Drugmakers settle healthcare fraud claims‎ for $421M

Yesterday was a big day for False Claims Act settlements. Abbott Laboratories ($ABT), B. Braun Medical and Roxane Laboratories and their affiliates agreed to pay $421 million to settle False Claims Act allegations, the Department of Justice announced. These settlements resolve claims that the defendants reported false and inflated prices for their drugs knowing that federal healthcare programs relied on these figures to set payment rates. Abbott is paying $126.5 million to resolve the claims; Roxane is paying $280 million; and B. Braun Medical agreed to pay $14,744,000.

The cases involved the average wholesale price that companies report to published national pricing lists as the price of their drugs.  The government uses these same price lists to pay healthcare providers who purchased those drugs for their Medicare and Medicaid patients. However, the government alleges, the AWP reported by these defendants were greatly inflated.  According to Tony West, the DoJ's assistant AG for the Civil Division, the practice within the pharmaceutical industry has been widespread--so much so that AWP was jokingly said to stand for "Ain't What's Paid." Government agencies have been working together to crack down on such healthcare fraud over the last two years, West added. 

Roxane, Bloomberg notes, said it settled the "expensive and disruptive litigation" and "at all times" complied with U.S. laws and regulations. Abbott spokeswoman Adelle Infante told the news service in a phone interview the company continues "to believe that we have complied with all laws and regulations and have entered into this agreement to eliminate the uncertainty associated with continued litigation."

Later in the day, it was announced that Abbott subsidiary Kos Pharmaceuticals agreed to pay more than $41 million to resolve criminal and civil liability arising from conduct relating to its drugs Advicor and Niaspan.

Kos will pay more than $38 million to settle allegations that it offered and paid doctors, other medical professionals, physician groups and managed care organizations, illegal kickbacks in the form of money, free travel, grants, honoraria and other services, in violation of the Anti-Kickback Statute to get them to prescribe or recommend the drugs. In addition, the drugmaker has entered a deferred prosecution agreement and agreed to the filing of a criminal information in U.S. District Court for the Middle District of Louisiana charging the company with one count of conspiracy to violate the Anti-Kickback Statute.

Specifically, two doctors said they would endorse the use of Kos products, including Advicor, for the treatment of cholesterol in exchange for a series of payments. Between January 2002 and June 2006, one of the doctors wrote 4,130 prescriptions for Kos products, the DOJ notes.

The government has settled similar cases with drug companies recently. For example, the Wall Street Journal notes, in 2007, Bristol-Myers Squibb paid $515 million to resolve a broad set of allegations, including claims it exaggerated the price of its products to secure inflated federal reimbursements.

- check out the DoJ release
- get the DoJ release on Kos
- read West's remarks
- get more from Bloomberg
check out the WSJ's coverage