Friday, September 28, 2007

Bristol-Myers Squibb settles illegal drug marketing charges

Bristol-Myers Squibb Company will pay over $515 million to resolve charges of illegal drug marketing and pricing practices, according to a U.S. Dept. of Justice press release dated September 28, 2007.

Among the practices that the government alleged were that BMS paid illegal remuneration to physicians and other health care providers to induce them to purchase BMS drugs; that BMS subsidiary Apothecon paid illegal remuneration to induce its retail pharmacy and wholesaler customers to purchase its products; that BMS promoted the sale of Abilify for off-label uses; and that both BMS and Apothecon set fraudulent and inflated prices for drugs, knowing that federal health care programs established reimbursement rates based on those prices.

The allegations originated in seven qui tam actions brought under the False Claims Act.

Artificial joint manufacturers pay $310 million to settle fraud charges

Four of the largest artificial joint manufacturers have agreed to pay a total of $310 million in penalties to settle federal accusations that they used fake consulting agreements and other tactics to get surgeons to use their products. The New York Times reported on September 28, 2007 that the companies will not be prosecuted for criminal conspiracy to violate anti-kickback laws, providing they follow new compliance procedures for 18 months.

The companies are Biomet; the DePuy Orthopaedics unit of Johnson & Johnson; Zimmer Holdings; and Smith & Nephew. A fifth company, Stryker Orthopedics, was not charged because it was the first company to cooperate in the investigation.


The government said the five companies represented 95 percent of the hip and knee implant market.

Monday, September 24, 2007

Whistleblower suit against hospital purchasing organization unsealed

A former Novation employee has filed a whistleblower suit alleging that the hospital group purchasing organization defrauded government health plans.

Group purchasing organizations negotiate contracts that groups of hospitals use to buy a wide array of medical products. According to a Dallas Morning News article of September 22, 2007, the suit alleges that Novation received kickbacks from suppliers it was negotiating with. The cost of these kickbacks is passed on to the hospitals in the form of higher prices. These higher prices are then passed on to the government when the hospitals seek reimbursement from Medicare and Medicaid.

The suit, brought by Cynthia Fitzgerald under the qui tam provisions of the False Claims Act, was recently unsealed when the United States and the state of Texas declined to intervene.

Novation is the nation's largest group purchasing organization for hospitals, serving 2,200 community-owned hospitals and 100 teaching hospitals. It purchases more than $25 billion in supplies and services annually.

Friday, September 21, 2007

Former Tenet lawyer sued under FCA

Christi Sulzbach, the former Tenet general counsel, has been sued under the federal False Claims Act for her role in the hospital chain's fraud.

According to an article in the September 19, 2007 issue of the Los Angeles Times, Sulzbach certified to the Department of Health and Human Services that Tenet was in compliance with federal rules, even though she knew that one of its Florida hospitals had contracts with physicians that violated the so-called Stark Statute.

Tenet settled with the government in 2004 for $22.5 million but admitted no wrongdoing.

Tuesday, September 18, 2007

Sun Microsystems cancels federal contract after overcharging probe

Sun Microsystems, a major supplier of technology to the federal government, has canceled its contract with the General Services Administration. According to a September 15, 2007 article in the Washington Post, the cancellation follows months of questions from investigators and lawmakers regarding overcharging.

Auditors in the GSA's inspector general's office claimed that Sun abused the GSA schedule system, billing the government millions more than it had charged its commercial customers. GSA had pressed to renew the contract despite those claims.

In April the Dept. of Justice announced that it was joining a False Claims Act suit against Sun. That suit, which also named Hewlett-Packard and Accenture LLP, alleges kickbacks and conflicts of interest.

New York State files FCA suit against Merck

New York State has filed its first suit under the state's recently enacted False Claims Act. The suit, filed jointly by the state and New York City on September 17, 2007, accuses Merck of misrepresenting the dangers of its drug Vioxx. According to the Attorney General's press release, the suit seeks damages and civil penalties in addition to restitution for tens of millions of taxpayer dollars wrongly spent on Vioxx.

According to the press release, Merck deliberately suppressed and concealed information about the seriousness of the cardiovascular risks associated with Vioxx. The suit claims many of those prescriptions would never have been written had doctors been properly informed.

Between 1999, when Vioxx was introduced, and 2004 when it was pulled from the market, Medicaid and EPIC (the New York State-sponsored prescription plan for seniors) spent over $100 million on Vioxx prescriptions in New York State.

Friday, September 14, 2007

False Claims Act Corrections Act of 2007 introduced

Sens. Chuck Grassley and Dick Durbin have introduced legislation to strengthen the False Claims Act, the government's main weapon in combatting fraud against federal programs. Recent federal court have threatened the scope and applicability that Grassley says Congress intended.

The False Claims Act Corrections Act of 2007 has the support and cosponsorship of Judiciary Committee Chairman Patrick Leahy and Ranking Member Arlen Specter. Companion legislation will be introduced in the U.S. House of Representatives by Rep. Howard Berman.

The False Claims Act, last amended in 1986, has recovered $20 billion for the U.S. Treasury that would otherwise be lost to fraud.

Among the changes the proposed legislation would make are removing the requirement that false claims be presented to a government employee; revising the "public disclosure bar" to allow dismissal on these grounds only on a motion by the Dept. of Justice; clarifying that false claims against non-U.S. Government funds under the trust and control of the U.S. Government are subject to recovery under the FCA; and resolving a split between Circuit Courts of Appeal as to when a government employee may act as a qui tam relator under the FCA.

Whistleblower will not share in Putnam settlement

A former employee of Putnam Investments, who was a key figure in state and federal probes of the company, will not receive a share of the $193.5 million settlement, a Massachusetts state appeals court has ruled.

According to an article in the September 1, 2007 edition of the Boston Globe, the court held that Peter Scannell failed to file a law suit within the time frame required by the state's False Claims Act.

Scannell had detailed how Putnam permitted some fund customers and managers to reap benefits from certain trades at the expense of other fund investors, using an abusive practice known as market timing.

Top law firms aiding Iraq defense contractors

Defense contractors are employing top law firms to assist them in navigating lawsuits and federal investigations into alleged war profiteering and fraud in Iraq. According to an article in the September 5, 2007 issue of the National Law Journal, there are currently 80 federal investigations into contract fraud and more than 20 cases have been referred to the Dept. of Justice for prosecution. The government estimates that $10 billion in Iraq-related contracts are unaccounted for and may have been lost to fraud or other misconduct.

Among the law firms representing defense contractors are Akin Gump Strauss Hauer & Feld and Vinson & Elkins of Houston, who are representing former Halliburton subsidiary KBR Inc. in a suit concering a $25.7 billion contract to help rebuild oil services in Iraq.

Aventis settles drug pricing fraud for over $190 million

Aventis Pharmaceuticals Inc. has paid the federal government and a number of states more than $190 million to resolve allegations that the company defrauded Medicare and other federal health programs as a result of the company’s alleged fraudulent pricing and marketing of drugs.

The suit began as a whistleblower complaint filed under the qui tam provisions of the False Claims Act. The Act allows for private persons to file a suit on behalf of the government and to share in the recovery if the suit is successful.

An investigation into the company's practices began after Ven-A-Care of the Florida Keys Inc. filed a qui tam suit. The suit alleged that Aventis, now sanofi-aventis US, engaged in a scheme to set and maintain inflated prices for Anzemet, an antiemetic drug, according to the Justice Department's September 10, 2007 press release.