Tony West, Assistant Attorney General for the Civil Division of the Department of Justice, and Sally Quillian Yates, U.S. Attorney for the Northern District of Georgia, today announced the filing of a criminal information against Allergan for promoting Botox® for headache, pain, spasticity and juvenile cerebral palsy – none of which were approved by the FDA. According to the criminal information, Allergan made it a top corporate priority to maximize sales of Botox® for such off-label uses.

In 1989, the FDA approved Botox®, a prescription biological product containing botulinum toxin type A, a purified neurotoxin, to treat strabismus (crossed eyes) and blepharospasm (involuntary eyelid muscle contraction). In 2000 and 2004, approval was given to treat cervical dystonia (involuntary neck muscle contraction) and primary axillary hyperhidrosis (excessive underarm sweating), respectively. In 2010, approval was given to treat adult upper-limb spasticity.

The criminal information alleges that Allergan exploited its on-label cervical dystonia (CD) indication to grow off-label pain and headache (HA) sales. In 2003, Allergan developed the “CD/HA Initiative” as a “rescue strategy” in the event of negative results from its clinical trials to ensure continued expansion into the pain and headache markets. As part of this initiative, Allergan claimed that cervical dystonia was “underdiagnosed” and that doctors could diagnose cervical dystonia based on headache and pain symptoms, even when the doctor “doesn‟t see any cervical dystonia.”

Allergan‟s off-label marketing tactics also included calling on doctors who typically treat patients with off-label conditions. In 2003, Allergan doubled the size of its reimbursement team to assist doctors in obtaining payment for off-label Botox® injections. Allergan held workshops to teach doctors and their office staffs how to bill for off-label uses, conducted detailed audits of doctors‟ billing records to demonstrate how they could make money by injecting Botox®, and operated the Botox® Reimbursement Hotline, which provided a wide array of free on-demand services to doctors for off-label uses. Allergan also lobbied government health care programs to expand coverage for off-label uses, directed physician workshops and dinners focused on off-label uses, paid doctors to attend “advisory boards” promoting off-label uses, and created a purportedly independent online neurotoxin education organization to stimulate increased use of Botox® for off-label indications.

The Department announced that the case arose from three separate whistleblower suits. The relators will split $37.8 million of the civil settlement (a 16.7% relators’ share).

The company announced in a press release that as part of the settlement, it was required to dismiss its pending suit seeking to enjoin the FDA’s off-label enforcement. Allergan also agreed to enter a Corporate Integrity Agreement with HHS.

Brooks Brothers moved to dismiss for lack of standing (Rule 12(b)(1)) and lack of particularity (12(b)(6)). A judge in the Southern District of New York granted the motion on standing grounds, and denied the government’s motion to intervene.

The Federal Circuit reversed, reasoning that under Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765 (2000), the relator could establish standing through the law’s partial assignment of the United States’ damages claims, and need not prove any personal injury in fact. The court rejected the company’s reliance on Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992), distinguishing the law in that case because it allowed private individuals to sue the government.

The Federal Circuit declined to address the arguments of an amicus, Ciba Vision Corp., that the patent qui tam violated the Take Care Clause of Article II of the Constitution, because the issue had not been briefed or argued by the parties in the District Court.

Finally, the court agreed with the government that the District Judge had erred in refusing to permit it to intervene. The government’s ability to enforce the law, the court reasoned, would be impaired or impeded by the District Court’s disposition of the case without the government’s intervention.

Our work is making a significant difference. In FY2009, the Department of Justice (DOJ), including its 94 U.S. Attorneys’ Offices, HHS’s Office of the Inspector General, and the Centers for Medicare and Medicaid Services (CMS) worked together to file charges involving criminal health care fraud violations against more than 800 defendants, secure 583 criminal convictions, open 886 new civil health care fraud investigations, obtain 337 civil administrative actions against individuals and organizations who were committing Medicare Fraud, and recovered more than $2.5 billion in criminal, civil and administrative actions related to our joint health care fraud enforcement activities.

The success of HEAT’s collaboration has been recognized by President Barack Obama, whose FY2011 budget request includes an additional $60.2 million to allow the Strike Forces to continue to expand into additional cities in the near future.

As part of ongoing HEAT activities, Attorney General Holder and Secretary Sebelius recently sent a letter to all state attorneys general urging them to work with HHS and federal, state and local law enforcement officials to mount a substantial outreach campaign to educate seniors and other Medicare beneficiaries about how to prevent scams and fraud beginning this summer. In the letter, the Attorney General and Secretary outline education and outreach efforts where state attorneys general could make a significant difference.

HEAT’s creation and ongoing collaboration has allowed top-level law enforcement agents, criminal prosecutors and civil attorneys, and staff from DOJ and HHS to examine lessons learned and innovative strategies in our efforts to both prevent fraud and enforce current anti-fraud laws around the country.

Since its creation in May 2009, HEAT has focused on key areas for coordination and improvement. HEAT members are working to identify new enforcement initiatives and areas for increased oversight and prevention to increase efficiency in pharmaceutical and device investigations. This includes close collaboration with DOJ’s Civil Division and U.S. Attorneys’ Offices, HHS’s Office of the Inspector General and the Food and Drug Administration.

Medicare Fraud Strike Forces, which include teams from DOJ’s Criminal Division and U.S. Attorneys’ Offices, the FBI, CMS and HHS’s Office of the Inspector General have expanded from the launch sites of South Florida (2007) and Los Angeles (2008) to Houston, Detroit, Brooklyn, Baton Rouge and Tampa.

Since announcing HEAT in May 2009, the Medicare Fraud Strike Forces have charged 465 defendants with defrauding Medicare of more than $830 million taxpayer dollars.

In the three years since they were created, Medicare Fraud Strike Forces have charged more than 810 defendants with defrauding Medicare of nearly $1.9 billion taxpayer dollars.

Since the False Claims Act was significantly amended in 1986 through FY 2009, DOJ’s Civil Division and U.S. Attorneys’ Offices have recovered nearly $16 billion in matters alleging fraud against government health care programs. . DOJ’s Civil Division and U.S. Attorneys’ Offices have recovered more than $3.6 billion in health care fraud matters pursued under the False Claims Act and Food, Drug and Cosmetic Act since HEAT was announced.

As a primary tool in finding fraudulent activity, DOJ and HHS have expanded data sharing and improved information sharing procedures in order to get critical data and information into the hands of law enforcement to track patterns of fraud and abuse, and increase efficiency in investigating and prosecuting complex health care fraud cases.

A cross-government health care fraud data intelligence sharing workgroup has been established to share fraud trends, new initiatives, ideas and success stories to improve awareness across the government of issues relating to health care fraud.

Both departments have worked to increase training to prevent honest mistakes and help stop potential fraud before it happens. This includes CMS compliance training for providers, ongoing meetings at U.S. Attorneys’ Offices with the public and private sector, and increased efforts by HHS to educate specific groups – including elderly and immigrant communities – to help protect them. CMS has also expanded several of their programs, including a demonstration project on Durable Medical Equipment and their Medicaid provider audit program, to help monitor activities and detect fraud.

Recognizing that training is also necessary for investigative and law enforcement personnel, both agencies have also increased opportunities within their departments. In November 2009, DOJ conducted Medicare Fraud Strike Force training, which was designed to teach the Strike Force concept and case model to prosecutors, law enforcement agents and administrative support teams. CMS and the HHS Office of the Inspector General are also providing ongoing training to DOJ and HHS staff on the use of new technology to catch and quickly turn off funding to those who are defrauding the system.

In January 2010, the first “National Summit on Health Care Fraud” was held to bring together leaders from the public and private sectors to identify and discuss innovative ways to eliminate fraud, waste and abuse in the health care system.

HHS established the CMS Center for Program Integrity (CPI) in April 2010 to apply innovative methods and technology to prevent fraud, and to ensure that correct payments are made to legitimate providers for appropriate and reasonable services for eligible beneficiaries of the Medicare and Medicaid programs.

The HEAT program grew out of a Medicare Fraud Strike Force in South Florida, started in March, 2007.

This settlement resolves allegations under the False Claims Act that HP knowingly paid kickbacks, or “influencer fees,” to systems integrator companies in return for recommendations that federal agencies purchase HP’s products. The settlement also resolves claims that HP’s 2002 contract with the GSA was defectively priced because HP provided incomplete information to GSA contracting officers during contract negotiations.
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The allegations that HP improperly paid kickbacks were first made in a lawsuit that whistleblowers Norman Rille and Neal Roberts filed in the U.S. District Court for the Eastern District of Arkansas in 2004. Under the qui tam provisions of the False Claims Act, private citizens may file actions for fraud on behalf of the United States and share in any recovery.
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HP disclosed the defective pricing allegations resolved by today’s settlement to GSA contracting officials. In 2002, HP entered into a contract with GSA to sell computer equipment and software to federal agencies. Under applicable regulations and contract provisions, HP was required to tell GSA how it conducted business in the commercial marketplace so that GSA could use that information to negotiate a fair price for government customers using the GSA contract to purchase HP products. HP informed GSA contracting officials in 2007 that it might not have complied with all applicable provisions of the GSA contract. This disclosure led to an audit by the GSA Office of Inspector General (GSA-OIG), which concluded that the contract had been defectively priced.

Neither the press release nor the article identified the relator’s share of the recovery. The company had also paid a civil settlement to the Department of Education in 2007.

The court concluded:

• Under prior section 3729(a)(1), that a genuine issue of material fact existed whether the private crop insurance company which issued the policies had submitted claims for the losses to the federal government;
• Under prior section 3729(a)(2), that the defendant’s long experience selling federally subsidized crop insurance permitted a reasonable inference that he knew that a natural and foreseeable consequence of his submission of false insurance applications and acreage reports to the private insurer would be that the company would use those records to get the government to pay its claims (and for a similar reason, a genuine issue of fact existed for a conspiracy claim under former section 3729(a)(3); and
• That under Iowa common law fraud, a jury could find that the defendant had reason to expect that the insurance company would pass on his alleged misrepresentations to the government, and that they would rely on them.

Comment: The court’s reference to Iowa’s common law of fraud seems to be erroneous. The federal government’s common law fraud claims are governed by federal common law, not law borrowed from the state in which the suit is brought. The issue was not briefed by the parties here, and was apparently not material to the outcome.

The government had ample opportunity to investigate the allegations prior to the close of fact discovery, the Court reasoned, and had chosen not to do so for reasons of efficiency. In addition, Chief Judge Hewitt disagreed with the government’s argument that the circumstances of the case (including the company’s operation of its sawmill) warranted reopening discovery. The United States argued that discovery into the company’s subjective basis for its claim was necessary because there was no objective basis for its assertion that its sawmill had operated as less than full capacity during the time in question.