The case was brought by a former account manager at Boston Scientific Corp. against her employer and its subsidiary, Guidant Corp., alleging kickbacks in the sale and promotion of its implantable cardiac devices. The whistleblower filed her case in 2009, while an earlier-filed case remained under seal. The Department of Justice declined to intervene in the first-filed case, and the relator in that matter dismissed it. The companies moved to dismiss the later-filed suit on first-to-file grounds, under 31 USC 3730(b)(5), and the district court granted the motion, over the whistleblower’s protest that the earlier case lacked particularity.

The First Circuit affirmed. It first analyzed the text of the FCA, and concluded that it would be inappropriate to graft a particularity requirement on the first-to-file rule, especially since Congress had specifically referenced other Federal Rules in other sections of the Act, and so the plain language of the provision made particularity unnecessary. In addition, the court reasoned, the two provisions had different purposes: the first-to-file bar was intended to protect the government from parasitic lawsuits, and Rule 9(b) was intended to protect defendants from meritless fraud allegations.

Applying the Circuit’s “essential facts” test in assessing first-to-file arguments, the court concluded that the earlier complaint barred the latter one. It rejected the whistleblower’s attempt to distinguish the complaints on the grounds of details, finding that the complaints need only overlap in material facts, and need not be identical for the bar to apply.

The Justice Department and U.S. Attorney Kenneth J. Gonzales of the District of New Mexico announced today that Science Applications International Corporation (SAIC) has paid $11.75 million to settle allegations filed in the U.S. District Court for the District of New Mexico that it violated the False Claims Act by charging inflated prices under grants to train first responder personnel to prevent and respond to terrorism attacks. SAIC provides scientific, engineering, and technical services to commercial and government customers and is headquartered in Northern Virginia.

Between 2002 and 2012, the New Mexico Institute of Mining and Technology (New Mexico Tech) received six federal grants from the Department of Justice, the Department of Homeland Security, and the Federal Emergency Management Agency to train first responder personnel to prevent and respond to terrorism events involving explosive devices. New Mexico Tech awarded subgrants to SAIC to provide course management, development, and instruction. The United States alleged that SAIC’s cost proposals falsely represented that SAIC would use far more expensive personnel to carry out its efforts than it intended to use and actually did use, resulting in inflated charges to the United States.

DOJ added that the share that would be paid to the relator, a former project manager for the first responder program, had not yet been determined.

The Justice Department announced today that a number of related entities and individuals agreed to pay $2,883,947 to resolve allegations that they falsely claimed disadvantaged business status on a number of federally-funded transportation projects. These entities are Dayton-based TesTech, Inc. and its owner, Sherif Aziz, and Dayton-based CESO Testing Technology, Inc., CESO International, LLC, and CESO, Inc. (collectively CESO), and their owners, David and Shery Oakes.

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The Department of Transportation’s Disadvantaged Business Enterprise (DBE) program encourages the use of woman- and minority-owned businesses on federally-funded transportation projects. Contractors on such projects must make good-faith attempts to meet DBE participation goals as a condition of federal funding.

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The settlement announced today resolves allegations that the defendants claimed DBE status for TesTech, a civil engineering firm, on numerous highway and airport construction projects in Ohio, Indiana, Michigan, and Kentucky. The United States alleged that TesTech was owned and controlled by CESO, a non-DBE firm, and its owners, the Oakes, who falsely claimed that TesTech was owned by Aziz and qualified as a minority-owned business in order to take advantage of the DBE program.

The Department announced that the whistleblower, a former TesTech employee, will receive $562,370 of the settlement (a relator’s share of 19.5%).

According to DOJ’s press release:

American Commercial Colleges Inc. (ACC) has agreed to pay the United States up to $2.5 million, plus interest, to resolve allegations that it violated the civil False Claims Act by falsely certifying that it complied with certain eligibility requirements of the federal student aid programs, the Justice Department announced today.

To maintain eligibility to participate in federal student aid programs authorized by Title IV of the Higher Education Act of 1965, for-profit colleges such as ACC must obtain no more than ninety percent of their annual revenues from Title IV student aid programs. At least ten percent of their revenues must come from other sources, such as payments from students using their own funds or private loans independent of Title IV. Congress enacted this “90/10 Rule” based on the belief that quality schools should be able to attract at least a portion of their funding from private sources, and not rely solely upon the Federal Government. The civil settlement resolves allegations that ACC violated the False Claims Act when it orchestrated certain short-term private student loans that ACC repaid with federal Title IV funds to artificially inflate the amount of private funding ACC counted for purposes of the 90/10 Rule. The short-term loans at issue in this case were not sought or obtained by students on their own; rather, the United States contends ACC orchestrated the loans for the sole purpose of manipulating its 90/10 Rule calculations.

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Under the False Claims Act settlement, ACC, a privately-owned college operating several campuses in Texas, will pay the United States $1 million, plus interest, over five years, and could be obligated to pay an additional $1.5 million under the terms of the agreement.

The whistleblowers, former directors of two of the company’s campuses, will receive $170,000 of the base $1 million in payments (a relator’s share of 17%), and would receive $255,000 if the company must pay the additional $1.5 million.

The watchdog group identified 11 of the top 20 billing physicians as Florida doctors, including one whose rate of claims would require him or her to perform six operations each day, every day of the week.

One former Medicare official described the difficulty of policing these claims:

Dr. Bruce Quinn, who served as Medicare medical director of California’s Medicare Part B program from 2004 to 2008, said monitoring blepharoplasty claims is notoriously difficult. When a claim is reviewed, Quinn said, staff receives a medical record from a doctor that says a patient’s eyelids interfered with their vision, along with a photo of someone with droopy eyelids. There really isn’t anything to review, Quinn said. “It’s really hard to go much further on that.”

It’s also difficult and expensive to take blepharoplasty cases to court if a provider is suspected of fraudulent billing, Quinn said. To make a case, the prosecution requires patient testimony and boxes of records, a bar that is hard to meet. Quinn said although the explosion of blepharoplasty caught his attention in California, it was “pretty slippery to get a handle on.”

Pharmaceutical company ISTA Pharmaceuticals, Inc. pled guilty earlier today to conspiracy to introduce a misbranded drug into interstate commerce and conspiracy to pay illegal remuneration in violation of the Federal Anti-Kickback Statute, the Justice Department announced today. U.S. District Court Judge Richard J. Arcara accepted ISTA’s guilty pleas. The guilty pleas are part of a global settlement with the United States in which ISTA agreed to pay $33.5 million to resolve criminal and civil liability arising from its marketing, distribution and sale of its drug Xibrom.

ISTA pled guilty in the Western District of New York to criminal charges that the company conspired to illegally introduce a misbranded drug, Xibrom, into interstate commerce. Under the Food, Drug and Cosmetic Act (FDCA), it is illegal for a drug company to introduce into interstate commerce any drug that the company intends will be used for uses not approved by the Food and Drug Administration (FDA). Xibrom is an ophthalmic, nonsteroidal, anti-inflammatory drug that was approved by FDA to treat pain and inflammation following cataract surgery. In order to expand sales of Xibrom outside of its approved use, ISTA conspired to introduce misbranded Xibrom into interstate commerce.

Between 2005 and 2010, some ISTA employees promoted Xibrom for unapproved new uses, including the use of Xibrom following Lasik and glaucoma surgeries, and for the treatment and prevention of cystoid macular edema. The evidence showed that continuing medical education programs were used to promote Xibrom for uses that were not approved by the FDA as safe and effective, and that post-operative instruction sheets for unapproved uses were paid for by some company employees and provided to physicians. These activities are evidence of intended uses unapproved by FDA, which rendered the drug misbranded under the FDCA.

ISTA pled guilty to a felony based on evidence that some ISTA employees were told by management not to memorialize in writing certain interactions with physicians regarding unapproved new uses, and not to leave certain printed materials in physicians’ offices relating to unapproved new uses. These instructions were given in order to avoid having their conduct relating to unapproved new uses being detected by others. ISTA agreed that this conduct represented an intent to defraud under the law.

In addition, ISTA pled guilty to a conspiracy to knowingly and willfully offering or paying remuneration to physicians in order to induce those physicians to prescribe Xibrom, in violation of the federal Anti-Kickback Statute. Under the law, it is illegal to offer or pay remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to physicians to induce them to refer individuals to pharmacies for the dispensing of drugs, for which payments are made in whole or in part under a Federal health care program. In this matter, certain ISTA employees, with the knowledge and at the direction of ISTA, offered and provided physicians with free Vitrase, another ISTA product, with the intent to induce such physicians to refer individuals to pharmacies for the dispensing of the drug Xibrom. In addition, ISTA provided other illegal remuneration, including a monetary payment to sponsor an event of a non-profit group associated with a particular physician, a golf outing, a wine-tasting event, paid consulting or speaker arrangements, and honoraria for participation in advisory meetings which were intended to be marketing opportunities, with the intent to induce physicians to refer individuals to pharmacies for the dispensing of the drug Xibrom.

Under the terms of the plea agreement, ISTA will pay a total of $18.5 million, including a criminal fine of $16,125,000 for the conspiracy to introduce misbranded Xibrom into interstate commerce, $500,000 for the conspiracy to violate the Anti-Kickback Statute, and $1,850,000 in asset forfeiture associated with the misbranding charge.

ISTA also entered into a civil settlement agreement under which it agreed to pay $15 million to the federal government and states to resolve claims arising from its marketing of Xibrom, which caused false claims to be submitted to government health care programs. The civil settlement resolved allegations that ISTA promoted the sale and use of Xibrom for certain uses that were not FDA-approved and not covered by the Federal health care programs, including prevention and treatment of cystoid macular edema, treatment of pain and inflammation associated with non-cataract eye surgery, and treatment of glaucoma. The United States further alleged that ISTA’s violations of the Anti-Kickback Statute resulted in false claims being submitted to federal health care programs. The federal share of the civil settlement is $14,609,746.16, and the state Medicaid share of the civil settlement is $390,253.84. Except as admitted in the plea agreement, the claims settled by the civil settlement agreement are allegations only, and there has been no determination of liability as to those claims.

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In addition to the criminal fines and asset forfeiture, ISTA’s parent company, Bausch+Lomb, Incorporated (B+L), has agreed to maintain a Compliance and Ethics Program. B+L has agreed that it will maintain policies and procedures that: (1) prohibit the involvement of sales and marketing personnel and others on the businesses’ commercial team in the final decision-making process with respect to educational grants in the United States, while also ensuring that the educational programming is focused on objective scientific and educational activities and discourse; (2) require sales agents to discuss only those product uses that are consistent with what is indicated on the product’s approved package labeling and to forward requests for information regarding uses of B+L’s products not approved by FDA to a Medical Affairs Professional; and (3) prohibit the company from engaging in any conduct that violates the Anti-Kickback Statute, including the offering or paying of any remuneration to any person to induce such person to prescribe any drug for which payment may be made in whole or in part under a Federal health care program. The Program also requires that B+L’s President of Global Pharmaceuticals conduct an annual review of the effectiveness of B+L’s Program as it relates to the marketing, promotion, and sale of prescription pharmaceutical products, and certify that to the best of his or her knowledge, the Program was effective in preventing violations of Federal health care program requirements and the FDCA regarding sales, marketing, and promotion of B+L’s prescription pharmaceutical products.

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Upon conviction for the criminal charges described above, ISTA will face mandatory exclusion from Federal healthcare programs. Exclusion will mean that on the effective date of the exclusion, any ISTA labeled drugs in ISTA’s possession would no longer be reimbursable by Medicare, Medicaid, or other Federal healthcare programs. In June 2012, B+L acquired ISTA. Simultaneous with the False Claims Act settlement and the entry of the plea, the U.S. Department of Health and Human Services’ Office of Inspector General, ISTA, and B+L will enter into a Divestiture Agreement under which ISTA agrees to be excluded for 15 years, effective six months after the date of the settlement. Under the terms of the Divestiture Agreement, ISTA will transfer all assets to B+L or a B+L subsidiary and will stop shipping ISTA labeled drugs within six months of the Divestiture Agreement. Six months after the effective date of the Divestiture Agreement, all ISTA labeled drugs in the possession of ISTA or B+L will no longer be reimbursable by Medicare, Medicaid, and other Federal healthcare programs. Those ISTA labeled drugs in the stream of commerce at that time will continue to be reimbursable.

The government also announced that one of the qui tam relators, a former ISTA sales representative, will receive $2.5 million of the federal share of the civil settlement (a relator’s share of approximately 17%). The government did not announce what, if any, share the other relator will receive.

Disclosure: The Vernia Law Firm represented ISTA in this matter.

C.R. Bard Inc. has agreed to pay the U nited States $48.26 million to resolve claims that it knowingly caused false claims to be submitted to the Medicare program for brachytherapy seeds used to treat prostate cancer in violation of the False Claims Act. Bard is a New Jersey based corporation that develops, manufacturers, and markets medical products used for a variety of conditions, including prostate cancer.

The settlement requires that Bard pay $48.26 million and it resolves claims relating to Bard’s sale of brachytherapy seeds, a form of radiation therapy, to hospitals. The United States alleged that from 1998 to 2006, Bard provided illegal remuneration to customers and physicians to induce them to purchase Bard’s seeds, in violation of the Anti-Kickback Statute. The illegal remuneration allegedly took the form of certain grants, guaranteed minimum rebates, conference fees, marketing assistance and/or free medical equipment that Bard paid to customers and/or physicians who used the seeds to perform treatment for prostate cancer. Hospitals ultimately submitted bills to Medicare for these seeds, which the government alleged were rendered false by Bard’s illegal kickback activity. The government alleged that Bard was liable under the False Claims Act for causing the submission of those false claims.

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In addition, according to a non-prosecution agreement with the United States, Bard has agreed to pay an additional $2.2 million and to take numerous remedial steps, many of which the company identified and began to implement prior to the criminal investigation, to enhance its corporate compliance program to prevent similar illegal actions in the future. For example, Bard has agreed to refine its Code of Conduct and other written policies and procedures that promote Bard’s commitment to full compliance with all Federal health care program requirements and to develop an effective program to monitor medical education grants provided by Bard to ensure compliance with those requirements.

The government announced that the relator in the case, a former contract administrator for Bard, will receive $10,134,600 of the settlement (a 21% relator’s share).

In the largest drug safety settlement to date with a generic drug manufacturer, Ranbaxy USA Inc. , a subsidiary of Indian generic pharmaceutical manufacturer Ranbaxy Laboratories Limited, pleaded guilty today to felony charges relating to the manufacture and distribution of certain adulterated drugs made at two of Ranbaxy’s manufacturing facilities in India, the Justice Department announced today. Ranbaxy also agreed to pay a criminal fine and forfeiture totaling $150 million and to settle civil claims under the False Claims Act and related State laws for $350 million.

The federal Food, Drug and Cosmetic Act (FDCA) prohibits the introduction or delivery for introduction into interstate commerce of any drug that is adulterated. Under the FDCA, a drug is adulterated if the methods used in, or the facilities or controls used for, its manufacturing, processing, packing, or holding do not conform to, or are not operated or administered in conformity with, current Good Manufacturing Practice (cGMP) regulations. This assures that a drug meets the requirements as to safety and has the identity and strength, and meets the quality and purity characteristics, which the drug purports or is represented to possess.

Ranbaxy USA pleaded guilty to three felony FDCA counts, and four felony counts of knowingly making material false statements to the FDA. The generic drugs at issue were manufactured at Ranbaxy’s facilities in Paonta Sahib and Dewas, India. Under the plea agreement, the company will pay a criminal fine of $130 million, and forfeit an additional $20 million.

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Ranbaxy USA admitted to introducing into interstate commerce certain batches of adulterated drugs that were produced at Paonta Sahib in 2005 and 2006, including Sotret, gabapentin, and ciprofloxacin. Sotret is Ranbaxy’s branded generic form of isotretinoin, a drug used to treat severe recalcitrant nodular acne; gabapentin is a drug used to treat epilepsy and nerve pain; ciprofloxacin is a broad-spectrum antibiotic. In a Statement of Facts filed along with the Information, Ranbaxy USA acknowledged that FDA’s inspection of the Paonta Sahib facility in 2006 found incomplete testing records and an inadequate program to assess the stability characteristics of drugs. “Stability” refers to how the quality of a drug varies with time under the influence of a variety of factors, such as temperature, humidity, and light. Such testing is used to determine appropriate storage conditions and expiration dates for the drug, as well as to detect any impurities in the drug.

Ranbaxy also acknowledged that the FDA’s 2006 and 2008 inspections of the Dewas facility found the same issues with incomplete testing records and an inadequate stability program, as well as significant cGMP deviations in the manufacture of certain active pharmaceutical ingredients and finished products. Ranbaxy USA also acknowledged that in 2003 and 2005 the company was informed of cGMP violations by consultants it hired to conduct audits at the Paonta Sahib and Dewas facilities. Those cGMP violations resulted in the introduction into interstate commerce of some adulterated drugs.

Ranbaxy USA further admitted to failing to timely file required reports known to FDA as “field alerts” for batches of Sotret and gabapentin that had failed certain tests. With respect to Sotret, Ranbaxy USA was aware in January 2003 that a batch of Sotret failed an accelerated dissolution stability test but continued to distribute the batch into the United States for another 13 months. With respect to gabapentin, Ranbaxy USA was aware at various times between June and August 2007 that certain batches of gabapentin were testing out-of-specification, had unknown impurities, and would not maintain their expected shelf life. Nevertheless, Ranbaxy USA did not notify FDA and institute a voluntary recall until October 2007.

Ranbaxy USA also admitted to making false, fictitious, and fraudulent statements to the FDA in Annual Reports filed in 2006 and 2007 regarding the dates of stability tests conducted on certain batches of Cefaclor, Cefadroxil, Amoxicillin, and Amoxicillin and Clavulanate Potassium, which were manufactured at the Dewas facility. Ranbaxy USA was found to have conducted stability testing of certain batches of these drugs weeks or months after the dates reported to FDA. In addition, instead of conducting some of the stability tests at prescribed intervals months apart, the tests were conducted on the same day or within a few days of each other. This practice resulted in unreliable test results regarding the shelf life of the drugs. Ranbaxy USA also acknowledged that drug samples waiting to be tested were stored for unknown periods of time in a refrigerator, which did not meet specified temperature and humidity ranges for an approved stability chamber, and that this was not disclosed to the FDA.

The criminal case is U.S. v. Ranbaxy USA, Inc., JFM-13-CR-0238 (D. Md.).

Under the civil settlement, Ranbaxy has agreed to pay an additional $350 million to resolve allegations that it caused false claims to be submitted to government health care programs between April 1, 2003, and September 16, 2010, for certain drugs manufactured at the Paonta Sahib and Dewas facilities. The United States contends that Ranbaxy manufactured, distributed, and sold drugs whose strength, purity, or quality differed from the drug’s specifications or that were not manufactured according to the FDA-approved formulation. The United States further contends that, as a result, Ranbaxy knowingly caused false claims for those drugs to be submitted to Medicaid, Medicare, TRICARE, the Federal Employees Health Benefits Program, the Department of Veterans Affairs, and the U.S. Agency for International Development (USAID), which administers the U.S. President’s Emergency Plan for AIDS Relief (PEPFAR).

The federal government’s share of the civil settlement amount is approximately $231.8 million, and the remaining $118.2 million will go to the states participating in the agreement.

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Last year, FDA and Ranbaxy agreed to an injunction that prevents drugs produced at the Paonta Sahib and Dewas facilities from entering the U.S. market until the facilities have been brought into full compliance with the FDCA and its implementing regulations. Since September 16, 2008, when the FDA placed drugs from those facilities on an Import Alert, Ranbaxy has not imported drugs from those facilities into the U.S. In addition, the injunction requires Ranbaxy to review and verify data contained in Ranbaxy’s past drug applications to the FDA. United States v. Ranbaxy Laboratories, Ltd., et al. , Case No. JFM-12-250 (D. Md).

The government also announced that the case was originally brought by a whistleblower, a former Ranbaxy executive, who will receive $48.6 million from the federal share of the settlement (a 21% relator’s share).

Testifying before the Committee were Senators Charles Grassley (IA) and Jonny Isakson (GA), on of the case’s whistleblower, Fredrick Newell, and False Claims Act practitioner Shelley Slade.

Ben Vernia of The Vernia Law Firm, NYU Professor and legal ethics expert Stephen Gillers, and Gary Azorsky and Jeanne Markey, at Cohen Milstein Sellers & Toll, PLLC provided letters in support of the propriety of the Department of Justice’s decision-making process in the case.

The United States has filed suit against Chemed Corporation and various wholly owned hospice subsidiaries, including Vitas Hospice Services LLC and Vitas Healthcare Corporation, alleging false Medicare billings for hospice services, the Justice Department announced today. Vitas is the largest for-profit hospice chain in the United States and provides hospice services to patients in 18 states (Alabama, California, Colorado, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Kansas, Michigan, Missouri, New Jersey, Ohio, Pennsylvania, Texas, Virginia and Wisconsin) and the District of Columbia. Chemed, which is based in Cincinnati, Ohio and also owns Roto-Rooter Group Inc., a national drain cleaning and plumbing service company, acquired Vitas in 2004.

The Medicare hospice benefit is available for patients who elect palliative treatment (medical care focused on providing patients with relief from pain and stress) for a terminal illness, and have a life expectancy of six months or less if their disease runs its normal course. When a Medicare patient receives hospice services, that individual no longer receives services designed to cure his or her illness. Medicare reimburses for different levels of hospice care, including continuous home care, also called crisis care, which is available for patients who are experiencing acute medical symptoms resulting in a brief period of crisis. Crisis care is available when a patient’s acute medical symptoms require the immediate and short-term provision of skilled nursing services in order to keep the patient at home. The reimbursement rate for crisis care services is the highest daily rate a hospice can bill Medicare, and hospices are paid hundreds of dollars more on a daily basis for each patient they certify as having received crisis care services rather than routine hospice services.

The government’s complaint alleges that Chemed and Vitas Hospice knowingly submitted or caused the submission of false claims to Medicare for crisis care services that were not necessary, not actually provided, or not performed in accordance with Medicare requirements. According to the complaint, the companies set goals for the number of crisis care days that were to be billed to Medicare. The companies also allegedly used aggressive marketing tactics and pressured staff to increase the numbers of crisis care claims submitted to Medicare, without regard to whether the services were appropriate or were actually being provided. For example, the complaint contends that Vitas billed three straight days of crisis care for a patient, even though the patient’s medical records do not indicate that the patient required crisis care and, indeed, reflect that the patient was playing bingo part of the time.

In addition, the government’s complaint alleges that Chemed and Vitas knowingly submitted or caused the submission of false claims for hospice care for patients who were not terminally ill. The companies allegedly paid bonuses to staff based on the number of patients enrolled in the program and based on patients who were admitted for longer lengths of stay, and took adverse employment actions against marketing representatives who did not meet monthly hospice admissions goals. According to the Complaint, these business practices resulted in the admission of patients who were not eligible for hospice care. As an example, the Complaint alleges that Vitas admitted a patient to hospice who showed no signs of a terminal condition and was described in Vitas’ own records as, “very healthy given her age.”

As a result of the conduct alleged in the complaint, the government contends that Chemed and Vitas violated the False Claims Act and misspent tens of millions of taxpayer dollars from the Medicare program.

The case appears to have arisen from the government’s own investigation, and not as a whistleblower, or qui tam, suit.