DOJ announces trio of settlements in pharma False Claims Act pricing cases

by Ben Vernia | December 7th, 2010

On December 7, the Department of Justice announced that three pharmaceutical companies had entered into agreements to pay a combined $421.2 million to settle allegations that they violated the False Claims Act by providing false drug pricing information for a variety of drugs. According to DOJ’s press release:

Abbott Laboratories Inc., B. Braun Medical Inc. and Roxane Laboratories Inc. n/k/a Boehringer Ingelheim Roxane Inc. and affiliated entities have agreed to pay $421 million to settle False Claims Act allegations, the Justice Department announced today. 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.

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 health care provider or pharmacist who gets reimbursed by the government. The government alleges 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.

These significant settlements are a part of the Attorney General’s aggressive effort to combat fraud on the federal treasury, said Assistant Attorney General for the Civil Division Tony West. Since January of 2009, the Justice Department’s Civil Division and the U.S. Attorneys around the nation have recovered more than $9 billion in cases alleging false claims, fraud against the government, and violations of the Food, Drug and Cosmetic Act. Cases alleging fraud or false claims against government health care programs are the largest portion of these recoveries, and during this period the Justice Department has opened more health care fraud cases, secured larger fines and judgments, and recovered more dollars lost to health care fraud than in any other period: more than $5 billion. Criminal fines, forfeitures, restitution and disgorgement under the Food, Drug and Cosmetic Act have yielded another $3 billion, again a record number.

As for Roxane:

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, Roxicodones 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.

And Braun:

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.

All of the cases are apparently the product of one whistleblower: Ven-A-Care of the Florida Keys, Inc. The government announced that the company will receive $88.4 million (a 21% relator’s share).

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