Massachusetts Healthcare Fraud/Medicare Fraud Enforcement

The federal government sometimes accomplishes this task with the assistance of the Massachusetts Medicaid Fraud Control Unit (MFCU). Both entities are, in turn, often assisted in their efforts by the bravery and actions of whistleblowers.

Modeled after the federal False Claims Act, the Massachusetts False Claims Act permits private citizens to bring qui tam actions on behalf of the State of Massachusetts to recover treble damages and civil penalties. ALM GL ch. 12 § 5 et seq.

Nolan Auerbach & White represents whistleblowers in federal court only. We will bring cases on behalf of whistleblowers under the Massachusetts qui tam statute as part of an action under the federal False Claims Act. We do so under the Court’s pendent jurisdiction.

The liability provisions of the Massachusetts False Claims Act, ALM GL ch. 12 §5B, provide that it is unlawful for any person who:

(1) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;

(2) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim;

(3) conspires to commit a violation of this subsection;

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(10) is a beneficiary of an inadvertent submission of a false claim to the commonwealth or political subdivision thereof, or is a beneficiary of an overpayment from the commonwealth or a political division thereof, and who subsequently discovers the falsity of the claim, or the receipt of overpayment and fails to disclose the false claim to the commonwealth or political subdivision within a reasonable time after discovery of the false claim shall be liable to the commonwealth or political subdivision…

Cases completed in Massachusetts that were originally brought in a Massachusetts federal court include:

On August 13, 2020, the United States Attorney’s Office for the District of Massachusetts announced a $3.5 million settlement with Advanced Care Scripts, Inc. (ACS) a specialty pharmacy. The Government alleged that ACS conspired with Teva Neuroscience, Inc. (Teva) a pharmaceutical manufacturer to pay kickbacks to Medicare patients taking a drug manufactured by Teva called Copaxone, which was approved to treat multiple sclerosis.

On July 1, 2020 the Department of Justice announced Novartis Pharmaceuticals Corporation (“Novartis”) agreed to pay $632 million to settle False Claims Act violations. Specifically the settlement pertains to the use of three foundations as conduits to pay Medicare copayments for patients taking Gilenya and Afinitor, both Novartis drugs. In the first settlement, Novartis agreed to pay $51.25 million to resolve allegations that it illegally paid the copay obligations for patients taking its drugs. The second settlement in the amount of nearly $592 million, Novartis resolved allegations arising from payments the company made to physicians in the form of kickbacks to induce them to prescribe the Novartis drugs Lotrel, Valturna, Starlix, Tekturna, Tekturna HCT, Tekamlo, Diovan, Diovan HCT, Exforge, and Exforge HCT.

Nolan Auerbach & White has represented whistleblowers in cases against Novartis. In November 2010, Novartis paid $237.5 million to resolve civil allegations that it unlawfully promoted its drug Trileptal for unapproved uses and that it paid illegal remuneration to healthcare providers to induce them to prescribe the company’s products. In addition, the company paid a $185 million criminal fine and to plead guilty to a misdemeanor charge of introducing misbranded drugs into interstate commerce. The second case was brought by Nolan Auerbach & White client Jeremy Garrity. Mr. Garrity was an Associate Cardiovascular Metabolic Specialist in the Cardiovascular/Metabolic Divison from 2002-2005 and an Area Scientific Sales Consultant from 2005-2008. Mr. Garrity’s detailed allegations of widespread kickbacks and illegal inducements moved this case to its successful conclusion. He specifically alleged that Novartis had various programs utilized by its sales representatives to induce physicians to use its cardiovascular products, Diovan, Tekturna and Exforge. These programs primarily consisted of excess payments to physicians that were disguised as “consultant payments” or “speaker honoraria.”

On January 21, 2020 the United States Attorney’s Office for the District of Massachusetts announced a resolution with “foundations” that were used to funnel money from pharmaceutical companies, Insys, Aegerion and Alexion. Four foundations: Patent Services, Inc., The Assistance Fund, Chronic Disease Fund, and Patient Access Network Foundation, paid $13 million.

St. Jude Medical Inc. agreed to pay the United States $16 million to resolve allegations that the company violated the False Claims Act and the Anti-kickback Act by knowingly and intentionally using post-market studies and a patient registry as means to pay kickbacks to induce participating physicians to implant St. Jude pacemakers and implantable cardioverter defibrillators (ICDs) in their patients.

In June 2002, DOJ announced that American Medical Response, Inc. (AMR), the nation’s largest ambulance provider, had agreed to pay $20 million to settle allegations that the company submitted false claims for ambulance services to Medicare. According to the Government, the company submitted thousands of false claims for non-emergency ambulance transportation that was not medically necessary or that lacked valid documentation of medical necessity. The Government alleged that the company stated that certain patients were confined to bed or unable to walk when in fact there was no information supporting the statement or the company knew that the patients in question were not bed-confined and were able to walk. Susan Caporaletti and Robin Rau, former employees of AMR, brought this qui tam action in 1998.

Pfizer Inc. agreed to pay the $14.5 million to resolve allegations involving the improper marketing of the prescription drugs Detrol and Detrol LA. The drugs were approved by the FDA for the treatment of overactive bladder, but Pfizer allegedly marketed the drugs for treatment of men who were suffering from benign prostate hyperplasia.

Sandoz Inc. agreed to pay the United States, the State of California, and the State of Florida a combined $150 million to settle claims that it caused these government entities to overpay for drugs by manipulating average wholesale prices. Under the agreement, the United States recovered $86.5 million, California collected $40 million and Florida received $15.2 million. The relator, Ven-a-Care of the Florida Keys, received an $8.275 million reward.

KV Pharmaceutical Company agreed to pay $17 million to resolve federal and state allegations that its now-defunct subsidiary, Ethex Corporation, submitted false quarterly reports to the government regarding two of its drugs: Nitroglycerin Extended Release Capsules (Nitroglycerin ER) and Hyoscyamine Sulfate Extended Release Capsules (Hyoscyamine ER). Ethex was alleged to have failed to advise the Centers for Medicare and Medicaid Services (CMS) that the two products did not qualify for coverage.

Par Pharmaceuticals, Inc. and Par Pharmaceuticals Companies, Inc. agreed to pay the United States and the states of Texas, Florida, Alaska, South Carolina, and Kentucky $154 million to resolve Medicaid fraud claims that the companies reported inflated average wholesale pricing information that caused government entities to pay inflated reimbursements for drugs under Medicare and Medicaid.

Generic drug makers Watson Pharmaceuticals Inc. and Sandoz Inc. agreed to pay the United States $145 million to resolve two False Claims Act cases alleging that they defrauded U.S. and state governments by causing Medicaid to overpay for drugs. Watson agreed to pay $79 million and Sandoz—Novartis AG’s generic unit—agreed to pay $66 million.

GlaxoSmithKline (GSK) agreed to pay the United States a total $750 million to settle a False Claims Act qui tam action. In addition, SB Pharmco Puerto Rico Inc., a subsidiary of GSK, agreed to plead guilty to charges related to the manufacture and distribution of certain adulterated drugs made at GSK’s manufacturing facility in Cidra, Puerto Rico. Of the $750 million settlement amount, $150 million will resolve a criminal fine and the remaining $600 million will settle civil FCA charges. This settlement involved charges related to product contamination and dosage irregularities affecting the drugs: Paxil, Avandia, Avandament, Coreg, Bactroban, Abreva, Cimetidine, Compazine, Denavir, Dyazide, Thorazine, Stelazine, Ecotrin, Tagamet, Relafen, Kytril, Factive, Dyrenium, and Albenza.

Irish pharmaceutical manufacturer Elan Corporation, PLC and Japanese pharmaceutical company Eisai Company, Ltd. have agreed to pay the United States a combined $214.5 million to settle allegations involving off-label marketing of the anti-seizure medication Zonegran. Elan has also agreed to enter into a Corporate Integrity Agreement with OIG-HHS. The companies were alleged to have violated Federal and State False Claims statutes, the Federal Food, Drug, and Cosmetic Act, and the Medicare-Medicaid Anti-Kickback Act. The companies were alleged to have illegally promoted Zonegran and to have caused false claims to be submitted to government health care programs for a variety of uses that were not medically accepted and therefore not covered by the programs.

Elan Corporation, PLC agreed to pay over $200 million to settle a False Claims Act case, which alleged improper sales and marketing practices for the antiepileptic drug Zonegran (zonisamide). As part of settlement agreement the company plead guilty to a misdemeanor violation of the U.S. Federal Food, Drug and Cosmetic Act. The company also agreed to enter into a Corporate Integrity Agreement with the Office of Inspector General of the United States Department of Health and Human Services.

Forest Laboratories Inc. and Forest Pharmaceuticals, Inc. agreed to pay the United States over $313 million to resolve criminal charges and False Claims Act allegations. This settlement resolves three FCA qui tam actions alleging that the drug-maker marketed the thyroid drug, Levothroid, without FDA approval and unlawfully promoted the two antidepressants, Celexa and Lexapro, for pediatric use.

As part of the civil settlement, $149 million will resolve federal and state civil claims (with more than $88 million to be distributed to the federal government and more than $60 million to be distributed to the states involved), while the remainder will account for a criminal penalty of $150 million and an asset forfeiture of $14 million. In addition to the settlement agreement, the pharmaceutical company agreed to enter into a Corporate Integrity Agreement with the Office of Inspector General, Department of Health and Human Services.

Schwarz Pharma Inc. agreed to pay the United States $22 million to settle allegations that the company misrepresented the regulatory status of two unapproved drugs— Deponit and Hyoscyamine Sulfate Extended Release—that did not qualify for coverage under federal health care programs and that the company failed to advise the Centers for Medicare and Medicaid Services that these unapproved drugs did not qualify for coverage under federal health care programs.

Johnson and Johnson subsidiaries Ortho-McNeil Pharmaceutical LLC and Ortho- McNeil-Janssen Pharmaceuticals Inc. agreed to pay over $81 million to settle criminal and civil liability in connection with off-label promotion of the epilepsy drug Topamax. The complaint alleges that the companies violated the False Claims Acts through an off label marketing and kickback scheme involving aggressive and improper promotion of numerous unapproved off-label uses of Topamax and payments of illegal kickbacks to health care providers in order to induce them to prescribe Topamax.

Atlanta-based Mariner Health Care Inc. and SavaSeniorCare Administrative Services LLC, as well as their principals, Leonard Grunstein, Murray Forman and Rubin Schron, agreed to pay the United States and several states $14 million to settle allegations that they created a kickback scheme in which Omnicare (the nation’s largest pharmacy that specializes in dispensing drugs to nursing home patients) would pay Mariner and Sava $50 million in exchange for agreements by Mariner and Sava to continue using Omnicare’s pharmacy services for 15 years. The government further alleged that the defendants attempted to cover up the kickback scheme by creating phony business transactions and by falsifying documents.

Aventis Pharmaceuticals Inc. (API) agreed to pay $95 million to the United States Government to settle claims that it inflated its calculations of Best Price on three of its prescription drugs: Nasacort®, Nasacort AQ®, and Azmacort®. The United States alleged that API knowingly excluded certain instances where they sold these drugs at a discounted rate between October 1, 1995 and September 30, 2000. Specifically, API sold the decongestant Nasacort® (also marketed as Azmacort®) to the HMO Kaiser Permanente Group at a heavily discounted rate. The United States also alleged that API used a private label sales contract (by labeling the drugs sold to Kaiser with a different code than the same drugs sold to Medicaid) in order to avoid including the discounted prices in its calculations of Best Price, and thus knowingly made false statements in order to decrease the rebates it owed to Medicaid based on Best Price.

In May 2004, Warner-Lambert reportedly agreed to pay $83.6 million to settle allegations of illegally promoting the epilepsy drug Neurontin for conditions not approved or tested. The Government alleged Warner-Lambert promoted Neurontin to doctors for the off-label purposes of treating epilepsy and bipolar disorder, despite studies showing it was not effective for either. David Franklin, a former Warner-Lambert medical liaison, filed this qui tam action in 1996. The relator’s share was approximately 29percent or $24.6 million. HHS OIG, the FDA Office of Criminal Investigations, the Veteran’s Administration’s Office of Criminal Investigations, and the FBI investigated the matter. Assistant U.S. Attorneys Thomas Kanwit and Sara Bloom, and Stanley Alderson of the DOJ Civil Division represented the Government. In addition to the federal FCA settlement, Warner-Lambert agreed to pay $68.4 million to settle its civil liabilities to the fifty states and the District of Columbia, as well as a $240 million criminal fine for violating the FDA branding standards.

DOJ announced that Bayer Corp. and GlaxoSmithKline (GSK) had agreed to pay over $344 million to settle allegations of Medicaid fraud. Bayer will pay a total of $257,200,00 and GSK will pay $87,600,922. The Federal Government, 49 states, the District of Columbia, and Public Health Services entities shared the settlement proceeds. The Government alleged that Bayer and GSK, in a scheme referred to as “lick and stick,” sold re-labeled drugs to an HMO at deeply discounted prices, and then concealed this information in order to avoid their obligation to pay millions of dollars in additional rebates to the Medicaid program. The drugs involved included Bayer’s Cipro, an antibiotic, and Adalat, an antihypertensive, as well as GSK’s Paxil, an antidepressant, and Flonase, a nasal spray. The Medicaid Rebate program requires drug manufacturers to report to CMS the best price they offer to any commercial, for-profit customer, and to pay a quarterly rebate based on that best price.

DOJ announced that TAP Pharmaceutical Products Inc. had agreed to pay $559.5 million to settle allegations that it violated the False Claims Act by paying illegal kickbacks to doctors who prescribed its prostate cancer drug Lupron. The company also agreed to pay a $290 million criminal fine to the Federal Government and a $25.5 million civil settlement to the fifty states and the District of Columbia, bringing the total value of the settlement to $845 million, the largest health care fraud settlement at that time in U.S. history. The Government’s investigation was triggered by qui tam lawsuits brought by two whistleblowers. Douglas Durand, TAP’s former Vice President of Sales, quit his job and alerted the Government when he became concerned about the company’s marketing practices. Meanwhile, Tufts Associated Health Maintenance Organization and its medical director Dr. Joseph Gerstein also notified the Government after it came under increasing pressure from TAP to switch from Zoladex, an equally effective but significantly less expensive alternative drug, to Lupron. The Government alleged that TAP offered doctors a panoply of inducements to prescribe Lupron, including ski and golfing trips, free televisions and VCRs, cocktail party bar tabs, and an array of free products and services.

Dey Inc., Dey Pharma L.P. (formerly known as Dey, L.P.) and Dey L.P. Inc. agreed to pay $280 million to settle False Claims Act allegations that the companies engaged in a scheme to report false and inflated prices for several pharmaceutical products, including: Albuterol Sulfate, Albuterol MDI, Cromolyn Sodium and Ipratropium Bromide.