This week’s Department of Justice “Catch of the Week” goes to Ireland-based Shire Pharmaceuticals LLC. On Wednesday, the company and certain subsidiaries agreed to pay $350 million to settle charges that Shire and the company it acquired in 2011, Advanced BioHealing (ABH), violated the False Claims Act and Anti-Kickback Statute by using kickbacks and other unlawful methods to induce clinics and physicians to use or overuse their “Dermagraft” product. Dermagraft is a bioengineered human skin substitute approved by the FDA for the treatment of diabetic foot ulcers. It is the largest False Claims Act recovery in a kickback case involving a medical device. See DOJ Press Release.
According to the government, Dermagraft salespersons unlawfully induced clinics and physicians with lavish dinners, drinks, entertainment and travel; medical equipment and supplies; unwarranted payments for purported speaking engagements and bogus case studies; and cash, credits and rebates. In addition to violating the Anti-Kickback Statute — which bars inducements to using medical devices covered by Medicare, Medicaid and other federally-funded health care programs — these kinds of bribes are also barred under the Anti-Bribery statute and the Federal Acquisition Regulations.
The government alleged that as a result of their violation of these provisions, ABH and Shire submitted or caused to be submitted to federally-funded health care programs hundreds of millions of dollars of false claims for Dermagraft. In addition to the kickback allegations, the settlement also resolved allegations that Shire and ABH unlawfully marketed Dermagraft for uses not approved by the FDA, made false statements to inflate the price of Dermagraft, and caused improper coding, verification, or certification of Dermagraft claims and related services.
In announcing the settlement, the government stressed how “[k]ickbacks by suppliers of healthcare goods and services cast a pall over the integrity of our health care system,” and that “[p]atients deserve the unfettered, independent judgment of their health care professionals.” The government also made clear it will not tolerate this kind of illegal activity and will go after both the companies and individuals involved. In this vein, the government noted it had already obtained the criminal convictions of three high-level executives who supervised the implementation of the illegal kickback scheme, as well as a number of healthcare providers who received kickbacks.
The allegations originated in six whistleblower lawsuits filed under the qui tam provisions of the False Claims Act. The whistleblowers will receive a yet-to-be-determined whistleblower award from the proceeds of the government recovery.
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