Daiichi Sankyo Inc. Agrees to Pay $39 Million to Settle Kickback Allegations Under the False Claims Act
Daiichi Sankyo Inc., a global pharmaceutical company with its U.S. headquarters in New Jersey, has agreed to pay the United States and state Medicaid programs $39 million to resolve allegations that it violated the False Claims Act by paying kickbacks to induce physicians to prescribe Daiichi drugs, including Azor, Benicar, Tribenzor and Welchol, the Justice Department announced today.
“The Anti-Kickback Statute prohibits payments intended to influence a physician’s ordering or prescribing decisions,” said Acting Assistant Attorney General Joyce R. Branda for the Civil Division. “The Department of Justice is committed to preserving the independence and objectivity of those decisions, which are cornerstones of our public health programs.”
The Anti-Kickback Statute was enacted to ensure that physicians’ medical judgment is not compromised by improper payments and gifts by other health care providers. The statute generally prohibits anyone from offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by federal health care programs, including Medicare and Medicaid.
In this case, the government alleged that Daiichi paid physicians improper kickbacks in the form of speaker fees as part of Daiichi’s Physician Organization and Discussion programs, known as “PODs,” which were run from Jan. 1, 2005, through March 31, 2011, as well as other speaker programs that were run from Jan. 1, 2004, through Feb. 4, 2011. Allegedly, payments were made to physicians even when physician participants in PODs took turns “speaking” on duplicative topics over Daiichi-paid dinners, the recipient spoke only to members of his or her own staff in his or her own office, or the associated dinner was so lavish that its cost exceeded Daiichi’s own internal cost limitation of $140 per person.
“Drug companies are prohibited from using lavish entertainment and padded speaker program payments to induce physicians to prescribe their drugs for beneficiaries of federal health care programs,” said U.S. Attorney Carmen Ortiz for the District of Massachusetts. “Settlements like this one show that the government will continue to pursue health care companies that use kickbacks to promote their products.”
As part of the settlement, Daiichi has agreed to enter into a corporate integrity agreement with the Department of Health and Human Services-Office of Inspector General (HHS-OIG), which obligates the defendants to undertake substantial internal compliance reforms for the next five years.
“Schemes such as this are particularly abhorrent,” said Inspector General Daniel R. Levinson for the U.S. Department of Health and Human Services. “Manufacturers and physicians who engage in them are cheating Medicare and Medicaid out of millions of dollars and threatening programs upon which many elderly and disabled Americans rely. My office will take whatever steps necessary to guard against improper alliances between manufacturers of drugs and those who prescribe them. Through our corporate integrity agreement we will be closely monitoring Daiichi.”
The settlement announced today stems from a complaint filed by Kathy Fragoules, a former Daiichi sales representative, under the whistleblower provisions of the False Claims Act, which authorize private parties to sue on behalf of the United States, and to receive a portion of any recovery. Fragoules will receive $6.1 million of the federal recovery.
This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services. 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 this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $23.3 billion through False Claims Act cases, with more than $14.9 billion of that amount recovered in cases involving fraud against federal health care programs.
The investigation and litigation was conducted by the Civil Division, the U.S. Attorney’s Office for the District of Massachusetts, the U.S. Department of Veterans Affairs, the Department of Defense Criminal Investigative Service, HHS-OIG and the FBI. The claims settled by this agreement are allegations only and there has been no determination of liability.
The case is captioned U.S. ex rel. Fragoules v. Daiichi Sankyo, Inc., Civil Action No. 10-10420 (D. Mass.).