Justice Department Recovers Over $3.7 Billion From False Claims Act Cases in Fiscal Year 2017

From The Department of Justice Press Release

The largest recoveries involving the health care industry this past year – over $900 million – came from the drug and medical device industry.  Shire Pharmaceuticals LLC paid $350 million to resolve allegations that Shire and the company it acquired in 2011, Advanced BioHealing (ABH), induced clinics and physicians to use or overuse its bioengineered human skin substitute by offering 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.  In addition to these kickback allegations, the settlement also resolved allegations brought by relators that Shire and ABH unlawfully marketed the skin substitute for uses not approved by the FDA, made false statements to inflate the price of the product, and caused improper coding, verification, or certification of claims for the product and related services.  The settlement included $343.9 million in federal recoveries, and another $6.1 million in recoveries to state Medicaid programs.


In another important case, drug manufacturer Mylan Inc. paid approximately $465 million to resolve allegations that it underpaid rebates owed under the Medicaid Drug Rebate Program by erroneously classifying its patented, brand name drug EpiPen – which has no therapeutic equivalents or generic competition – as a generic drug to avoid its obligation to pay higher rebates.  Between 2010 and 2016, Mylan increased the price of EpiPen by approximately 400 percent yet paid only a fixed 13 percent rebate to Medicaid during the same period based on EpiPen’s misclassification as a generic drug.  Mylan paid approximately $231.7 million to the federal government and $213.9 million to state Medicaid programs.


The department also reported substantial recoveries from other health care providers.  Life Care Centers of America Inc. and its owner agreed to pay $145 million to settle allegations that it caused skilled nursing facilities to submit false claims for rehabilitation therapy services that were not reasonable, necessary, or skilled.  This was the largest civil settlement with a skilled nursing facility chain in the history of the False Claims Act.  The government alleged that Life Care instituted corporate-wide policies and practices designed to place beneficiaries in the highest level of Medicare reimbursement – known as “Ultra High” – irrespective of the clinical needs of the patients, resulting in the provision of unreasonable and unnecessary therapy to many beneficiaries.  Life Care also allegedly sought to keep patients longer than necessary in order to continue billing for rehabilitation therapy.


In addition, eClinicalWorks (ECW) – a national electronic health records software vendor – and certain of its employees paid $155 million to resolve allegations that they falsely obtained certification for the company’s electronic health records software by concealing from its certifying entity that its software did not comply with the requirements for certification.  For example, rather than programming all the required standardized drug codes into its software, the company allegedly “hardcoded” into its software only the drug codes required for testing.  As a result of the deficiencies in its software, ECW allegedly caused physicians who used its software to submit false claims for federal incentive payments.  The United States also alleged that ECW paid unlawful kickbacks to certain customers in exchange for promoting its product.


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