Cardinal Health to Pay $8M to Resolve 'Upfront Discount' Allegations

Cardinal Health Inc. will pay the federal government $8 million to resolve whistleblower claims that it paid kickbacks to pharmacy owners to induce referrals for the distributor's prescription drugs, the Department of Justice said.

The settlement with Dublin, OH-based Cardinal Health resolves a whistleblower False Claims Act lawsuit filed by former pharmacy owner R. Daniel Saleaumua and pharmacy consultant Kevin Rinne.

Saleaumua alleged that Cardinal paid him $440,000 in exchange for an agreement that he purchase from Cardinal prescription drugs for his pharmacies. Saleaumua and Rinne will receive a combined $760,000 as their share of the government's recovery.

"American taxpayers are the victims of illegal kickback schemes that result in Medicare and Medicaid paying millions of dollars more than they should for prescription drugs," said Beth Phillips, U.S. Attorney for the Western District of Missouri, whose office led the investigation. "Today's $8 million settlement underscores our commitment to combating healthcare fraud and protecting taxpayers."

Cardinal Health issued a statement acknowledging the settlement with the federal government, but denied any wrongdoing and referred to the alleged kickbacks as an "upfront discount."

 "The transaction did not result in the Government paying more than it was obligated to pay for pharmaceuticals provided by the customer to federal health care program beneficiaries. Cardinal Health strongly believes that it acted appropriately and complied with all applicable laws and regulations," Cardinal Health said in a prepared statement. "In the settlement agreement, Cardinal Health explicitly denies the contentions of the Government and the Plaintiffs. In addition, Cardinal Health contends that the complaint by the plaintiffs contains numerous inaccuracies. While Cardinal Health believes it would have prevailed in litigation, the Company settled for the purpose of avoiding the time and expense of protracted litigation."

The Department of Justice has used the False Claims Act to recover more than $5.5 billion since January 2009 in cases involving fraud against federal healthcare programs.