Shire to fork over $350M to settle 'flagrant' Dermagraft kickback claims

Shire will fork over $350 million to settle kickback claims surrounding skin substitute Dermagraft.

Last summer, Shire set aside $350 million to settle federal marketing allegations over skin substitute Dermagraft. Now, the U.S. Justice Department has made that settlement official, citing “flagrant and systemic kickback activity” designed to increase use of the product.

The settlement resolves claims that reps bribed clinics and doctors—including Veterans Administration physicians—to use Dermagraft, using “lavish” dinners, drinks, entertainment and travel. The reps also offered docs medical equipment and supplies, the government says, as well as “unwarranted” payments for “purported speaking engagements” and “bogus” case studies. Cash, credits and rebates also figured in.

The result? Shire and Dermagraft-maker Advanced BioHealing, which the Dublin drugmaker acquired in 2011, “submitted or caused to be submitted to federally-funded health care programs hundreds of millions of dollars of false claims for Dermagraft,” the DOJ says.

It’s one of pharma’s heftiest marketing settlements in recent years, and it’s the largest-ever False Claims Act settlement involving a medical device, the Justice Departments' civil division head, Benjamin Mizer, said in a statement.

Prosecutors are hoping it sends a warning to the rest of the industry. “This lawsuit and today’s historic settlement demonstrate our office’s vigilant and ongoing efforts to safeguard federal health care program beneficiaries from the effects of such illegal and deplorable conduct,” U.S. Attorney A. Lee Bentley III for the Middle District of Florida said in a statement.

Meanwhile, Shire—which sold off its Dermagraft assets early in 2014—has found itself here before, though for a fraction of the fine. In September 2014, the Shire paid $56.5 million to put to rest allegations that the company marketed ADHD star Vyvanse for unapproved uses and made unsupported claims about the med’s use—that it would prevent car accidents, divorce, arrests and unemployment, for example.