Healthcare Fraud

A settlement has been reached to resolve False Claims Act allegations against McKesson Corporation.

The allegations arose from a lawsuit that claimed McKesson Corporation violated the Controlled Substances Act (CSA).

According to the Department of Justice, allegedly McKesson failed to design and implement an effective system to detect and report “suspicious orders” for controlled substances distributed to its independent and small chain pharmacy customers – i.e., orders that are unusual in their frequency, size, or other patterns. From 2008 until 2013, McKesson supplied various U.S. pharmacies an increasing amount of oxycodone and hydrocodone pills, frequently misused products that are part of the current opioid epidemic.

For example, in Colorado, McKesson processed more than 1.6 million orders for controlled substances from June 2008 through May 2013, but reported just 16 orders as suspicious, all connected to one instance related to a recently terminated customer. 

As part of the settlement, McKesson will have to suspend sales of controlled substances from distribution centers in Colorado, Ohio, Michigan and Florida for several years. The settlement also imposes new and enhanced compliance obligations on McKesson’s distribution system. Additionally, the government and McKesson agreed to enhanced compliance terms for the next five years. Also, McKesson has agreed to specific, rigorous staffing and organizational improvements; periodic auditing; and stipulated financial penalties for failing to adhere to the compliance terms and require to engage an independent monitor to assess compliance.

A settlement has been reached to resolve False Claims Act allegations against MB2 Dental Solutions (MB2) and 21 pediatric dental practices affiliated with MB2, along with their owners and marketing chief.

The allegations arose from a lawsuit that claimed MB2 Dental Solutions knowingly submitted, or caused the submission of, claims for pediatric dental services that were not rendered, were tainted by kickbacks, or falsely identified the person who performed the service.

This settlement resolves allegations that between January 1, 2009, and December 31, 2014, MB2 and affiliated dental practices submitted claims to the Texas Medicaid Fee for Service Program for single-surface fillings in children that were not provided. The settlement also resolves allegations that MB2 paid kickbacks to Medicaid beneficiaries and their families, marketers, and marketing entities, in violation of the Anti-Kickback Statute, and that MB2 and affiliated dental practices used erroneous Medicaid provider numbers misrepresenting the dentists performing the pediatric procedures.

As part of the settlement, five Texas-based MB2 dentists, Christopher Steven Villanueva, Trung Minh Tang, Mauricio Dardano, Gabriel Shahwan and Akhil Reddy have agreed to pay the government $250,000 each to resolve individual claims against them. MB2's marketing head, Frank Villanueva, agreed to pay $100,000 to resolve claims against him.

Furthermore, all five dentists entered into a five year Corporate Integrity Agreement with the Health and Human Services Office of Inspector General, which requires that an independent organization will annually review claims reimbursed by federal health care programs to ensure they were correctly coded and documented and medically necessary.

The whistleblower, a former employee of MB2, Veronica Garcia will receive $1.52 million from the settlement.

A settlement has been reached to resolve False Claims Act allegations against Walgreens Co.

The allegations arose from a lawsuit that claimed Walgreens paid kickbacks to induce beneficiaries of government healthcare programs to fill their prescriptions at Walgreens’ pharmacies.

According to the Department of Justice, Walgreens provided government beneficiaries with discounts and other monetary incentives under the Prescription Savings Club program (PSC), in order to induce them to patronize Walgreens’ pharmacies for all of their prescription drug needs. The Complaint also alleges that Walgreens marketed the program to government beneficiaries and paid its employees bonuses for each customer they enrolled in the program, without verifying whether the customers were government beneficiaries.

As part of the settlement, Walgreens admitted, acknowledged, and accepted responsibility for the following conduct:

• During the period January 1, 2007 through December 31, 2010, Walgreens’ published materials regarding the PSC program stated that persons receiving benefits from the Medicare and Medicaid programs were not eligible to participate in the PSC program.
• In October 2007, Walgreens identified approximately 13,000 PSC program members who it had determined were beneficiaries of the Medicare and Medicaid programs, and it removed those individuals from the PSC program. In an internal news release informing its employees of this removal, Walgreens stated that “any customer who ha[d] any type of 3rd party coverage with a Medicare or Medicaid plan was removed from the [Prescription] Savings Club database,” and that “th[is] removal was necessary to comply with State/Federal regulations.”
• Subsequent to October 2007 and continuing through December 31, 2010, internal Walgreens documents reflect that its stated policy to exclude Medicare and Medicaid beneficiaries from the PSC program was based on, among other things, the prohibition on offering inducements to beneficiaries of government healthcare programs reflected in the federal Anti-Kickback Statute (AKS) and corresponding state anti-kickback laws.
• Notwithstanding its stated policy to exclude Medicare and Medicaid beneficiaries from the PSC program, subsequent to October 2007 and continuing through December 31, 2010, Walgreens enrolled hundreds of thousands of Medicare and Medicaid beneficiaries in the PSC program.
• Between November 2007 and December 31, 2010, Walgreens also enrolled more than 10,000 TRICARE beneficiaries in the PSC program.
• Prior to December 31, 2010, pharmacists at Walgreens’ stores nationwide made tens of thousands of notations in Walgreens’ internal customer database reflecting that specific Medicare, Medicaid, and TRICARE beneficiaries had been enrolled in the PSC program and were using the PSC program to purchase some of their prescription drugs.
• At various times between November 2007 and December 31, 2010, Walgreens paid its employees a bonus of between $1 and $5 for each customer they enrolled in the PSC program. When paying these bonuses, Walgreens did not verify that the customers its employees had enrolled in the PSC program were not government beneficiaries.
• Prior to December 31, 2010, Walgreens did not have effective mechanisms in place to block  government beneficiaries from enrolling in the PSC program or to monitor adequately whether government beneficiaries had been allowed to enroll in the PSC program, to ensure compliance with its stated policy to exclude such beneficiaries from the PSC program. As a result, hundreds of thousands of government beneficiaries were enrolled in the PSC program.
• Subsequent to December 31, 2010, and continuing through December 31, 2015, Walgreens’ internal company policy continued to preclude the enrollment of government beneficiaries in the PSC program, and Walgreens continued to enroll such beneficiaries in the program.

Walgreens will pay approximately $46.21 million to the United States and will pay approximately $3.79 million to resolve the state law civil fraud claims.

A settlement has been reached to resolve False Claims Act allegations against ICP Medical LLC.

The allegations arose from a lawsuit that claimed ICP Medical LLC submitted false claims for medical items to the U.S. Department of Veterans Affairs and Department of Defense.

Allegedly, ICP Medical LLC concealed the Chinese origin of medical supplies and inflated prices. Reportedly, the company obtained products from China that included body bags, gowns, and scrubs, and removed the “Made in China” label from the items and put them in new boxes and added U.S. flag stickers to the packages.

Sourcing goods from China is typically prohibited for government contractors. A contractor can only source goods from the United States or another designated country.

This case was brought forward by a former employee of ICP Medical, under the qui tam or “whistleblower” provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery.

ICP Medical LLC is an infection control and prevention manufacturer serving hospitals and medical facilities in the United States and worldwide. 

A settlement has been reached to resolve False Claims Act allegations against Shire PLC Subsidiaries.

The allegations arose from lawsuits that claimed Shire and Advanced BioHealing (ABH) a company it acquired in 2011, employed kickbacks and other unlawful methods to induce clinics and physicians to use or overuse its product “Dermagraft,” a bioengineered human skin substitute approved by the FDA for the treatment of diabetic foot ulcers.

According to the Department of Justice, the settlement resolves allegations that Dermagraft salespersons unlawfully induced clinics and physicians with lavish dinners, drinks, entertainment and travel; medical equipment and supplies; unwarranted payments for purported speaking engagements and bogus case studies; and cash, credits and rebates, to induce the use of Dermagraft. The Anti-Kickback Statute prohibits, among other things, the payment of remuneration to induce the use of medical devices covered by Medicare, Medicaid and other federally-funded health care programs, including the Department of Veterans Affairs (VA). Claims filed in violation of the Anti-Kickback Statute are considered false or fraudulent under the False Claims Act. In addition, the Anti-Bribery statute and the Federal Acquisition Regulations prohibit bribes to government officials or employees, including VA physicians, to obtain a contract or favorable treatment under a supply contract. The United States alleged that as a result of their violation of these provisions, ABH and Shire submitted or caused to be submitted to federally-funded health care programs hundreds of millions of dollars of false claims for Dermagraft.

Also, the settlement resolved allegations that Shire and its predecessor ABH 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.

“Kickbacks by suppliers of healthcare goods and services cast a pall over the integrity of our health care system. Patients deserve the unfettered, independent judgment of their health care professionals,” stated Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.

The whistleblower shares to be awarded in this case have not yet been determined.

A settlement has been reached to resolve False Claims Act allegations against Forest Laboratories and Forest Pharmaceuticals.

The allegations arose from a lawsuit that claimed Forest Laboratories and Forest Pharmaceuticals paid kickbacks to induce physicians to prescribe the drugs Bystolic, Savella, and Namenda. These drugs are used to treat hypertension, fibromyalgia and Alzheimers.

According to the Department of Justice, this settlement resolves allegations that Forest violated the Anti-Kickback Statute, which prohibits the payment of remuneration to induce referrals of items or services covered by federal health care programs, by providing payments and meals to certain physicians in connection with speaker programs about Bystolic, Savella, or Namenda between January 1, 2008 and December 31, 2011. 

The United States contends that the payments and meals were intended as improper inducements because Forest provided these benefits even when the programs were cancelled (and Forest provided no evidence of a bona fide reason for the cancellation), when no licensed health care professionals attended the programs, when the same attendees had attended multiple programs over a short period of time, or when the meals associated with the programs exceeded Forest’s internal cost limitations.

The federal government will receive $35.5 million and state Medicaid programs will receive $2.5 million. 

The allegation were brought forward by a former Forest employee, Kurt Kroening. Mr. Kroening sued Forest Laboratories and Forest Pharmaceuticals in 2012 under the federal False Claims Act. 

Mr. Kroening is entitled to $7.8 million of the settlement for blowing the whistle.

A settlement reached to resolve False Claims Act Allegations against Dr. Labib E. Riachi of New Jersey, and two companies that he owns and operates, Riachi, Inc and Center for Advanced Pelvic Surgery LLC.

The allegations arose by a lawsuit claiming Dr. Labib E. Riachi and his medical practice companies knowingly submitted millions of dollars in false claims to Medicare and Medicaid for thousands of diagnostic tests that were never performed and for physical therapy services performed by unqualified personnel.

According to the Department of Justice, the defendants routinely billed Medicare and Medicaid for anorectal manometry, an invasive diagnostic test, and electromyography, another diagnostic test, even though most of the tests were never performed. Also, the defendants submitted claims to Medicare for physical therapy services that should not have been paid because they were not performed by a qualified therapist.

Dr. Labib E. Riachi agreed to the $5.25 million monetary settlement over his False Claims Act liability back in February.

The New Jersey physician has not admitted any liability as part of the settlement agreement.

A settlement reached to resolve False Claims Act Allegations against Biocompatibles Inc.

The allegations arose by a lawsuit claiming Biocompatibles Inc misbranded its embolic device LC Bead, which is used to treat liver cancer and other diseases.

LC Bead was approved by the FDA as an embolization device that can be placed in blood vessels to block or reduce blood flow to certain types of tumors and arteriovenous malformations.  LC Bead was never approved by FDA as a drug-device combination product or for use as a drug-delivery device or “drug-eluting” bead.

According to the Department of Justice, Biocompatibles will pay an $8.75 million criminal fine for the misbranding of LC Bead and a criminal forfeiture of $2.25 million.  Biocompatibles told the FDA in 2004, that it would not use FDA clearance for the device for embolization to market the device for drug delivery. Yet, two years later, Biocompatibles began marketing LC Bead for drug delivery through the company it hired to carry out its sales and distribution in the United States.  According to the statement of offense, the distribution company told its sales representatives that LC Bead was “[a] drug-delivery device” and trained its sales representatives to “aggressively penetrate the chemoembolization market.” 

The whistleblowers' share of the settlement will be $5.1 million. 

A settlement reached to resolve False Claims Act Allegations against Life Care Centers of America Inc and its owner Forrest L. Preston.

The allegations arose by a lawsuit claiming Life Care Centers of America Inc and its owner Forrest L. Preston, intentionally caused skilled nursing facilities to submit false claims to Medicare and TRICARE for rehabilitation therapy services that were not reasonable, necessary or skilled.

According to the Department of Justice, between January 1, 2006 and February 28, 2013, Life Care submitted false claims for rehabilitation therapy by engaging in a systematic effort to increase its Medicare and TRICARE billings.  Medicare reimburses skilled nursing facilities at a daily rate that reflects the skilled therapy and nursing needs of their qualifying patients.  The greater the skilled therapy and nursing needs of the patient, the higher the level of Medicare reimbursement.  The highest level of Medicare reimbursement for skilled nursing facilities is for “Ultra High” patients who require a minimum of 720 minutes of skilled therapy from two therapy disciplines (e.g., physical, occupational, speech), one of which has to be provided five days a week. Life Care set up corporate-wide policies and practices designed to place as many beneficiaries in the Ultra High reimbursement level and kept patients longer than was needed in order to continue billing for rehabilitation therapy.

Also, as part of the settlement, Life Care has agrees to a five-year chain-wide Corporate Integrity Agreement with the  Department of Health and Human Services Office of Inspector General that requires an independent review organization to annually assess the medical necessity and appropriateness of therapy services billed to Medicare. 

These claims were brought forward by two former Life Care employees. The whistleblowers' share of the settlement will be $29 million. 

A settlement reached to resolve False Claims Act Allegations against Best Choice Home Health Care Agency Inc and its owner Reginald King.

The allegations arose by a lawsuit claiming Best Choice Home Health Care Agency Inc and its owner Reginald King, paid kickbacks for the referral of Medicaid-covered patients for home and community-based healthcare services from Best Choice.

According to the Department of Justice, from July 1, 2010, through December 31, 2014, Best Choice submitted claims for home and community-based healthcare services to Medicaid that resulted from a kickback arrangement between Reginald King, on behalf of Best Choice and Christopher Thomas, who transported patients from their homes to healthcare facilities in Kansas City.  Reginald King paid Christopher Thomas $58,000 in kickbacks for new patients referred to Best Choice based on a formula which accounted for each hour of service that Best Choice billed to Medicaid.

As part of the $1.8 million settlement, Reginald King and Best Choice will pay the United States $1,011,780 and the state of Kansas $788,220.

The whistleblowers' share of the settlement will be $43,178.