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DaVita Reaches Settlement for Intentionally Wasting Medicine to Receive Higher Reimbursements

Toviaz-Off-Label-PromotionIn the largest False Claims Act settlement in which the government did not intervene, DaVita Healthcare Partners has come to an agreement to pay the government $450 million. The false claims lawsuit involved DaVita’s largest division, DaVita Kidney Care. The division was accused of intentionally wasting medicine in order to defraud federal healthcare programs out of millions of dollars. This settlement concludes the false claims act cases that DaVita has defended in the past years, paying out nearly $1 billion to settle the three whistleblower lawsuits.

Two former DaVita employees, Dr. Alon Vainer and Daniel Barbir, filed the false claims act lawsuit in 2011. The whistleblowers alleged that DaVita dialysis clinics routinely overbilled Medicare and Medicaid between 2003 and 2010. The whistleblowers noticed that the clinicians would use partial vials of the drugs Epogen, Venofer and Zemplar and would dump the rest of the vial in the trash. The doctors would then bill the government for the entire vial. For example, if a patient required 45 milligrams of a medication, the doctors would use the necessary amount from a 100 mg vial and throw out the remainder, while federal healthcare programs would be billed for the entire vial. DaVita used larger than necessary vials of medicine knowing that the company would just bill the entire vial to Medicare if the unused portion were deemed unavoidable waste. In this scheme, Medicare and Medicaid paid for more pharmaceuticals than were actually dispensed.

In 2001, the National Centers for Disease Control and Prevention (CDC) recommended against allowing multiple uses of the same vial based on infection outbreaks. However, a year later this policy was changed and re-entry of single-use vials were again allowed if procedures were followed. DaVita failed to follow updated CDC protocol for administering medications. The company chose not to update its protocol to align with the CDC’s policy in order to receive higher reimbursements from federal healthcare programs. Clinics could make a profit because Medicare would reimburse slightly more than the clinics paid to buy the drugs. Medicare has since changed its policies of reimbursing clinics separately for the drugs they use. In 2011, in order to deter the overuse of drugs, Medicare implemented a new system in which the program would only pay a fixed amount per treatment. If the clinic can treat the patient for less than the amount paid by Medicare, it would make money; if not, it would lose money.

The case was brought in Atlanta, Georgia by two whistleblowers. The plaintiffs were former employees of DaVita. Alon Vainer is a licensed nephrologist who has worked in dialysis in Georgia. He had worked as a medical director at various Gambro and DaVita clinics. His position was not renewed after the company learned he had filed the lawsuit. Daniel Barbir, the second whistleblower, is a registered nurse in Georgia. He served as director of a dialysis clinic that was owned by Gambro (a major dialysis chain acquired by DaVita in 2005) from 2000 to 2006. Barbir resigned in 2006 after complaining about the practices.

Vainer and Barbir originally filed their lawsuit under the False Claims Act in 2007. The government conducted a two-year investigation into their allegations, but ultimately declined to intervene. After learning of the government’s decision, the whistleblowers amended their complaint and filed a civil suit. As per the terms of the settlement, DaVita will pay the government $450 million. The company will also pay $45 million to cover court and attorney fees. It is not yet clear how much each whistleblower will receive. They could be eligible to receive up to $135 million of the settlement. If the case had gone to trial, the jury could have forced the company to pay up to $10,000 for each false claim, or every instance in which the contents of a vial were wasted.

Whistleblowers are less likely to win False Claims Act cases when the government declines to intervene. The recent success of Mr. Vainer and Mr. Barbir demonstrates the growing success among plaintiffs who choose to carry on the suit alone. The whistleblowers in the present case have received the largest settlement to date on a false claims act case in which the government chose not to intervene. The previous record for a false claims act case in which the government declined to intervene was a settlement of $125 million.