Two Tennessee orthopedic clinics pay nearly $2 million to settle reimportation allegations

by Ben Vernia | January 27th, 2014

On January 24, the Department of Justice announced that two East Tennessee-based orthopedic clinics had agreed to pay $1.85 total to resolve allegations, originally filed by a whistleblower, that they caused the submission of false claims by using reimported pharmaceuticals. According to DOJ’s press release:

Two orthopedic clinics will pay a combined $1.85 million to resolve state and federal False Claims Act allegations that they knowingly billed state and federal health care programs for reimported osteoarthritis medications, known as viscosupplements, the Department of Justice announced today. Tennessee Orthopaedic Clinics P.C., headquartered in Knoxville, Tenn., will pay $1.3 million, and Appalachian Orthopaedic Clinics P.C., headquartered in Kingsport, Tenn., will pay $550,000.
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Viscosupplements, such as Synvisc and Orthovisc, are injections approved by the Food and Drug Administration for the treatment of osteoarthritis pain in the knee. Viscosupplements are reimbursed by Medicare, Medicaid and other federal health care programs at a set rate based on the average sales price of the domestic product. The government contended that the clinics knowingly purchased deeply discounted viscosupplements that were reimported from foreign countries and billed them to state and federal health care programs in order to profit from the reimbursement system, when such reimported viscosupplements were not reimbursable by those programs. Allegedly, the reimported product included labeling in foreign languages and in English for additional uses not approved in the United States, which demonstrated that the product was reimported. Moreover, because the product was reimported, the government alleged there was no manufacturer assurance that it had not been tampered with or that it was stored appropriately.

DOJ announced that the relator will receive $323,750 of the settlement (a 17.5% relator’s share).

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