Drug Makers to Pay $421M to Settle False Claims Allegations

Drug makers Abbott Laboratories, B. Braun Medical, and Roxane Laboratories will pay $421 million to settle whistleblower allegations that they inflated prices for drugs paid for by Medicare and Medicaid, a violation of the False Claims Act, the U.S. Justice Department announced Tuesday.

DOJ said the three drug makers created artificially inflated "spreads" – the differences between the inflated government payments and the actual price paid by healthcare providers -- for drugs to market, promote and sell the drugs to existing and potential customers.

Because Medicare and Medicaid overpayments were involved, DOJ said, the drug makers caused the government to pay millions of claims for far greater amounts than it would have if the drug makers had reported truthful prices.

"Some pharmaceutical manufacturers have asserted that a culture within the industry gave them license to manipulate the system to suit their interests. This is not the case," said Carmen M. Ortiz, U.S. Attorney for Massachusetts, which led the prosecution. "When manufacturers report drug pricing information that they know will be relied upon by government healthcare programs, they are obliged to report honest prices. It is unlawful to do otherwise."

The settlements resolve allegations brought by whistleblower suits filed by a Florida home infusion company, Ven-A-Care of the Florida Keys Inc. As part of these settlements, the Ven-A-Care whistleblowers could receive about $88.4 million.

Roxane is paying $280 million to resolve claims against it and affiliates Roxane Laboratories Inc., Boehringer Ingelheim Corp. and Boehringer Ingelheim Pharmaceuticals Inc. for the following drugs: Azathioprine, Diclofenac Sodium, Furosemide, Hydromorphone, Ipratropium Bromide, Oramorph SR, Roxanol, Roxicodone and Sodium Polystyrene Sulfonate.
Roxane denied any wrongdoing and said it agreed to the settlement to end "expensive and disruptive litigation with the Department of Justice."

"The company at all times complied with laws, regulations and customary industry practices.  Our generic medicines lower the overall cost of the US healthcare system – a shared goal of healthcare reform," Roxane said in a statement. "The expense of protracted litigation adds to the cost of producing Roxane medicines and therefore impacts the competitiveness of our business."

Abbott is paying $126.5 million to resolve the claims against it in two whistleblower cases challenging its pricing of intravenous dextrose solutions, sodium chloride solutions, sterile water, vancomycin, and the oral antibiotic drug erythromycin.

Abbott also denied any wrongdoing. "We continue to believe that we have complied with all laws and regulations and have entered into this agreement to eliminate the uncertainty associated with continued litigation," said Adelle Infanct, manager of external communications for Abbott.

B. Braun Medical Inc., a U.S. subsidiary of German pharmaceutical company, B. Braun Melsungen AG, has agreed to pay $14.7 million to resolve allegations that inflated drug prices for 49 of its drugs, including water-based solutions used for intravenous infusion of other drugs and for fluid replacement, including dextrose solutions, sodium chloride solutions, sterile water and lactated ringers solution, intravenous nutritional solutions and other intravenous drugs.

Tony West, assistant attorney general for the Justice Department's Civil Division, said the federal government has recovered more than $1.8 billion from drug makers using similar drug pricing schemes. "By offering their customers one price and then falsely reporting a greatly inflated price to the lists the government uses when determining how much to pay for the drugs, we believe pharmaceutical companies created an incentive for the purchase of their drugs, since buyers could obtain government payment at the inflated price and pocket the difference," West said. "Taxpayer-funded kickback schemes like this not only cost federal healthcare programs millions of dollars, they threaten to undermine the integrity of the choices healthcare providers make for their patients."