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.

* * *

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.

* * *

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.

* * *

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.

St. Vincent Healthcare, a hospital located in Billings, Mont., and Holy Rosary Healthcare, a hospital located in Miles City, Mont., have agreed to pay $3.95 million plus interest to resolve allegations that they violated the Stark Law and the False Claims Act by improperly providing incentive pay to physicians that made referrals to the hospitals, the Justice Department announced today.

The Stark Law forbids a hospital from billing Medicare for certain services referred by physicians who have a financial relationship with the hospital unless that relationship falls within certain exceptions. A prohibited financial relationship includes a hospital’s agreement to compensate a physician in a manner that takes into account the volume of the physician’s referrals or the revenue realized through those referrals.

The settlement announced today resolves allegations that the hospitals paid several physicians incentive compensation that took into account the value or volume of their referrals by improperly including certain designated health services in the formula for calculating physician incentive compensation. These issues were disclosed by the hospitals to the government.

The Justice Department announced today that the United States has filed a second civil false claims lawsuit against Novartis Pharmaceuticals Corp. involving alleged kickbacks paid by the company to health care providers. The government’s complaint seeks damages and civil penalties under the False Claims Act and under the common law for paying kickbacks to doctors to induce them to prescribe Novartis pharmaceutical products that were reimbursed by federal health care programs. The lawsuit alleges that the payments violated the Anti-Kickback Statute and, as a result of Novartis’s unlawful conduct, the government paid false claims for reimbursement for Novartis pharmaceutical products.

* * *

The following allegations are based on the government’s complaint filed in the Southern District of New York:
Novartis, a pharmaceutical company headquartered in East Hanover, N.J., is a subsidiary of Novartis AG, an international pharmaceutical company headquartered in Basel, Switzerland. From January 2001 through at least November 2011, Novartis systematically violated the Anti-Kickback Statute , which prohibits the payment of remuneration to induce referrals of items or services covered by Medicare, Medicaid, and other federally-funded programs. Indeed, Novartis violated its own internal policies concerning speaker programs, which require that the programs have an educational purpose and that slides about the company’s drugs be presented. Novartis violated the Anti-Kickback Statute by paying doctors to speak about certain drugs, including its hypertension drugs Lotrel and Valturna and its diabetes drug Starlix, at events that were often little or nothing more than social occasions for the doctors. The payments and lavish dinners given to the doctors were, in reality, kickbacks to the speakers and attendees to induce them to write prescriptions for Novartis drugs. In many instances Novartis made payments to doctors for purported speaker programs that either did not occur at all or that had few or no attendees, and thousands of programs were held all over the country at which few or no slides were shown and the doctors who participated spent little or no time discussing the drug at issue.

Many speaker programs were also held in circumstances in which it would have been virtually impossible for any presentation to be made, such as on fishing trips off the Florida coast. Other Novartis events were held at Hooters restaurants.

In connection with these programs, Novartis also frequently treated the doctors to expensive dinners that they hosted at high-end restaurants. For example, a July 5 dinner for three, including the speaker, at a Washington, D.C. restaurant cost $2,016, or $672 per person. Novartis also paid a $1,000 honorarium to the speaker for this program. One of the two attendees had attended the same program a short time earlier. At another program held on Valentine’s Day in 2006, Novartis paid $3,127, for a meal for two at a West Des Moines, Iowa restaurant, or $1,042 per person.

Novartis’s internal analyses show that speaker programs had a high return on investment in terms of the additional prescriptions for its drugs written by the doctors who participated in the programs, both as speakers and attendees, with the highest return arising from payments to doctors as “honoraria” for speaking. In short, doctors increased the number of prescriptions they wrote when they were being paid by Novartis to speak about a drug. As a result, Novartis spent millions on speaker programs yearly. According to Novartis’s data, during the period from January 2002 through November 2011, it spent nearly $65 million and conducted more than 38,000 speaker programs for just three drugs: the hypertension drugs, Lotrel and Valturna, and the diabetes drug, Starlix. In the absence of a legitimate purpose for many of the programs, the payments were nothing more than kickbacks to the doctors that induced them to write prescriptions in violation of the Anti-Kickback Statute .

Novartis was well aware that its speaker programs created opportunities to provide kickbacks to doctors. In September 2010, Novartis entered into a settlement with the U.S. Department of Justice to settle False Claims Act lawsuits based in part on violations of the AKS due to illegal remuneration paid to doctors through such mechanisms as speaker programs, and signed a corporate integrity agreement with the U.S. Department of Health and Human Services Office of Inspector General agreeing to implement a rigorous compliance program.

Even after entering into the corporate integrity agreement, Novartis’s compliance program failed to prevent kickbacks from being paid in conjunction with Novartis’s speaker programs. No individual at the company was tasked with examining its speaker program data to determine whether the programs were used for an illegitimate purpose. Furthermore, although instances of speaker program abuse were reported to Novartis, sanctions were generally mere slaps on the wrist. In some cases, sales representatives who violated Novartis’s own speaker program policies were nevertheless promoted. Even after September 2010, Novartis continued to conduct bogus speaker programs that were simply vehicles for paying kickbacks to doctors in the form of honoraria and expensive meals.

As a consequence of its violations of the Anti-Kickback Statute , Novartis has caused the submission of numerous false claims for drugs to federal health care programs, including Medicare, Medicaid, TRICARE and the Department of Veterans Affairs health care program, resulting in millions of dollars in reimbursements. Novartis’s unlawful conduct caused those false claims to be made to and paid by the federal health care programs.

The complaint seeks treble damages and penalties under the False Claims Act for the false claims for reimbursement for Lotrel, Valturna, and Stalix, as well as for other Novartis cardiovascular drugs. In addition, the United States seeks damages under the common law.

The case was originally brought as a qui tam suit by a former Novartis sales representative.

Amgen Inc., a California-based biotechnology company, has agreed to pay the United States $24.9 million to settle allegations that it violated the False Claims Act, the Justice Department announced today. Amgen develops, manufactures, and sells pharmaceutical products, including products sold under the trade name Aranesp.

The settlement resolves allegations that Amgen paid kickbacks to long-term care pharmacy providers Omnicare Inc., PharMerica Corporation and Kindred Healthcare Inc. in return for implementing “therapeutic interchange” programs that were designed to switch Medicare and Medicaid beneficiaries from a competitor drug to Aranesp. The government alleged that the kickbacks took the form of performance-based rebates that were tied to market-share or volume thresholds. The government further alleged that, as part of the therapeutic interchange program, Amgen distributed materials to consultant pharmacists and nursing home staff encouraging the use of Aranesp for patients who did not have anemia associated with chronic renal failure.

Although DOJ disclosed that the case was initially brought by a whistleblower, the Department did not identify the amount the qui tam relator will receive as a result of the settlement.

Disclosure: The Vernia Law Firm represents a whistleblower in an unrelated qui tam case against Omnicare, Inc., which was named as a kickback recipient in DOJ’s press release. (That suit, U.S. ex rel Fox Rx, Inc. v. Omnicare, Inc. (N.D.Ga.), alleges that Omnicare knowingly submitted claims for a different class of drugs (atypical antipsychotics) to Medicare’s Part D program that lacked a medically accepted indication.)

The report recites documents in reaching its conclusions that, in addition to the agreement to decline the qui tam cases, AAG Perez offered DOJ’s assistance to the City in motions to dismiss the cases (though the Civil Division and the U.S. Attorney’s Office refused to cooperate) and attempted to conceal the arrangement from the public.

The Justice Department is proposing a program increase of $55 million for financial and mortgage fraud initiatives to complement ongoing efforts to combat financial and health care fraud, that are supported by existing direct resources and reimbursable funding.

According to the Washington Post:

U.S. District Judge Amy Berman Jackson said Cannon’s actions represented “more than bad judgment.”

“There’s an appropriate way to go about it, and this wasn’t it,” she said.

Cannon, 63, has been barred from future government contracting work and has agreed to pay a $40,000 fine in a separate civil case. In that federal whistleblower case, which names Cannon, the Justice Department alleges that Gallup inflated its cost estimates and work hours for three federal agencies.

The whistleblower case resulted when a former Gallup employee approached the Justice Department alleging that he witnessed the company repeatedly inflate its prices. The former employee also accused Gallup of promising a job to Cannon while the FEMA official was helping expand the company’s contract.

Standing at the courtroom lectern Tuesday, Cannon apologized to his family, friends and former federal colleagues for a “lapse in judgment.”

* * *

According to court documents, Cannon was instrumental in getting FEMA to hire Gallup in 2008 to work on improving employee morale in the aftermath of Hurricane Katrina. Soon after requesting additional funding for Gallup’s contract, Cannon formally interviewed with the company and eventually received an offer letter for a six-figure salary.

When Cannon announced his retirement in early 2009, he did not list his employment arrangement with Gallup in a financial disclosure report as he was required to do. Gallup pulled the plug on Cannon’s employment, however, after a company employee raised red flags because of concerns from people at FEMA.