WASHINGTON—Abbott Laboratories Inc., B. Braun Medical Inc. and Roxane Laboratories Inc., though Boehringer Ingelheim Roxane Inc. and affiliated entities, have agreed to pay $421 million to settle False Claims Act allegations, the U.S. Justice Department announced on Dec. 7.
These settlements resolve claims by the United States that the defendants engaged in a scheme to report false and inflated prices for numerous pharmaceutical products knowing that federal healthcare programs relied on those reported prices to set payment rates. The actual sales prices for the products were far less than what defendants reported, according to the Justice Department.
The difference between the resulting inflated government payments and the actual price paid by healthcare providers for a drug is referred to as the “spread.” The larger the spread on a drug, the larger the profit for the healthcare provider or pharmacist who gets reimbursed by the government, according to the Justice Department.
The government alleged that Abbott, Roxane and Braun created artificially inflated spreads to market, promote and sell the drugs to existing and potential customers. Because payment from the Medicare and Medicaid programs was based on the false inflated prices, the government alleged that the defendants caused false claims to be submitted to federal healthcare programs, and as a result, the government paid millions of claims for far greater amounts than it would have if Abbott, B. Braun and Roxane had reported truthful prices.
Roxane is paying $280 million to resolve claims against it and related entities: Roxane Laboratories Inc., Boehringer Ingelheim Corp. and Boehringer Ingelheim Pharmaceuticals Inc. The United States intervened and filed suit against Roxane on Jan. 18, 2007. The United States alleged that Roxane reported false prices for the following drugs: Azathioprine, Diclofenac Sodium, Furosemide, Hydromorphone, Ipratropium Bromide, Oramorph SR, Roxanol, Roxicodone and Sodium Polystyrene Sulfonate.
Abbott is paying $126.5 million to resolve the claims against it in two qui tam cases. In the first, the United States intervened and filed suit against Abbott in May 2006. This case initially was filed in the Southern District of Florida before being transferred for pre-trial proceedings to pending multi-district litigation in the District of Massachusetts. In this case, the United States alleged violations by Abbott of the False Claims Act with respect to its pricing of dextrose solutions, sodium chloride solutions, sterile water and vancomycin. Dextrose solutions, sodium chloride solutions and sterile water are generic, water-based solutions primarily used to facilitate the intravenous infusion or injection of other drugs. Vancomycin is a powerful, intravenous antibiotic. The second lawsuit was filed by a whistleblower, and involved Abbott’s pricing of the drug erythromycin, an oral antibiotic.
B. Braun Medical Inc., a U.S. subsidiary of German pharmaceutical company, B. Braun Melsungen AG, has agreed to pay $14,744,000 to resolve allegations that it caused the Medicaid program to pay inflated amounts for 49 of its drug products. These products included water-based solutions used to facilitate the intravenous infusion of other drugs and for fluid replacement, including dextrose solutions, sodium chloride solutions, sterile water and lactated ringers solution. They also included intravenously administered nutritional solutions and a variety of other intravenously administered drugs.
“With these settlements, the Department of Justice has now recovered more than $1.8 billion from pharmaceutical manufacturers arising from similar unlawful drug pricing schemes. By offering their customers one price and then falsely reporting a greatly inflated price to the lists the government uses when determining how much to pay for the drugs, we believe pharmaceutical companies created an incentive for the purchase of their drugs, since buyers could obtain government payment at the inflated price and pocket the difference,” said Tony West, Assistant Attorney General for the Justice Department’s Civil Division. “Taxpayer-funded kickback schemes like this not only cost federal healthcare programs millions of dollars, they threaten to undermine the integrity of the choices health care providers make for their patients.”
The settlements resolve allegations brought by a whistleblower under the qui tam provisions of the False Claims Act. The False Claims Act suits were filed by a Florida home infusion company, Ven-A-Care of the Florida Keys Inc., and its principals. The False Claims Act allows for private persons to file suits to provide the government information about wrongdoing.
Under the statute, if it is established that a person has knowingly submitted or caused others to submit false or fraudulent claims to the United States, the government can recover treble damages and $5,500 to $11,000 for each violation of the statute. If the government is successful in resolving or litigating its claims, the whistle blower who initiated the action can receive a share of between 15 percent to 25 percent of the amount recovered. As part of these settlements, the Ven-A-Care whistleblowers will receive approximately $88.4 million.
