The Qui Tam Blog

Pfizer Inc. agreed to pay $14.5 million to settle False Claims Act allegations related to marketing of its drug Detrol.  The qui tam suit alleged that Pfizer illegally marketed Detrol–a drug approved for the treatment of overactive bladder–for use in men with enlarged prostates and related conditions, including bladder obstruction. Pfizer denied all allegations of wrongdoing in a statement.

Of the $14.5 million settlement, $11,878,846 will go to the federal government, and $2,621,154 will go to state Medicaid programs.  The whistleblowers will receive  a relator’s share of $3,282,019 under the False Claims Act.  The settlement was part of the governments’ Health Care Fraud Prevention and Enforcement Action Team (HEAT), announced in May 2009 by the Department of Justice and the Department of Health and Human Services.

A Louisville, Kentucky physician, Dr. Steven H. Stern, and his practice, Kentuckiana Center For Better Bone and Joint Health (“KCB”), have settled allegations of overbilling Medicare.  The complaint, brought by a former employee, claims that Stern and KCB falsely billed Medicare for rheumatoid arthritis infusions over a three-year period.  Specifically, the complaint alleges that Stern and KCB split vials of Infliximab across multiple patients, then billed Medicare as if an entire vial were used for each patient.

In addition to the $349,860 paid to settle the overbilling allegations, Stern and KCB will pay the attorney’s fees, costs, and expenses of the former KCB employee whistleblower.  The whistleblower will receive a payment of $70,000 as a realtor’s share.

Maryland-based Maxim Healthcare Services, Inc. (“Maxim”) agreed to pay $150 million to settle criminal and civil charges relating to a nationwide scheme to defraud state Medicaid programs and the Veterans Affairs program. Maxim will pay $130 million in civil settlements and a $20 million fine as part of a Deferred Prosecution Agreement (“DPA”). If Maxim complies with the DPA’s reform and compliance requirements, it will avoid a conviction on the health care fraud charges.

According to the complaint, Maxim submitted more than $61 million in fraudulent billings to government healthcare programs for services not rendered or not reimbursable. From 2003 through 2009, Maxim received over $2 billion in reimbursements from programs in 43 states.

Eight former Maxim employees and the parent of a former Maxim patient pleaded guilty to federal charges arising out the submission of false billings and false statements.

Novo Nordisk will pay $25 million to the U.S. Government to settle allegations of improper marketing of the anti-clotting drug NovoSeven. The complaint alleged that the company improperly promoted NovoSeven for indications not approved by the Food and Drug Administration.

Novo Nordisk also agreed to pay $1.725 million to the U.S. Government and four states to resolve allegations that its sales representatives paid Rite Aid pharmacists to recommend the diabetes drugs Novolin and Novolog.

Novo Nordisk made no admission of wrongdoing in either settlement.

AARP has signed on as co-counsel in a qui tam whistleblower suit filed in 2006 against Abbott Laboratories, Johnson & Johnson and Boston Scientific who allegedly deceived the Food and Drug Administration (FDA) to gain approval for biliary stents, which they then illegally marketed its off-label use as vascular stents. AARP is sending a clear message to pharmaceutical companies who illegally market their drugs and devices off-label with their involvement in this qui tam case.

“More and more people see the False Claims Act as a means of correcting years of fraudulent activity,” says Joel Androphy, partner at the Nationwide Law Firm of Berg & Androphy.

The education of the growing senior population is an essential ingredient in reducing the incidents of Medicare fraud. Recently, the Centers for Medicare & Medicaid Services (CMS) announced that $9 million in grants have been awarded to bolster 51 Senior Medicare Patrol programs enlisting volunteers to educate seniors to recognize and report Medicare fraud.

The Obama administration recently warned that, due to confusion over the provisions of the Patient Protection and Affordable Care Act, fraudsters are taking advantage of the Act to prey on seniors, whose Medicare beneficiary numbers are the key to billing scams that drain resources from the federal health program.

Allergan Inc., has agreed to settle a federal investigation over how it marketed Botox, said the Associated Press (AP). Allergan Inc. allegedly promoted Botox Therapeutic for unapproved medical uses through Medicaid resulting in a combined $600 million in civil and criminal penalties. The settlement becomes official once a federal judge approves it, said the AP.

A whistleblower complaint led to the probe that lasted one year, with the Justice Department looking at Allergan’s marketing of Botox from 2001 through 2008. The five whistleblowers will split $37.8 million of the government’s settlement.

Private citizens who file lawsuits on behalf of the government alleging fraud are eligible for up to 18 percent of whatever is recovered as the result of a qui tam lawsuit. According to a press release, Allergan Inc. agreed to pay state governments and the federal government a combined $225 million civil settlement to compensate Medicaid, Medicare and other federal health programs for reimbursements wrongly paid for Botox Therapeutic. This includes $210 million to the federal government—the rest to a number of states—connected to the probe.

“Off-label marketing violates the civil and criminal laws.” says Joel Androphy, Partner at the prestigous Nationwide law firm of Berg and Androphy. “In addition to misbranding a drug, many pharmaceutical companies pay kickbacks to doctors to induce more prescriptions. As long as companies compete for patients, off-label marketing will continue.”

$176,000 was just paid to qui tam whistleblower who filed a lawsuit against Cochlear Americas on behalf of the federal government. Whistleblower Brenda March filed the lawsuit as the company allegedly paid illegal remuneration to health care providers as an incentive to sell Cochlear devices.

The total settlement with Cochlear Americas was worth $880,000. The defendant company is a subsidiary of the Australian company Cochlear Limited.

March originally filed using provision in the Anti-Kickback Act and False Claims Act, saying that the company was clearly paying kickbacks to physicians who sold Cochlear devices to Medicare and Medicaid patients.

Signed into law on March 23, 2010, the Patient Protection and Affordable Care Act (the “Affordable Care Act”) narrowed the bar against bringing suits based on public disclosure by restricting the public disclosure bar to only information publically disclosed at the Federal level – not at the State or Local level.

The Affordable Care Act, however, broadened the definition of an “original source” to include, not only a relator with direct and independent knowledge of the information on which the allegations were based and that voluntarily provided that information to the government before filing suit, but also a relator who provides knowledge to the government before filing suit that is “independent of and materially adds to the publically disclosed allegations or transactions.”

The Affordable Care Act amends the Anti-Kickback Statute to provide that items or services resulting from an Anti-Kickback Statue violation are false for purposes of the FCA, disposing of the need to rely on a false certification theory of FCA liability.

Additionally, the Affordable Care Act settles the circuit split regarding the definition of “willfulness” in the Anti-Kickback Statute. Some courts required the government to prove that a defendant knew that the Anti-Kickback Statute prohibited the conduct at issue, while other courts disagreed. The new law, however, makes it clear that the Anti-Kickback Statute does not require the government to prove actual knowledge of a “known legal duty” that was being violated.

Earlier this week AtriCure, Inc. executed a settlement with the Department of Justice in a case brought to court by a relator in 2007. AtriCure, primarily a manufacturer of cardiac surgical ablation systems, settled with the Department of Health and Human services for $3.8 million plus interest covering a five year period.

The case was filed in the United States District Court for the Southern District of Texas and charges AtriCure in violation of the Federal False Claims Act. By using illegal kickbacks and sponsoring non-branded marketing, AtriCure coaxed medical practices into favoring the corporation’s costly in-patient cardiac surgical ablation procedure over a clinically more effective out-patient catheter process.

Compensation for the costs incurred to Medicare because of the more costly treatment being falsely preferred are being sought by the relator and the Department of Justice on behalf of the Department of Health and Human Services.

In a press release earlier this week, the Department of Justice stated that this case is part of a larger movement to fight healthcare fraud. In the last year alone, the legal jurisdiction granted by the False Claims Act has been used by the US Government to recover approximately $2.2 billion in cases of fraud towards United States health care programs.

Last Wednesday, the Justice Department held a conference to announce Pfizer’s off-label criminal and civil settlement for its fraudulent marketing practices.

Pfizer’s subsidiaries will plead guilty to a felony violation of the Food, Drug and Cosmetic Act for misbranding with the intent to defraud or mislead. It will pay a criminal fine of $1.195 billion and forfeit $105 million, bringing the total criminal settlement to $1.3 billion.

The civil settlement of $1 billion will resolve claims under the False Claims Act that Pfizer illegally promoted four of drugs (most notably the anti-inflammatory drug Bextra), caused false claims to be submitted to government healthcare programs for indications other than those approved by the FDA, and provided kickbacks to doctors to induce them to prescribe these drugs.

Pfizer has also entered into a Corporate Integrity Agreement with the Office of Inspector General of the Department of Health and Human Services that will subject the company’s marketing practices to additional review procedures and safeguards to help avoid and promptly detect similarly offending conduct. For example, Pfizer’s executives will need to complete annual compliance certifications and the company will be required to make detailed disclosures on its website.

The settlement is notable enough for its sheer magnitude: it is the largest in the Department of Justice’s history; it also represents the largest criminal fine imposed ever in the United States for any matter.

But the story behind the story is also interesting. The settlement itself was already announced–and largely completed–by the Bush administration. But whereas the Bush administration was less likely to tout its strikes against big pharmaceutical companies, the Obama administration is happy to take the credit. This certainly signals a bleak future for the drug companies. The administration appears poised to go after these cases with more gusto, especially as it faces criticism for the high cost of Obama’s healthcare proposals.

In January, Eli Lilly and Company settled similar claims over its marketing of Zyprexa for $800 million. The success of that case can be traced directly to courageous stands taken by employee whistleblowers.

The six whistleblowers in the Pfizer case will share some $102 million of the federal portion of the civil recovery. As employee whistleblowers continue to work with the current administration, we can expect to see more of these announcements in the coming months.

Learn more about the Justice Department Conference
Learn more about Pfizer’s Corporate Identity Agreement
Learn more about Eli Lilly and Company’s Zyprexa case