In July 2022, the United States, Massachusetts, and Connecticut settled a False Claims Act case that our client brought against BioReference Health, LLC. BioReference is one of the largest clinical laboratories in the United States. The case alleged that BioReference paid kickbacks to physicians to induce referrals for its laboratory tests.
In announcing the settlement, United States Attorney Rachael S. Rollins said:
Medical decisions by doctors should be based on what is best for each patient, not a doctor’s personal financial interest. When companies violate the federal health care laws that are meant to protect patients, health care costs for hard working people increase. We will continue to find fraud and use the False Claims Act to make companies that break the law pay back the taxpayers they defrauded as well as pay a financial price for their misconduct.
Under the terms of the False Claims Act settlement, the defendants will pay $10 million, plus interest. BioReference also has entered into a Corporate Integrity Agreement with the HHS Office of Inspector General (HHS-OIG).
The government alleged that BioReference induced physician practices to send their laboratory business to BioReference by paying them above-market rent. The payments were for BioReference to lease space for its Patient Service Centers (“PSCs”). PSCs are locations where BioReference collects patients’ blood samples for testing. These excessive lease payments violated the Physician Self-Referral Law (commonly known as the Stark Law) and the Anti-Kickback Statute (“AKS”). As the United States Attorney’s Office explained in its press release, “Both the Stark Law and the Anti-Kickback Statute are intended to ensure that physicians’ medical judgments are not compromised by improper financial inducements.” Because of these improper payments, BioReference submitted or caused the submission of false claims for payment to federal healthcare programs.
Defendants admitted that, for several years, BioReference made lease payments to physicians and physician practices that exceeded fair market value. Defendants further admitted that, in deciding whether to open, maintain, or close PSCs, BioReference analyzed referrals from nearby healthcare providers. Significantly, BioReference considered referrals from many of the physician-lessors who received excessive rent payments. Finally, defendants conducted internal audits between 2017 and 2019 that identified excessive lease payments to some physician-lessors. However, they failed to report or return any overpayments to government health care programs.
Our client provided government prosecutors with information about the alleged fraud. In 2019, we filed a qui tam complaint under federal and state False Claims Acts. Under the False Claims Act, a private citizen (known as a “relator”) who suspects or knows of fraud against the government can act as a whistleblower and file a sealed complaint on behalf of the government. For successful cases, the government pays a share – between 15% and 30% – to the relator. In this case, our client will receive 17 percent of the recovery.
In DOJ’s press release, the Federal Bureau of Investigation thanked our client, stating:
Laboratories that scheme to enrich their businesses through health care fraud—such as by paying kickbacks—drive up health care costs for everyone. This settlement shows how seriously the FBI takes its responsibility to weed them out, and we’d also like to thank the whistleblower in this case for helping us ensure these entities are held accountable.
-Joseph R. Bonavolonta, Special Agent in Charge of the FBI Boston Division
As this case illustrates, whistleblowers are a critical part of fraud enforcement. Last year, according to DOJ, qui tam cases resulted in over $1.6 billion in False Claims Act recoveries. DOJ noted in announcing this settlement that the False Claims Act is one of government’s most powerful tools to combat healthcare fraud.
The Whistleblower Law Collaborative LLC, based in Boston, devotes its practice entirely to representing clients nationwide in bringing actions under the federal and state False Claims Acts and other whistleblower programs. Among the firm’s many successes is a $234 million settlement earlier this year with Mallinckrodt under federal and state False Claims Acts for Medicaid rebate fraud.
In October, 2022, the United States settled a False Claims Act case brought one of our clients against DermaTran Health Solutions, LLC, a compounding pharmacy based in Rome, Georgia, its parent State Mutual Insurance Company, President Delos Yancey, and other defendants. Under the Agreement, Defendants agreed to pay over $6.87 million to resolve allegations that they violated the False Claims Act by waiving copays, charging the government higher prices than permitted, and trading federal healthcare business with other pharmacies.
As alleged in our Complaint,Yancey caused State Mutual Insurance subsidiaries to bankroll DermaTran Health Solutions, LLC, to sell “compounded” pain creams. Compounded drugs are drugs created by a pharmacy pursuant to a doctor’s order. These are often described as “custom” made formulations, but the vast majority of DermaTran’s compounds consisted of a very few formulations. Another State Mutual Insurance Company subsidiary named Pharmacy Insurance Administrators, LLC (“PIA”), was created to handle the billing for DermaTran.
Compound pain creams were very lucrative. Government-backed health insurance programs such as TRICARE (for the military) and the Federal Employees Health Benefits Program (for federal workers) would often reimburse thousands of dollars for these prescriptions. But the government programs imposed certain restrictions to limit spending. Most notably, these programs require that pharmacies charge them no more than the “usual and customary price”—or the price it would charge to cash-paying, uninsured patients.
In the interests of profit, the defendants ignored these restrictions. For example, they would represent to TRICARE that the hundreds or thousands of dollars they charged veterans was the “usual and customary” price for that drug. However, defendants regularly, and often the same day, sold the exact same prescription for as little as $30 when a patient’s insurance would not pay. Similarly, defendants utilized various schemes to avoid charging copays to patients to make them indifferent to the high prices they charged insurers. In some instances, DermaTran sales personnel offered and paid kickbacks to doctors to induce them to write prescriptions to the pharmacy.
Eventually, insurers began to terminate DermaTran from their networks. To keep the scheme alive, DermaTran, began transferring prescriptions to other pharmacies which kicked back part of the proceeds to DermaTran. Three other pharmacies, also named as defendants, participated in this prescriptions-trading scheme and settled claims: Legends Pharmacy (in Texas), Lake Side Pharmacy (in Alabama), and TriadRx (in Alabama).
Under the terms of the False Claims Act settlement, PIA contributed $6.5 million plus interest to the settlement. It also paid damages to our client for retaliating against her, which is illegal under the FCA.
DermaTran was sold to a third-party, the proceeds of that sale were also turned over to the government as part of the settlement. Legends Pharmacy will pay $59,293. TRIAD Rx, Inc. will pay $166,547. Lake Side Pharmacy is no longer in business, but former owners of Lake Side Pharmacy will pay $110,724.
The affected Government Agencies praised the settlement and thanked our client for coming forward:
Waiving copays and charging the government higher prices leads to overutilization and costs federal programs millions of dollars in unnecessary spending, Our office will continue to enforce the False Claims Act to recover government payments that result from such misconduct.
Northern District of Georgia U.S. Attorney Ryan Buchanan.
Health care fraud abuse like this case erodes the trust patients have in the health care system, the FBI will not stand by when there are allegations of companies operating corporate wide schemes to illegally line their pockets.
Keri Farley, Special Agent in Charge of FBI Atlanta.
Fraud through compounding pharmacies bilked billions out of TRICARE and undermined the integrity of our healthcare system designed to care for our service members and their families, I appreciate the partnership among involved law enforcement agencies and the U.S. Attorney’s Office to bring this matter to justice.
Cynthia Bruce, Special Agent in Charge of the Department of Defense, Office of Inspector General, Defense Criminal Investigative Service (DCIS).
The OPM OIG has no tolerance for businesses that knowingly take advantage of FEHBP, violating the rules to make a profit, I am extremely proud of the hard work of our investigators, analysts, and other law enforcement partners because overcharging the government is not a victimless crime – it contributes to higher premium prices and harms the financial integrity of the FEHBP.
Amy K. Parker, Special Agent in Charge, OPM OIG.
The U.S. Postal Service, Office of Inspector General, will continue to tirelessly investigate those who commit frauds against federal benefit programs and the U.S. Postal Service. This settlement is a clear message that the USPS OIG is dedicated to rooting out corruption and bringing to justice those responsible for these crimes, The USPS OIG would like to thank our law enforcement partners and the Department of Justice for their efforts in this investigation.
Special Agent in Charge Matthew Modafferi of the U.S. Postal Service, Office of Inspector General Northeast Area Field Office.
Health care providers that try to boost their profits by submitting fraudulent claims to Federal health care programs threaten the integrity of those programs and drive up prices for everyone, we work tirelessly alongside our law enforcement partners to protect the integrity of Federal health care programs and to ensure the appropriate use of taxpayer dollars.
Tamala E. Miles, Special Agent in Charge with the U.S. Department of Health and Human Services Office of Inspector General.
Our client was hired by State Mutual Insurance Company to provide accounting services for Dermatran. While there, she repeatedly expressed concerns about the practices she witnessed. However, after being repeatedly ignored by her employers she approached our firm to ask for assistance in providing government prosecutors with information about the alleged fraud. In 2017, we filed a complaint under the federal False Claims Act.
Under the False Claims Act, a private citizen (known as a “relator”) who suspects or knows of fraud against the government can act as a whistleblower and file a sealed complaint on behalf of the government. If the case is successful, the relator is entitled to a share – between 15% and 30% – of the government’s recovery.
In this case, our client will receive $1,434,775 or nearly 21% of the funds received by the government in addition to a payment from defendants as compensation for their retaliation against her.
The process of this suit was long, stressful and sometimes scary – but it was necessary. When you see people in business who take advantage of the system, without regard to the harm it causes to veterans, hard-working citizens, and taxpayers, you can’t stand by silently. I am grateful to my amazing legal team, for standing by my side throughout.
As this case illustrates, whistleblowers are a critical part of fraud enforcement. Last year, according to DOJqui tam cases resulted in over $1.6 billion in False Claims Act recoveries. The False Claims Act is one of the government’s most powerful tools to combat health care fraud.
Whistleblower Law Collaborative LLC attorney David W. S. Lieberman praised the outstanding work of Assistant U.S. Attorneys Anthony DeCinque, Neeli Ben-David, and Armen Adzhemyan. “This was an extremely complex fraud, but the attorneys in the Northern District of Georgia worked hand in glove with relator to understand the scheme and bring the case to a successful resolution.”
WLC attorneys Bruce Judge and Suzanne Durrell added their appreciation for WLC’s courageous client who sounded the alarm on this important issue. “Our client could easily have kept silent about the fraud she witnessed, but she did the right thing and came forward to tell the government about a serious fraudulent scheme that was draining millions from veterans and other vulnerable patients. We view this settlement as a clear vindication of her difficult choice to come forward.”
The Whistleblower Law Collaborative is also grateful for the assistance provided by our co-counsel, Julie Bracker and Jason Marcus of Bracker and Marcus and Joshua Russ and Allison Cook of Reese Marketos.
CleanSlate, a nationwide chain of opioid treatment centers paid $6 million to partially settle a False Claims Act case. The case, originally brought by a client of Whistleblower Law Collaborative LLC alleged fraud against Medicaid and Medicare patients. In particular, CleanSlate required expensive urine drug tests at every patient visit. They ran tests regardless of medical necessity. Moreover, these tests were always directed to CleanSlate’s own clinical laboratory. The defendants also illegally backdated prescriptions.
CleanSlate owns and operates opioid treatment centers in Massachusetts, Indiana, and around the country. At these centers, individuals receive medication-assisted treatment for substance use disorders. Locations in Massachusetts include Athol, Boston, Falmouth, West Springfield, and Worcester. Additionally, CleanSlate operates a clinical laboratory in Holyoke where it performs drug tests for its patients.
In addition to paying $6 million to settle the case, CleanSlate Centers and its founder and former Chief Executive Officer will enter into an independent compliance program.
CleanSlate is settling allegations originally filed by our client under the whistleblower (or qui tam) provisions of the federal, Massachusetts, and Indiana False Claims Acts. In October 2020, the Massachusetts Attorney General intervened in the False Claims Act case against CleanSlate. In October 2021 a federal judge rejected CleanSlate’s bid to dismiss the case. This settlement resolves only the allegations relating to Massachusetts, but the parties have announced that they have reached a settlement in principle to resolve the remaining False Claims Act and retaliation claims.
As previously explained, our client alleged that CleanSlate and its founder required expensive urine drug tests at every patient visit. They ran tests regardless of medical necessity. These tests were always directed to CleanSlate’s own clinical laboratory. The defendants also illegally backdated prescriptions.
The Massachusetts Attorney General’s Office, through its Medicaid Fraud Control Division, took the lead in investigating our client’s allegations. The investigation led to the Commonwealth filing a Complaint in Intervention in our client’s case. That lawsuit had three core allegations.
This settlement is the “first of its kind” under the Massachusetts clinical laboratory anti-self-referral law originally enacted in 2014. The anti-self-referral law (MGL Chapter 111D, Section 8 (17) and Section 8A), prohibits referrals between clinical laboratories and any entity with a direct or indirect ownership interest in the laboratory and vice versa. State law also prohibits a laboratory from testing any specimen from an entity it owns. The related federal settlement similarly covers allegations under the federal anti-self-referral law known as the Stark law. The company’s policies directed clinicians at CleanSlate to refer laboratory work to its own Holyoke laboratory. These policies therefore violated federal and state self-referral statutes. CleanSlate’s founder owned both the clinic and laboratory in Massachusetts and developed the policies directing the self-referrals.
Defendants agreed to pay $3.2 million to Massachusetts Medicaid (known as MassHealth). Additionally, they will pay $1.3 million to the Medicare program for patients in Massachusetts and another $736,000 for patients in other states. They will also pay $170,000 to the state of Indiana. CleanSlate will also enter into a compliance program with annual audits reported to the Massachusetts Attorney General’s Office.
Our client, a former Divisional Medical Director, identified numerous troubling lapses of care. These include instances in which tests revealed use of drugs of abuse, indicative of significant relapse. However, these tests did not result in any change in care, or even acknowledgment by the responsible practitioners. In one particularly tragic case, Defendants’ policies led to the abandonment of a patient who lost their insurance and relapsed. Ultimately, this patient overdosed and died.
Our client brought CleanSlate’s fraud to the attention of the government by filing a qui tam complaint under the False Claims Act. Under the False Claims Act, a private citizen (known as a “relator”) who suspects or knows of fraud against the government can act as a whistleblower and file a sealed complaint on behalf of the government. If the case is successful, the relator is entitled to a share – between 15% and 30% – of the government’s recovery.
“Our client is pleased with the settlement and grateful to the Massachusetts Attorney General’s Office for their diligent pursuit and now settlement of her case,” said David W. S. Lieberman, who along with Suzanne E. Durrell and Bruce C. Judge, represents the Relator.
As we face a worsening opioid crisis in Massachusetts, it’s important that treatment centers follow the rules and not cut corners to increase their bottom line. Our resolution with CleanSlate will bring millions of dollars back to the state and implement the oversight needed to protect patients and prevent these violations from happening again. We are grateful to our federal partners for their work to help bring accountability in this case, and to the whistleblower for bringing these issues to our attention.
-Attorney General Maura Healey
This landmark case was the largest False Claims Act recovery of 2018. AmerisourceBergen Corporation, one of the nation’s largest wholesale drug companies, paid $625 million to settle claims under the False Claims Act. In a related settlement, one of its subsidiaries paid a $260 million criminal fine. The settlements involved AmerisourceBergen’s illegal repackaging of injectable drugs into pre-filled syringes at an unlicensed facility to profit from the “overfill” contained in the vials.
The combined $885 million settlement is one of the largest pharmaceutical settlements in history. AmerisourceBergen also entered into a Corporate Integrity Agreement with HHS OIG. In addition, AmerisourceBergen shuttered the unlicensed facility in 2014 as a result of the investigation.
AmerisourceBergen’s scheme centered on drugs treating cancer or the side effects of cancer treatments. Federal law requires that injectable drug vials contain a small amount of extra drug product, called overfill, to ensure that patients receive a full dose.
AmerisourceBergen operated a subsidiary in Alabama that it falsely told the government was a pharmacy. The defendants used the facility to open sterile vials of cancer drugs, pool the contents, and repackage the drugs into pre-filled syringes. The facility ignored safety protocols, called “current good manufacturing practices” (or “cGMPs”), required by the FDA.
AmerisourceBergen’s overfill scheme essentially allowed it to sell more doses than it purchased. It then used the “free” doses to offer the syringes to physicians at a discount. Consequently, patients unwittingly obtained adulterated and contaminated cancer drugs. These drugs included Procrit®, Aloxi®, Kytril®, and its generic form granisetron, Anzemet® and Neupogen®.
Drug manufacturers and repackagers have a duty to ensure the safety and proper handling of the drugs they distribute. However, by bypassing the FDA’s requirements and falsely holding itself out as a “pharmacy,” the subsidiary shipped unapproved drug forms. This also compromised critical information for doctors and patients. The unlicensed facility is now closed.
The Alabama-based subsidiary, which prosecutors say AmerisourceBergen had falsely told physician clients was a pharmacy, produced thousands of syringes daily, and eventually more than one million a year. The syringes were sold throughout the U.S., prosecutors said.
The scheme enabled the company to bill multiple health-care providers for the same vial of drug, causing some of them to bill the federal government more than once for the same vial. It also enabled the company to increase its market share by offering various discounts.
Samuel Rubenfeld and Micah Maidenberg, Former AmerisourceBergen Exec Blew Whistle That Led to Settlement, Wall Street Journal (October 2, 2018)
Our client, Michael Mullen, was the first relator to file a qui tam suit against AmerisourceBergen under the federal False Claims Act and state false claims acts. Mr. Mullen was the former chief operating officer of a subsidiary of AmerisourceBergen. As a result, he learned that the company was operating an unlicensed facility that it called a “pharmacy” outside the regulatory oversight of the U.S. Food and Drug Administration (FDA).
He then alerted law enforcement of his concerns after vetting his claims with whistleblower lawyers.
The credentials and experience of this team are exceptional. It was obvious that they have extraordinary credibility with the both the government and other counsel. What sets them apart is that they also are thoughtful, decent, friendly, smart people who welcomed and engaged me as a valued member of the team. They prefer to collaborate and play well with others but are equally effective when a tougher approach or litigation is called for. This is a fine, trustworthy group of attorneys who are committed to doing the right thing.
– Mike Mullen
Mr. Mullen’s inside knowledge played an instrumental role in the $625 million civil False Claims Act settlement. This resolved issues that the overfill scheme caused false and fraudulent claims to government health care programs. The claims were false and fraudulent because they included unapproved and adulterated cancer drugs, double-billing from exploiting overfill, and kickbacks to physicians. As a result, AmerisourceBergen was liable under the False Claims Act for causing physicians to submit the false and fraudulent claims.
Mr. Mullen’s whistleblowing was also critical in the federal government’s criminal investigation of the company. The investigation led to AmerisourceBergen Specialty Group, a wholly-owned subsidiary of AmerisourceBergen, pleading guilty to illegally distributing misbranded drugs. The subsidiary also paid $260 million to resolve criminal liability for distributing these drugs from a facility not registered with the FDA. Mr. Mullen provided the government with the first-hand, operational knowledge necessary to detect violations of federal and state laws and force the closure of the unlicensed facility.
Mr. Mullen could have remained silent and continued to accept the lavish compensation packages and perks of corporate life. However, he instead chose to do the right thing. He spoke up to his superiors about the problems he saw. His employer abruptly terminated Mr. Mullen shortly after he blew the whistle. In recognition of the critical role Mr. Mullen’s information and cooperation provided, as well as two later to file relators, federal and state governments awarded a relator’s share of close to $100 million, one of the largest relator share awards under the FCA.
If you know of fraud involving any health care item or service, we urge you to speak with a whistleblower lawyer to weigh your options. We invite you to contact us for a free, confidential, consultation.
In the single largest criminal and civil fraud settlement against a biotechnology company, Amgen Inc. pled guilty to illegally introducing a misbranded drug (Aranesp®) into interstate commerce, paid $150 million in criminal fines and forfeitures, and paid $612 million to resolve claims brought by our client (and other whistleblowers) under the federal and state False Claims Act, for a combined total recovery of $762 million.
Our whistleblower client’s case centered around allegations that Amgen, in manufacturing single use vials of its drug Aranesp, had intentionally manipulated the amount of “overfill” to increase the vial volume beyond that needed to ensure delivery of the labeled dosage. Amgen then encouraged doctors to bill Medicare and Medicaid for the overfill, which typically was more than the indicated or prescribed dose, and thereby increase their reimbursement from government insurers. By providing extra Aranesp in every vial and encouraging doctors to bill insurers – including Medicare and Medicaid and other government programs– for that overfill, Amgen presented an economic inducement for doctors to purchase Aranesp rather than the competing drug Procrit. This scheme constituted a kickback funded unknowingly by the government, and increased Aranesp’s market share and profits. This kind of economic inducement, designed to alter a physician’s medical judgment, violates the federal and Anti‐Kickback laws.
The qui tam case was unsealed by the court in 2009, at which time several States intervened. However, the United States indicated it was “not intervening at that time” but was nevertheless continuing its civil and criminal investigation of the company, an investigation which ultimately resulted in the record settlement. But, this meant that relator and her legal team had to “carry the ball” as the government prosecutors continued to investigate.
The relator, with the assistance of her attorneys, alleged that Amgen (and co-defendant International Nephrology Network (“INN”), a subsidiary of AmerisourceBergen Corporation), had systematically promoted “overfill billing” in order to change doctors’ prescribing patterns. During discovery, documents and deposition testimony confirmed that Amgen, in conspiracy with INN, had used overfill to entice physicians to choose Aranesp based on the promise of increased Medicare and Medicaid reimbursement for the overfill. Five Amgen employees at different levels of the company – from sales representative to National Sales Director – elected to stand on their Fifth Amendment rights against self‐incrimination rather than provide any testimony regarding these practices at Amgen. (When witnesses assert the Fifth in a civil case, a presumption arises that the testimony would be adverse to the party whose interests are aligned with the witnesses.)
After over two years of intense litigation in the trial and appellate courts resulting in four published federal court opinions, the case was scheduled to go to trial in the United States District Court in Boston on October 17, 2011. Just prior to trial, Amgen reached agreement with the United States and the States for a global $762 million criminal and civil settlement. The settlement resolved relator’s case on the eve of trial, as well as other whistleblower suits that had remained under seal while her case was being litigated.
Several co-counsel assisted in the litigation, which was styled as:
This $465 million EpiPen® settlement among the United States, the States, and pharmaceutical companies Mylan Inc. and Mylan Specialty L.P. was the largest False Claims Act settlement of 2017. This case was one of the reasons attorneys Bob Thomas and Suzanne Durrell were named Lawyers of the Year (2017) by the Taxpayers Against Fraud Education Fund. The settlement resolved allegations that Mylan violated the federal and state False Claims Acts by knowingly misclassifying EpiPen®, a branded epinephrine auto-injector drug, as a generic drug, to avoid paying rebates owed to Medicaid.
Our client worked with the government, and in August 2017, just over a year after we filed the qui tam complaint, Mylan entered into the settlement with the United States and the States. The company agreed to pay $465 million to resolve allegations that it violated the False Claims Act. The government contended that it improperly misclassified EpiPen as a generic drug to avoid paying state Medicaid programs the higher rebates for branded drugs, even though EpiPen had no FDA approved therapeutic equivalents and was marketed and priced as a brand name drug. Mylan raised the price of EpiPen by approximately 400% between 2010 and 2016.
Mylan also entered into a five-year Corporate Integrity Agreement with HHS-OIG that requires, among other things, an independent review organization to annually review multiple aspects of the company’s practices relating to the Medicaid drug rebate program. Mylan further agreed that going forward it would properly classify EpiPen®, meaning that the Medicaid program will receive much higher rebates in the future.
The United States Attorney was especially grateful that our client, another pharmaceutical company, chose to be a relator, stating:
“We will continue to root out fraud and abuse to protect the integrity of Medicaid and ensure a level playing field for pharmaceutical companies. We commend Sanofi for bringing this matter to our attention.”