This month, the Department of Justice (“DOJ”) announced that Shire Pharmaceuticals will pay $350 million to settle False Claims Act (“FCA”) allegations that Shire and the company it acquired in 2011, Advanced BioHealing (“ABH”), used kickbacks and other prohibited sales methods to compel hospitals, Doctors, and their firms to overuse its product “Dermagraft.”
Shire is a pharmaceutical company headquartered in Ireland. Its United States headquarters are located in Lexington, Massachusetts.
The allegations resolved by the settlement were brought in six lawsuits filed under the qui tam whistleblower provisions of the FCA. Those provisions permit private parties to sue on behalf of U.S. and state governments for false claims.
“Whistleblowers” may share in any recovery the government may make.
In 2014, Shire entered into a Corporate Integrity Agreement (“CIA”) with the U.S. Department of Health & Human Services (“HHS”) in connection with previous FCA allegations. In 2014, the lawsuit resulting in Shire’s previous settlement netted the government $56.5 million dollars.
Since January 2009, the Department of Justice has recovered a total of more than $31.4 billion through False Claims Act cases, with nearly $19.6 billion of that amount recovered in cases involving fraud against federal health care programs.
The present settlement centers around Dermagraft, a “human skin” substitute approved by the FDA for the treatment of diabetic foot ulcers.
The settlement ends allegations that Shire salespersons unlawfully tried to get clinics and physicians to use their products by supplying them with luxurious dinners, cocktails, entertainment and trips; medical supplies; inappropriate payments for no-show speaking engagements and fake case studies; and cash, credits, and rebates.
The allegations surrounding the Dermagraft fraud center around violations of the Anti-Kickback Statute (“AKS”.) The AKS prohibits, among other things, the payment of anything to improperly induce the use of medical devices covered by Medicare, Medicaid, and other federally-funded health care programs, including the VA’s “Tricare.”
Six whistleblowers filed separate lawsuits with distinct forms of Shire’s fraud. The cases were consolidated into one in the Middle District of Florida.
The allegations constituted violations of the AKS, in addition to the Anti-Bribery statute, and the Federal Acquisition Regulations, which prohibit bribes to government officials or employees to obtain a contract or “favorable treatment” to obtain a contract.
The United States and whistleblowers, or in legalese, “relators,”alleged that as a result of Shire’s violations, the company “submitted to federally-funded health care programs hundreds of millions of dollars of false claims for Dermagraft.”
In addition to the alleged violations of anti-kickback and procurement allegations, the 2017 settlement also resolved allegations that Shire unlawfully marketed Dermagraft for uses not approved by the FDA, made false statements to inflate the price of Dermagraft, and caused “improper coding, verification, or certification” of Dermagraft claims and related services. These schemes are often referred to “off-label promotion” and “up-coding.” They have been frequently used by drug companies to increase profits.
Whistleblowers who bring qui tam False Claims Act cases against companies that commit fraud against the government stand to not only disrupt questionable practices, but often recover significant financial rewards.