False Claims Act

Massachusetts-based medical device manufacturer Alere Inc. and its subsidiary Alere San Diego (Alere) have agreed to pay the United States $33.2 million to resolve allegations that Alere caused hospitals to submit false claims to Medicare, Medicaid, and other federal healthcare programs by knowingly selling materially unreliable point-of-care diagnostic testing devices, the Justice Department announced.

The United States alleged that Alere knowingly sold materially unreliable rapid point-of-care testing devices marketed under the trade name Triage®.  The Triage® devices aided in the diagnosis of acute coronary syndromes, heart failure, drug overdose, and other serious conditions, and the devices were frequently used in emergency departments where timely decisions are critical to ensuring proper patient care.  According to the government’s allegations, Alere received customer complaints that put it on notice that certain devices it sold produced erroneous results that had the potential to create false positives and false negatives that adversely affected clinical decision-making.  Nonetheless, the company failed to take appropriate corrective actions until FDA inspections prompted a nationwide product recall in 2012.  Of the $33.2 million to be paid by Alere, $28,378,893 will be returned to the federal government and a total of $4,860,779 will be returned to individual states, which jointly funded claims for Triage devices submitted to state Medicaid programs. 

The settlement with Alere resolves a lawsuit filed under the whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and share in a portion of the government’s recovery.  The civil lawsuit was filed by Amanda Wu, who formerly worked for Alere as a senior quality control analyst.  As part of today’s resolution, Ms. Wu will receive approximately $5.6 million.

The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who take action under the False Claims Act to report fraud committed against the federal and state governments.  We have years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud.  Read more about our expertise in False Claims Act cases and how you can take action.

UPMC Hamot (Hamot), a hospital based in Erie, Pennsylvania – and now affiliated with the University of Pittsburgh Medical Center (UPMC) – and Medicor Associates Inc. (Medicor), a regional physician cardiology practice, have agreed to pay the government $20,750,000 to settle a False Claims Act lawsuit alleging that they knowingly submitted claims to the Medicare and Medicaid programs that violated the Anti‑Kickback Statute and the Physician Self‑Referral Law, the Justice Department announced this week.  Hamot became affiliated with UPMC after the conduct resolved by the settlement occurred.

The Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid, and other federally funded programs.  The Physician Self-Referral Law, commonly known as the Stark Law, prohibits a hospital from billing Medicare for certain services referred by physicians with whom the hospital has an improper compensation arrangement.  Both the Anti-Kickback Statute and the Stark Law are intended to ensure that a physician’s medical judgment is not compromised by improper financial incentives and is instead based on the best interests of the patient.

The settlement resolves allegations brought in a whistleblower action filed under the False Claims Act alleging that Hamot paid Medicor up to $2 million per year under twelve physician and administrative services arrangements which were created to secure Medicor patient referrals.  Hamot allegedly had no legitimate need for the services contracted for, and in some instances the services either were duplicative or were not performed.

The lawsuit was filed by Dr. Tullio Emanuele, who worked for Medicor from 2001 to 2005, under the qui tam, or whistleblower, provisions of the False Claims Act.  The Act permits private parties to sue on behalf of the government when they believe that defendants submitted false claims for government funds and to share in any recovery.  The Act also allows the government to take over the case or, as in this case, the whistleblower to pursue it.  In a March 15, 2017 ruling, the U.S. District Court for the Western District of Pennsylvania held that two of Hamot’s arrangements with Medicor violated the Stark Law.  The case was set for trial when the United States helped to facilitate the settlement.  Dr. Emanuele will receive $6,017,500.

The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who take action under the False Claims Act to report fraud committed against the federal and state governments.  We have years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud.  Read more about our expertise in False Claims Act cases and how you can take action.

The Department of Justice announced that Hyperion Foundation, a Georgia not-for-profit entity (Hyperion), Julie Mittleider, a resident of Georgia and Hyperion’s former President, AltaCare Corporation, a Georgia corporation engaged in nursing home management (AltaCare), Douglas Mittleider, AltaCare’s Chief Executive Officer, and related companies, Long Term Care Services Inc. and Sentry Healthcare Acquirors Inc., have agreed to pay the United States a total of $1.25 million to resolve allegations of false claims to Medicare and the Mississippi Medicaid program for providing grossly substandard care to residents at the Oxford Health and Rehabilitation nursing home in Lumberton, Mississippi, from late 2005 through mid-2012, when it was operated by AltaCare, under a contract with Hyperion.

The government alleged that Hyperion made claims to Medicare and Medicaid for providing effectively worthless services to residents at the Lumberton, Mississippi facility, while the facility was managed by AltaCare.  For example, the United States alleged that Hyperion failed to meet the nutritional needs of residents, failed to administer medications to residents as prescribed by their physicians, overmedicated residents, hired insufficient staff to care for them, and diverted Medicare and Medicaid funds to other entities affiliated with Douglas or Julie Mittleider, leaving the facility unable to pay for its basic operations, including food, heat, air conditioning, pest control, and cleaning.  These failures, the United States alleged, caused the facility’s residents to suffer pressure ulcers, falls, dehydration, and malnutrition, among other physical, mental and emotional harms.  As a result, Hyperion allegedly submitted false claims for grossly substandard care, and Douglas Mittleider, AltaCare and certain related companies allegedly caused such false claims.

The settlement resolves allegations filed in a lawsuit by Academy Health Center Inc., the owner and landlord of the Lumberton, Mississippi skilled nursing facility.  The lawsuit was filed under the qui tam provisions of the False Claims Act, which permit private parties to sue on behalf of the government for the submission of false claims and share in any recovery.  The False Claims Act authorizes the United States to intervene and take over primary responsibility for the action, as it did in this case.  The amount to be recovered by the private whistleblower has not been determined.

The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who take action under the False Claims Act to report fraud committed against the federal and state governments.  We have years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud.  Read more about our expertise in False Claims Act cases and how you can take action.

Aegerion Pharmaceuticals Inc., a Cambridge, Massachusetts-based subsidiary of Novelion Therapeutics Inc., has agreed to plead guilty to charges relating to its prescription drug, Juxtapid, the Justice Department announced. 

As charged in a criminal information filed in September, Aegerion introduced Juxtapid into interstate commerce that was misbranded because, among other things, Aegerion failed to comply with a Risk Evaluation and Mitigation Strategy (REMS).  The resolution also includes a deferred prosecution agreement relating to criminal liability under the Health Insurance Portability and Accountability Act of 1996 (HIPAA).  In addition, Aegerion has agreed to settle allegations that it caused false claims to be submitted to federal health care programs for Juxtapid.  Aegerion has agreed to pay more than $35 million to resolve criminal and civil liability arising from these matters.  Aegerion has also agreed to enter into a civil consent decree of permanent injunction aimed at preventing future violations of the Federal Food, Drug, and Cosmetic Act (FDCA).

In a criminal information filed on Sept. 22 in the District of Massachusetts, the United States charged that Aegerion introduced into interstate commerce Juxtapid, a drug that was misbranded under the FDCA.  During this time period, Juxtapid was approved by the U.S. Food and Drug Administration (FDA) to treat patients with homozygous familial hypercholesterolemia (HoFH), a rare disorder, inherited from both parents, that prevents the removal of LDL-C, often called the “bad” cholesterol, from the blood, causing abnormally high levels of circulating LDL-C.  The Juxtapid label carried a black box warning that Juxtapid may cause liver toxicity, a serious side effect of using the drug, and the label also warned that Juxtapid may cause gastrointestinal adverse reactions.  FDA required a REMS, which is a  risk management plan deemed necessary to ensure that a drug’s benefits outweigh its risks, as part of Juxtapid’s approval.  The specific purpose of the Juxtapid REMS was to educate prescribers about the risks of liver toxicity and to restrict access to Juxtapid only to those patients with a clinical or laboratory diagnosis consistent with HoFH.

The information alleges that during the relevant time period, Aegerion failed to give health care providers complete and accurate information about HoFH and how to properly diagnose it, and that Aegerion also filed a misleading REMS assessment report.  According to the information, Aegerion therefore failed to comply with the required elements under the REMS to assure safe use of Juxtapid, in violation of the FDCA.  The information further alleges that Aegerion management and sales personnel distributed Juxtapid not only for the treatment of HoFH, but also as a treatment for high cholesterol generally, without adequate directions for such use.  Under the terms of a plea agreement, Aegerion has agreed to plead guilty to these charges and pay a criminal fine and forfeiture of $7.2 million.

In a deferred prosecution agreement to resolve a felony charge that Aegerion conspired to violate HIPAA, 42 U.S.C. §§ 1320d-6(a) and 1320-6(b)(3), Aegerion admitted that it conspired to obtain patients’ personally identifiable health information, without patient authorization, for commercial gain.  Under the terms of the deferred prosecution agreement, Aegerion will implement enhanced compliance provisions, including periodic certifications to the government concerning its implementation of those provisions.

Under the civil false claims settlement, Aegerion will pay $28.8 million over three years to resolve federal and state civil liability for causing false claims for Juxtapid to be submitted to government health care programs (Medicare, Medicaid, and TRICARE) arising from its promotion of Juxtapid for patients without a diagnosis of, or consistent with, HoFH; false and misleading statements to doctors that the use of Juxtapid was appropriate in patients with symptoms including high cholesterol, irrespective of whether such patients had a diagnosis of HoFH and despite counter-indications to a diagnosis of HoFH; and alteration or falsification of statements of medical necessity and prior authorizations that were submitted to federal health care programs.  The government further alleged that Aegerion defrayed patients’ copayment obligations for Juxtapid, in violation of the Anti-Kickback Statute (AKS), by funneling funds through Patient Services Inc. (PSI), an entity that claimed to be a non-profit patient assistance organization.  The federal share of the $28.8 million civil false claims settlement is $26.1 million and the state portion is $2.7 million. 

As part of the resolution, Aegerion has agreed to enter into a separate civil consent decree to resolve civil liability under the FDCA in connection with its failure to comply with the requirements of the Juxtapid REMS program and its distribution of Juxtapid with labeling that lacked adequate directions for all of Juxtapid’s intended uses.  Aegerion also entered into a Corporate Integrity Agreement (CIA) with the HHS-OIG.  The five-year CIA requires, among other things, that Aegerion implement measures designed to ensure that its promotional activities and any arrangements and interactions with third-party patient assistance programs comply with the law.  In addition, the CIA requires reviews by an independent review organization and compliance-related certifications from company executives and Board members.

The civil false claims settlement resolves a lawsuit filed by Michele Clarke, Tricia Mullins, and Kristi Winger Szudlo, former employees of Aegerion, under the qui tam or whistleblower, provisions of the False Claims Act, which permit private individuals, known as relators, to sue on behalf of the government for false claims and to share in any recovery.  The qui tam suit was filed in the District of Massachusetts and is captioned United States ex rel. Clarke, et al. v. Aegerion Pharmaceuticals, Inc., et al., No. 13-CV-11785 (D. Mass.).  Relators will receive $4.7 million from the federal proceeds of the civil false claims settlement. 

The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who take action under the False Claims Act to report fraud committed against the federal and state governments.  We have years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud.  Read more about our expertise in False Claims Act cases and how you can take action.

Galena Biopharma Inc. (Galena) will pay more than $7.55 million to resolve allegations under the civil False Claims Act that it paid kickbacks to doctors to induce them to prescribe its fentanyl-based drug Abstral, the Department of Justice announced earlier this month.

The United States contends that Galena paid multiple types of kickbacks to induce doctors to prescribe Abstral, including providing more than 85 free meals to doctors and staff from a single, high-prescribing practice; paying doctors $5,000, and speakers $6,000, plus expenses, to attend an “advisory board” that was partly planned, and attended, by Galena sales team members and paying approximately $92,000 to a physician-owned pharmacy under a performance-based rebate agreement to induce the owners to prescribe Abstral. The United States also contends that Galena paid doctors to refer patients to the company’s RELIEF patient registry study, which was nominally designed to collect data on patient experiences with Abstral, but acted as a means to induce the doctors to prescribe Abstral. Galena has not marketed any pharmaceutical drug since the end of 2015.

Two of the doctors who received remuneration from Galena were tried, convicted and later sentenced to prison in the U.S. District Court for the Southern District of Alabama following a jury trial of, among other counts, offenses relating to their prescriptions of Abstral. Galena cooperated in that prosecution.

The settlement resolves a lawsuit filed by relator Lynne Dougherty under the whistleblower provisions of the False Claims Act, which permit private parties to file suit on behalf of the United States and obtain a portion of the government’s recovery. As part of today’s resolution, Ms. Dougherty will receive more than $1.2 million. The matter remains under seal as to allegations against entities other than Galena.

The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who take action under the False Claims Act to report fraud committed against the federal and state governments.  We have years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud.  Read more about our expertise in False Claims Act cases and how you can take action.