whistleblower act

Salix Pharmaceuticals has agreed to pay $54 million to settle allegations that the company violated the federal Anti-Kickback Statute and the False Claims Act by using “speaker programs” as kickbacks to doctors to induce them to prescribe Salix drugs and medical devices, which were then reimbursed by federal health care programs, the U.S. Attorney’s Office of the Southern District of New York announced earlier this month.

The federal government alleges that many of SALIX’s speaker programs for Xifaxan, Apriso, Relistor, MoviPrep, OsmoPrep, Solesta, and Deflux were nothing more than social events at which SALIX wined and dined doctors to induce them to write prescriptions for these products.  These speaker programs included both in-person events (at which both the speaker and the attendees were present in person and the speaker was paid to provide an educational talk on a Covered Product to the attendees using a slide presentation), as well as pre-recorded events (at which a SALIX employee was supposed to use a laptop or other device to play for the attendees a pre-recorded video of a doctor delivering a slide presentation, and then call the paid speaker, who was to be available to answer any questions by telephone). 

The speaker programs, which were typically held in restaurants, were supposed to be educational in nature and the cost of the meal was supposed to be modest.  But in practice, SALIX held many speaker programs that were primarily social in nature, including events where it repeatedly invited the same doctors, who frequently were from the same practice or otherwise knew each other, to attend the same exact program on the same exact topic.  With respect to the pre-recorded programs – which SALIX personnel internally referred to as “doc-in-the-box programs” – the pre-recorded video frequently was not played or was intentionally played in a manner so it could be ignored.  SALIX also held many speaker programs at very expensive, high-end restaurants.

The doctors whom SALIX paid to be speakers and whom SALIX invited to its events were often the high prescribers of its products or were viewed as having the potential to be high prescribers.  Many of these doctors increased their prescription-writing for the Covered Products after becoming speakers and/or repeatedly attending sham speaker programs.  During the Covered Period, SALIX spent approximately $25 million on speaker payments and meals.

In connection with the filing of the lawsuit and settlement, the Government joined two private whistleblower lawsuits that had previously been filed under seal pursuant to the False Claims Act.

The False Claims Act allows private parties with knowledge of fraud against the government to file a whistleblower lawsuit, or a qui tam lawsuit, on behalf of the federal government.  The government may elect to intervene, as it has elected to do here.  The whistleblower is entitled to up to 30 percent of the recovery.  The whistleblower award has not been determined in this case.

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 United States has filed a complaint in the U.S. District Court for the District of Columbia against Guild Mortgage Company, alleging that the company knowingly submitted or caused the submission of false claims to the federal government by improperly originating and underwriting mortgages insured by the Federal Housing Administration (FHA), the U.S. Department of Justice announced last week.  Guild is a mortgage lender headquartered in San Diego, California.

Guild participated in the FHA insurance program as a direct endorsement (DE) lender.  As a DE lender, Guild had the authority to originate, underwrite and certify mortgages for FHA insurance.  If a DE lender such as Guild approves a mortgage loan for FHA insurance and the loan later defaults, the U.S. Department of Housing and Urban Development (HUD), FHA’s parent agency, is responsible for the losses resulting from the defaulted loan.  Under the DE lender program, neither the FHA nor HUD reviews the underwriting of a loan before it is endorsed for FHA insurance.  HUD therefore relies on DE lenders to follow program rules designed to ensure that they are properly underwriting and certifying mortgages for FHA insurance and DE lenders must certify that every loan endorsed for FHA insurance is underwritten according to the applicable FHA standards.

The government’s complaint alleges that Guild knowingly submitted, or caused the submission of, claims for hundreds of improperly underwritten FHA-insured loans.  The complaint further alleges that Guild grew its FHA lending business by ignoring FHA rules and falsely certifying compliance with underwriting requirements in order to reap the profits from FHA-insured mortgages.  For example, Guild allegedly allowed underwriters to waive compliance with FHA requirements when underwriting a loan.  Additionally, Guild used unqualified junior-underwriters who did not have a DE certification to waive mandatory conditions on higher risk loans where HUD required underwriting only by highly trained DE underwriters.

The government’s complaint further alleges that Guild’s senior management focused on growth and profits and ignored quality.  Guild conducted at least 125 branch audits in which almost 40 percent resulted in either a qualified rating or unsatisfactory rating.  A qualified rating was defined as having a “significant number of findings, and/or findings noted that have more serious impact or risk to Guild,” or “Knowledge of procedures and controls; however, they appear to be inefficient.”  An unsatisfactory rating was defined as one where “serious concerns were noted: lack of knowledge, procedures, and/or controls in branch.”  The complaint alleges that, through Guild’s quality control reviews, significant defects were found in over 20 percent of the FHA loans reviewed and over half the loans had either significant or moderate defects.  Significant defects included fraud, misrepresentation and other serious findings while moderate defects included not following guidelines.  However, Guild did not calculate or distribute any error rate during the relevant time period, thus management was not presented with these findings.  Additionally, Guild did not even distribute any of the quality control findings to management.  As a result, Guild management often did not review or remediate findings from quality control audits.  In the quarters where Guild management actually did review quality control findings, it did so almost a year after the loans closed and failed to timely remediate any identified problems.  When Guild finally began addressing the quality of its FHA underwriting, Guild’s head of quality control pointed out the ineffectiveness of its past efforts at addressing loan quality:  “I’m not optimistic about training reminders and individual follow-ups being all that effective.”

The government’s complaint alleges that as a result of Guild’s knowingly deficient mortgage underwriting practices, HUD has already paid tens of millions of dollars of insurance claims on loans improperly underwritten by Guild, and that there are many additional loans improperly underwritten by Guild that are currently in default and could result in further insurance claims on HUD.  For example, the government’s complaint identifies a mortgage loan that was improperly underwritten in violation of HUD requirements, causing the borrower to default and HUD to pay the loss on the loan.  Specifically, Guild failed to verify the borrower’s prior rental payments, overstated the borrower’s income, failed to develop a credit history for the borrower who had no credit score, exceeded FHA’s qualifying debt to income ratio without determining whether certain compensating factors were present, and failed to identify the source of a large deposit made to the borrower’s account.  The underwriter at Guild improperly waived multiple conditions and allowed an unauthorized junior underwriter to do the same for other conditions.  In sworn testimony, the Guild underwriter admitted the loan failed to comply with FHA underwriting requirements.

The lawsuit was brought under the qui tam, or whistleblower, provisions of the False Claims Act by a former employee of Guild.  Under the act, a private party may bring suit on behalf of the United States and share in any recovery.  The government may intervene in the case, as it has done here.  The False Claims Act allows the government to recover treble damages and penalties from those who violate it.

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.

Hollister Inc., a manufacturer of disposable health care products, and Byram Healthcare Centers Inc., a supplier of medical products, have to agreed to collectively pay $20.9 million to resolve allegations that the companies violated anti-kickback legislation that resulted in the submission of false claims to California's Medicaid program, Medi-Cal, the U.S. Department of Justice announced last month.

The settlement with Hollister resolves allegations that it paid kickbacks to Byram in return for marketing promotions, conversion campaigns and other referrals of patients to Hollister’s ostomy and continence care products.  On seven occasions, Hollister allegedly agreed to pay Byram the costs of bonus commissions (sometimes called spiffs) that Byram paid to its sales personnel for each new patient order for a Hollister product.  In addition, Hollister allegedly agreed to pay Byram $200,000 annually for “catalog funding” that was actually intended to induce Byram’s recommendation of Hollister products to patients.  

The settlement with Byram resolves the same catalog funding claims, as well as allegations that Byram received numerous kickbacks from Hollister and three other manufacturers of ostomy and continence care products, namely Coloplast Corp., Montreal Ostomy and Safe N’ Simple, in return for Byram’s agreement to conduct promotional campaigns and to refer patients to the manufacturers’ products.  The settlement with Byram also resolves allegations by the United States and the state of California that Byram submitted falsely inflated claims to the California Medi-Cal program in violation of California’s upper billing limit regulation, Cal. Code Regs., tit. 22, § 51008.1, which limits the amount a provider can bill for certain products.  The United States and the state of California allege that, when Byram billed Medi-Cal for Coloplast urology products that Byram sold to Medi-Cal beneficiaries, Byram knowingly failed to account for substantial discounts that Byram knew, at the time it billed the Medi-Cal program, materially reduced the prices it paid for the products. 

In connection with the False Claims Act settlement, Byram has also entered into a corporate integrity agreement with the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG).

The settlements resolve allegations in a whistleblower lawsuit filed by two former employees and one current employee of Coloplast under the qui tam provisions of the False Claims Act, which allow private parties to bring suit on behalf of the government and to share in any recovery.  The whistleblowers’ share of the Hollister and Byram settlements has not been determined.  Claims against two other defendants in the lawsuit, Coloplast Corp. and Liberator Medical Supply Inc., were resolved in December 2015 for a total of $3.66 million.  The settlements announced today bring the total recovery in the case to $24.6 million.  The whistleblowers are pursuing certain additional claims in the case. 

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.

Pharmaceutical companies Wyeth and Pfizer Inc. have agreed to pay $784.6 million to resolve allegations that Wyeth knowingly submitted or caused the submission of false claims in connection to two of its proton pump inhibitor (PPI) drugs, Protonix Oral and Protonix IV, the U.S. Department of Justice announced earlier this week.  Pfizer, which is headquartered in New York City, acquired New Jersey-based Wyeth in 2009, approximately three years after Wyeth had ended the conduct that gave rise to the settlement.

PPI drugs are used to treat symptoms of, among other things, acid reflux.  The government alleged that Wyeth failed to report deep discounts on Protonix Oral and Protonix IV that it made available to thousands of hospitals nationwide.  As part of the settlement, Wyeth and Pfizer do not deny the government’s allegations.

According to the government’s complaint, Wyeth sold Protonix Oral and Protonix IV through a bundled sales arrangement in which a hospital could earn deep discounts on both drugs if it placed them on formulary and made them “available” within the hospital.  Through this bundled arrangement, Wyeth sought to induce hospitals to buy and use Protonix Oral, which hospitals otherwise would have had little incentive to use, because other pre-existing oral PPI drugs were priced competitively and were considered to be as safe and effective.  Wyeth wanted to control the hospital market because patients discharged from the hospital on Protonix Oral were likely to stay on the drug for long periods of time, rather than switch to competing PPIs, during which time payers, including Medicaid, would pay nearly full price for the drug.

Under the Medicaid program, which is the nation’s provider of health insurance to the poor and disabled, drug companies must report to the government the best prices they offer other customers for their brand name drugs.  Based on these reported best prices, the drug companies pay rebates to the state Medicaid programs so that Medicaid, a large purchaser of drugs, receives the benefit of the same discounts drug companies offer to other large customers in the marketplace.

The government alleged that Wyeth hid from Medicaid the bundled discounts Wyeth gave to hospitals on Protonix Oral and Protonix IV.  As a result, Wyeth wrongfully avoided paying hundreds of millions of dollars in rebates to Medicaid.  Under the terms of today’s settlement, Wyeth will pay $413,248,820 to the federal government and $371,351,180 to state Medicaid programs. 

The settlement resolves allegations filed under the False Claims Act by Lauren Kieff, a former hospital sales representative for the pharmaceutical company AstraZeneca Pharmaceuticals, LP, and William St. John LaCorte, a physician practicing in New Orleans, Louisiana.  Under the False Claims Act, private parties may sue on behalf of the government for false claims for government funds and to receive a share of any recovery.  The relator share in this case will be $98,058,190 and will be paid from the proceeds of the federal and state settlements. 

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.

Respironics Inc. has agreed to pay $34.8 million to resolve allegations that the company knowingly submitted or caused the submission of false claims to state and federal health care programs, the U.S. Department of Justice announced earlier this week.

The United States alleged that Respironics violated the Anti-Kickback Statute and the False Claims Act by providing free services to durable medical equipment (DME) suppliers to induce them to purchase Respironics masks that treat sleep apnea.  Respironics allegedly provided DME companies with call center services to meet their patients’ resupply needs at no charge as long as the patients were using masks that Respironics manufactured; otherwise, the DME companies would have to pay a monthly fee based on the number of patients who used masks manufactured by a competitor of Respironics.

The Anti-Kickback Statute prohibits the knowing and willful payment of any remuneration to induce the referral of services or items that are paid for by a federal healthcare program, such as Medicare, Medicaid or TRICARE.  Claims submitted to these programs in violation of the Anti-Kickback Statute are also false claims under the False Claims Act.

Respironics will pay roughly $34.14 million to the federal government and roughly $660,000 to various state governments based on their participation in the Medicaid program. 

The settlement resolves a lawsuit originally brought by Dr. Gibran Ameer, who has worked for different DME companies, under the qui tam provisions of the False Claims Act.  The Act permits private citizens with knowledge of fraud against the government to bring a lawsuit on behalf of the United States and to share in any recovery.   Under the civil settlement announced today, Dr. Ameer will receive $5.38 million out of the federal share of the recovery.

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.