DOJ announces $22 million settlement with Schwarz Pharmaceutical over "DESI" drugs

by Ben Vernia | April 29th, 2010

In a press release on April 29, the Department of Justice announced that it was settling False Claims Act claims with Schwarz Pharmaceuticals, concerning two “DESI” drugs. (DESI drugs are those which the FDA had approved in a New Drug Application between 1938 and 1962 for which only safety – and not efficacy – had been shown.) According to DOJ’s press release:

Schwarz Pharma Inc. will pay $22 million to resolve False Claims Act allegations that the company failed to advise the Centers for Medicare and Medicaid Services (CMS) that two unapproved products did not qualify for coverage under federal health care programs, the Justice Department announced today. Schwarz, now a subsidiary of Belgium-based UCB S.A., is alleged to have submitted false quarterly reports to the government related to a pair of drugs, Deponit and Hyoscyamine Sulfate Extended Release (Hyoscyamine Sulfate ER).

Deponit is a nitroglycerin skin patch that has been used to prevent angina. Hyoscyamine Sulfate ER is an antispasmodic medication that has been used to treat various stomach, intestinal, and urinary tract disorders that involve cramps, colic, or other painful muscle contractions. While the active ingredients in Deponit and Hyoscyamine Sulfate ER had been in products on the market for many years, the Food and Drug Administration made determinations in 1997 and 1999 that resulted in the drugs being ineligible for reimbursement by government health care programs such as Medicaid.

The United States alleges that Schwarz misrepresented the regulatory status of both drugs and failed to advise CMS that these unapproved drugs did not qualify for coverage under federal health care programs. As a result, the government contends, Schwarz knowingly caused false claims to be submitted for Deponit and Hyoscyamine Sulfate ER. Ultimately, neither Deponit nor Hyoscyamine Sulfate ER ever received full regulatory approval for safety and effectiveness, and neither product is currently on the market.

According to the Department, the settlement resolves in part allegations in two multi-defendant qui tam suits brought in Massachusetts and the Southern District of Texas. The federal share of the settlement was $12,243,836 and the state Medicaid share was $9,756,164; the relators were to receive $1,836,575 from the federal share (15%) and an undisclosed additional amount from the state share.

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