Earlier this month the Department of Justice announced that Shire Pharmaceuticals LLC and other subsidiaries of Shire plc will pay $350 million to settle federal and state False Claims Act allegations that Shire and the company it acquired in 2011, Advanced BioHealing, employed kickbacks and other unlawful methods to induce clinics and physicians to use or overuse its product “Dermagraft,” a bioengineered human skin substitute which is used as a treatment of diabetic foot ulcers.  Shire plc is a multinational pharmaceutical firm headquartered in Ireland, with its United States operational headquarters in Lexington, Massachusetts.

The settlement, announced January 11, 2017, resolves allegations brought by six separate lawsuits filed under the qui tam, or whistleblower, provisions of the False Claims Act.  The False Claims Act permits private parties with knowledge of fraud against the government to sue on behalf of the government and receive a share of any recovery.  Whistleblowers, known as relators, are entitled to 15-30 percent of the government’s total recovery under the False Claims Act.  The whistleblower shares have yet to be determined in this case.

Specifically, the settlement resolves allegations that Dermagraft salespersons unlawfully induced clinics and physicians with lavish dinners, drinks, entertainment and travel; medical equipment and supplies; unwarranted payments for purported speaking engagements and bogus case studies; and cash, credits and rebates, to induce the use of Dermagraft. Such payments and gifts to induce the use of medical devices or pharmaceuticals that are ultimately paid for by government health care programs violate both the Anti-Kickback Statute and the False Claims Act. In addition, the Anti-Bribery statute and the Federal Acquisition Regulations prohibit bribes to government officials or employees, including VA physicians, to obtain a contract or favorable treatment under a supply contract.

These matters were investigated by the Civil Division’s Commercial Litigation Branch; the U.S. Attorneys’ Offices for the Middle District of Florida, District of Columbia, Middle District of Tennessee and Eastern District of Pennsylvania; the FBI; the U.S. Department of Health and Human Services (HHS) Office of Inspector General; the VA OIG and the Department of Defense Criminal Investigative Service.

Frohsin Barger & Walthall congratulates and thanks the government attorneys and investigators as well as the qui tam relators and their counsel for returning hundreds of millions of dollars to the United States taxpayers.

To learn more about pharmaceutical kickback fraud, click here.

To read the full Department of Justice press release, click here