforts resulted in this settlement was comprised of representatives from the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) and Office of General Counsel (OGC), the Food and Drug Administration (FDA) Office of Criminal Investigations (OCI) and Office of Chief Counsel (OCC), the Federal Bureau of Investigation (FBI), and the Tennessee Bureau of Investigation (TBI), coordinated by the U.S. Department of Justice (DOJ) Civil Division Fraud Section and the Civil Division of the U.S. Attorney’s Office for the Eastern District of Tennessee. U.S. Attorney Killian commended the cooperative efforts of the agencies which participated in this complex investigation, in particular, lead HHS-OIG Special Agent Tony Maffei, FBI Special Agent Joelle Olszewski, TBI Special Agent Denise Woodby, FBI Forensic Accountant LeAnn Lanz, FDA OCI Special Agents Alex Alvarado and Ron Houston, FDA OCC attorney Kelsey Schaefer, HHS-OIG attorney Maame Gyamfi, HHS OGC attorneys Eden Heard and Jessica Bowman, Assistant Tennessee Attorney General Eli Swiney, Assistant Virginia Attorney General Adele Nieburg, DOJ Trial Counsel Doug Rosenthal, and Assistant U.S. Attorney Suzanne Bauknight.

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 more than $12.1 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases in 2013 alone exceeded $3.8 billion. False Claims Act recoveries by the United States Attorney’s Office for the Eastern District of Tennessee alone during the period since January 2009 exceed $100 million.

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