Three Pharmaceutical Manufacturers Agree To Pay $421.2 Million In False Claims Act Settlement

Dec 09, 2010   

On December 7, 2010, the United States Department of Justice announced that it had reached a $421.2 million settlement agreement with three pharmaceutical manufacturers for alleged violations of the False Claims Act. The violations stem from allegations that the drug manufacturers published false and inflated prices of numerous medicines to defraud Medicare and Medicaid. A copy of the Department of Justice press release can be read here.

Authorities allege that the manufacturers, Abbott Laboratories, Inc., Roxane Laboratories, Inc., and B. Braun Medical, Inc., falsely published inflated average wholesale prices of numerous pharmaceuticals in an effort to market, promote, and sell the drugs to existing and potential customers. According to the Department of Justice, the scheme involved an agreement between healthcare providers and the manufacturers to falsely adjust the “spread” on the price of pharmaceuticals in order to create larger profits for the healthcare providers. The “spread” is the difference between the inflated published price, which the government reimburses at, and the actual price paid by the healthcare provider for drugs. The larger the “spread” the more profit the healthcare provider makes in reimbursements from the federal government.

Authorities alleged that providers would purchase pharmaceuticals from the companies at prices lower than the reported average wholesale price. Medicare and Medicaid would then reimburse healthcare providers at those higher prices and the providers would pocket the difference. The scheme was designed to allow the healthcare providers to make more profits and for the drug manufacturers to retain the providers as customers for the future. As a result of the scheme, federal healthcare programs paid millions more too healthcare providers than they would have had the manufacturers been truthful.

Under the settlement agreements, though each company denied wrongdoing, Roxane will pay $280 million, Abbott will pay $126.5 million, and B. Braun Medical will pay $14.7 million in civil fines. The settlements resolve allegations brought by a whistleblower under the qui tam provisions of the False Claims Act.

The False Claims Act allows for private persons to file suits to provide the government information about wrongdoing. Under the statute, if it is established that a person has knowingly submitted or caused others to submit false or fraudulent claims to the United States, the government can recover treble damages and $5,500 to $11,000 for each violation of the statute. If the government is successful in resolving or litigating its claims, the whistle blower who initiated the action can receive a share of between 15 percent to 25 percent of the amount recovered. In this case, the False Claims Act suits were brought by Ven-A-Care, a Florida home infusion company. As a result of its whistle blowing efforts, Ven-A-Care will receive approximately $88.4 million.

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