Pharmaceutical Manufacturer to Pay $280 Million to Settle False Claims Act Case

Pharmaceutical Manufacturer to Pay $280 Million to Settle False Claims Act Case

WASHINGTON – Dey Inc., Dey Pharma L.P. (formerly known as Dey, L.P.) and Dey L.P. Inc. have agreed to pay $280 million to settle False Claims Act allegations, the Department of Justice announced today.   This settlement resolves 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 health care programs relied on those reported prices to set payment rates.   The actual sales prices for the Dey products were far less than what Dey reported.   

The United States alleged that Dey reported false prices for the following drugs:   Albuterol Sulfate, Albuterol MDI, Cromolyn Sodium and Ipratropium Bromide.   The difference between the resulting inflated government payments and the actual price paid by health care providers for a drug is referred to as the “spread.”  The larger the spread on a drug, the larger the profit for the health care provider or pharmacist who is reimbursed by the government.  The government alleges that Dey 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 Dey caused false and fraudulent claims to be submitted to federal health care programs and, as a result, the government paid millions of claims for far greater amounts than it would have if Dey had reported truthful prices.

This is the fourth such settlement with pharmaceutical manufacturers that the Department of Justice has announced this month.   On Dec.7, 2010, the Department announced settlements totaling $421.1 million involving similar allegations against three other manufacturers: Abbott Laboratories Inc., B. Braun Medical Inc. and Roxane Laboratories Inc.  

“With this settlement, the Department of Justice has now recovered over $2 billion dollars from pharmaceutical manufacturers arising from similar unlawful drug pricing schemes.  As the department alleged in its complaint against Dey, by offering customers one price and then falsely reporting inflated prices to the lists the government uses when calculating how much to pay for the drugs, pharmaceutical companies created an incentive for the purchase of their drugs by allowing buyers to pocket the difference between the actual price of the drug and the inflated government payment,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice.  “ Taxpayer-funded kickback schemes like this not only cost federal health care programs millions of dollars, they threaten to undermine the integrity of the choices health care providers make for their patients.”  

  

United States Attorney Carmen M. Ortiz of the District of Massachusetts said, “Our federally-funded health care programs pay for prescription drugs based in part on pricing information reported by pharmaceutical companies.  When a company reports falsely inflated prices for the purpose of increasing its sales and profits, it undermines the integrity of our health care system.  Drug companies must understand that they risk substantial liability if they report false drug pricing information.”

The settlement resolves a whistleblower action filed under the False Claims Act by Ven-A-Care of the Florida Keys Inc., a Florida home-infusion company, and its principals, entitled United States of America ex rel. Ven-a-Care of the Florida Keys   Inc. v.   Dey Laboratories, et al., Civil Action No. 05-11084-PBS (D. Mass).   The False Claims Act’s qui tam provisions allow private persons with knowledge of fraud to file suit on behalf of the United States and share in any recovery.   As part of this settlement, the Ven-A-Care whistleblowers will receive a share of approximately $67.2 million.

“This settlement with Dey highlights the Office of the Inspector General’s decade-long commitment to protecting against artificially inflated drug prices,” said Daniel R. Levinson, Inspector General of the Department of Health & Human Services.  “Our analyses of drug price reporting practices – including the use of ‘Average Wholesale Price’ – have consistently identified excessive Medicare and Medicaid payments resulting from these practices.”

The case was handled by the Justice Department’s Civil Division, the U.S. Attorney’s Office for the District of Massachusetts and the Office of Inspector General of the Department of Health and Human Services.

This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover more than $5.3 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 now approach $6.8 billion.