Pharmaceutical Companies to Pay U.S. $4.7 Billion in False Claims Act Cases

01/05/2012 // San Francisco, CA, USA // Whistleblower Law Firm // Jeffrey Keller // (press release)

(False Claims Act Report) – Continuing its efforts to recoup federal funds improperly paid to private companies, the U.S. Government stands to collect $4.7 billion from three major pharmaceutical companies. The recovery — stemming from allegations made under the False Claims Act — will settle charges of kickbacks, off-label marketing, and fraud. The three settlements, whistleblower lawyers say, are among the largest sums ever returned to U.S. taxpayers under the False Claims Act.

On November 22, 2011, the U.S. Department of Justice announced that Merck & Co., Inc., will pay $950 million to settle claims pertaining to its drug Vioxx — pulled from the market in 2004 after the drug’s dangerous side effects, including heart attack and stroke, were publicly revealed. Just weeks before the DOJ’s announcement, pharmaceutical giant Amgen Inc. told shareholders that it was setting aside $750 million to resolve False Claims Act claims relating to alleged kickbacks and off-label marketing associated with its anemia drug Aranesp. And in a similar announcement in November, GlaxoSmithKline PLC announced to its shareholders that it was reserving $3 billion to resolve False Claims Act liability pertaining to its drug Avandia. Although official settlements in the Amgen and GSK cases have yet to be announced, industry experts and whistleblower lawyers expect them to be finalized in 2012.

“While the size of these settlements is obviously significant, the cases also highlight the enormous amount of money the federal government pays out to contractors, especially for healthcare, and the need to ensure that it is paying fair prices,” says Jeffrey Keller, a founding partner at Keller Grover, a nationally recognized labor and employment law firm, who also represents whistleblowers. “These cases involve just a handful of drugs, yet will see their manufacturers return nearly $5 billion to taxpayers. The lawsuits that spurred these recoveries were important, helping to make sure that the healthcare provided to Americans through Medicare and Medicaid — and funded by tax dollars — is free of fraud.”

The Vioxx settlement covers a range of allegedly unlawful conduct by Merck, including false claims to Medicaid — a major purchaser of the drug — about the painkiller’s safety, and promotion of the drug for treating rheumatoid arthritis when, in fact, the U.S. Federal Drug Administration had not approved Vioxx for that use.

The settlement, according to the DOJ, is the latest in a string of cases since 2003 in which the federal government has accused major drug makers of systematically bilking government healthcare programs. Last September, the pharmaceutical mega-company Bristol-Myers Squibb agreed to pay $515 million to avoid charges of improper conduct involving pricing and promotional activities for various drugs. In December of 2010, GSK agreed to a $750 million settlement in a False Claim Act settlement stemming from manufacturing practices at a plant in Puerto Rico. Currently, the DOJ is looking at some 150 other cases of alleged drug company misconduct involving billions of dollars in overcharges.

Under the False Claims Act, private citizens can bring lawsuits on behalf of the United States and share in any recovery obtained by the government. Since 2009, the government’s total recoveries in False Claims Act cases have totaled more than $7.8 billion.

Fraudulent Medicare claims and other forms of healthcare fraud account for some $75 billion in unnecessary spending each year, experts and whistleblower lawyers say.

“Whistleblower lawsuits have proven to be an effective method of revealing — and setting right — some very troubling behavior,” says Keller. “The False Claims Act is a powerful tool available to the government to police this behavior. In an ideal world the government wouldn’t have to use that law at all, but until then, we’re glad they have it to use.”

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