Dignity Health Agrees to Pay $37 Million to Settle False Claims Act Allegations

Dignity Health has agreed to pay the United States $37 million to settle allegations that 13 of its hospitals in California, Nevada and Arizona knowingly submitted false claims to Medicare and TRICARE by admitting patients who could have been treated on a less costly, outpatient basis, the Justice Department announced today.  Dignity, formerly known as Catholic Healthcare West, is based in San Francisco and is one of the five largest hospital systems in the nation with 39 hospitals in three states.

“Charging the government for higher cost inpatient services that patients do not need wastes the country’s vital health care dollars,” said Acting Assistant Attorney General Joyce R. Branda for the Justice Department’s Civil Division.  “This department will continue its work to stop abuses of the nation’s health care resources and to ensure patients receive the most appropriate care.”

The settlement resolves allegations that 13 Dignity Health hospitals knowingly overcharged Medicare and TRICARE, part of the military health care program, for inpatient services for patients who should have been treated on a less costly, outpatient basis.  Because hospitals generally receive significantly higher payments from federal health care programs for inpatient admissions as opposed to outpatient treatment, the admission of numerous patients who do not need inpatient care, as alleged here, can result in substantial financial harm to federal health care programs.

The United States alleged that from 2006 through 2010, 13 Dignity hospitals billed Medicare and TRICARE for inpatient care for certain patients who underwent elective cardiovascular procedures (e.g., stents, pacemakers) in scheduled surgeries when the claims should have been billed as outpatient surgeries.  In addition, the government alleged that from 2000 through 2008, four of the hospitals billed Medicare for beneficiaries undergoing elective kyphoplasty procedures, which are minimally-invasive and performed to treat certain spinal compression fractures that should have been billed as less costly outpatient procedures.  Lastly, the government alleged that from 2006 through 2010, 13 hospitals admitted patients for certain common medical diagnoses where admission as an inpatient was medically unnecessary and appropriate care could have been provided in a less costly outpatient or observation setting.

“This settlement demonstrates this office’s commitment to protecting our federal health care programs,” said U.S. Attorney Melinda Haag for the Northern District of California.  “We will continue to aggressively and appropriately pursue False Claims Act allegations of wrongdoing in the health care industry.”

As part of today’s agreement, Dignity entered into a corporate integrity agreement with the U.S. Department of Health and Human Services – Office of Inspector General (HHS-OIG) requiring the company to engage in significant compliance efforts over the next five years.  Under the agreement, Dignity is required to retain independent review organizations to review the accuracy of the company’s claims for services furnished to federal health care program beneficiaries.

“Hospitals that attempt to boost profits by admitting patients for expensive and unnecessary inpatient hospital stays will be held accountable,” said Special Agent in Charge Ivan Negroni of HHS-OIG’s San Francisco Office.  “Both patients and taxpayers deserve to have medical decisions made solely on what is best for the patient based on medical necessity.”

This settlement resolves a lawsuit filed in the U.S. District Court for the Northern District of California by Kathleen Hawkins, a former employee of Dignity, under the qui tam or whistleblower provisions of the False Claims Act, which permit private citizens to bring lawsuits on behalf of the United States and obtain a portion of the government’s recovery.  Hawkins will receive approximately $6.25 million.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $23 billion through False Claims Act cases, with more than $14.8 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement was a result of a coordinated effort by the Civil Division, the U.S. Attorneys’ Offices for the Northern District of California and the Western District of New York and the HHS-OIG.

The case is captioned United States ex rel. Hawkins v. Catholic Healthcare West, et al., CV C 09-5604 JCS.  The claims resolved by this settlement are allegations only and there has been no determination of liability.

Government Settles False Claims Act Allegations Against Florida-Based Baptist Health System for $2.5 Million

Baptist Health System Inc. (Baptist Health), the parent company for a network of affiliated hospitals and medical providers in the Jacksonville, Florida, area, has agreed to pay $2.5 million to settle allegations that its subsidiaries violated the False Claims Act by submitting claims to federal health care programs for medically unnecessary services and drugs, the Department of Justice announced today.  The alleged misconduct involved Medicare, Medicaid, TRICARE and the Federal Employee Health Benefits Program.

“Providers that bill for unnecessary services and drugs contribute to the soaring cost of health care,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery.  “Providers must deal fairly and honestly with federal health care programs, and the Justice Department will investigate aggressively and hold accountable those who do not.”

This settlement resolves allegations that, from September 2009 to October 2011, two neurologists in the Baptist Health network misdiagnosed patients with various neurological disorders, such as multiple sclerosis, which caused Baptist Health to bill for medically unnecessary services.  Although Baptist Health placed one of the physicians at issue on administrative leave in October 2011, it did not disclose any misdiagnoses to the government until September 2012.

“This settlement sends a clear message that health care fraud will not be tolerated in our district, particularly when there is the potential for harm to patients,” said U.S. Attorney A. Lee Bentley III for the Middle District of Florida.

The improper conduct at issue in this case included Medicaid patients.  Medicaid is funded jointly by the states and the federal government.  The state of Florida, which paid for some of the Medicaid claims at issue, will receive $19,024 of the settlement amount.

Health care providers will not be permitted to provide patients unnecessary medical services and drugs and then pocket the improper payments they receive as a result,” said Acting Special Agent in Charge Brian Martens, U.S. Department of Health and Human Services Office of Inspector General.  “Our agency is dedicated to investigating health care fraud schemes that divert scarce taxpayer funds meant to provide for legitimate patient care.” 

The government’s investigation was initiated by a qui tam,or whistleblower, lawsuit filed under the False Claims Act by Verchetta Wells, a former Baptist Health employee.  The act allows private citizens to file suit for false claims on behalf of the government and to share in the government’s recovery.  Wells will receive $424,155. 

“These health care providers did not only violate the laws of the United States – they violated the trust placed in them by their patients,” said Inspector General of the U.S. Office of Personnel Management Patrick E. McFarland.  “Federal employees deserve health care providers, including hospitals, that meet the highest standards of ethical and professional behavior.  Today’s settlement reminds all providers that they must observe those standards and reflects the commitment of federal law enforcement organizations to pursue improper and illegal conduct that may put the health and well-being of their patients at risk.” 

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and Secretary of Health and Human Services Kathleen Sebelius.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $19.1 billion through False Claims Act cases, with more than $13.6 billion of that amount recovered in cases involving fraud against federal health care programs. 

This settlement is the result of a coordinated effort among the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Middle District of Florida, the U.S. Department of Health and Human Services Office of Inspector General, the Defense Health Agency Program Integrity Office and the Office of Personnel Management Office of Inspector General. 

The claims resolved by this settlement are allegations only, and there has been no determination of liability.  The lawsuit against Baptist Health was filed in the U.S. District Court for the Middle District of Florida and is captioned United States ex rel. Wells v. Baptist Health System Inc. et al.

Justice Department Recovers $3.8 Billion from False Claims Act Cases in Fiscal Year 2013

The Justice Department secured $3. 8 billion in settlements and judgments from civil cases involving fraud against the government in the fiscal year ending Sept. 30, 2013, Assistant Attorney General for the Civil Division Stuart F. Delery announced today.    This dollar amount, which is the second largest annual recovery of its type in history, brings total recoveries under the False Claims Act since January 2009 to $ 17 billion – nearly half the total recoveries since the Act was amended 27 years ago in 1986.

The Justice Department’s fiscal year 2013 efforts recovered more than $3 billion for the fourth year in a row and are surpassed only by last year’s nearly $5 billion in recoveries.    As in previous years, the largest recoveries related to health care fraud, which reached $2. 6  billion.    Procurement fraud (related primarily to defense contracts) accounted for another $ 890  million – a record in that area.

“It has been another banner year for civil fraud recoveries, but more importantly, it has been a great year for the taxpayer and for the millions of Americans, state agencies and organizations that benefit from government programs and contracts,” said Assistant Attorney General Delery.    “The $3. 8 billion in federal False Claims Act recoveries in fiscal year 2013, plus another $443 million in recoveries for state Medicaid programs, restores scarce taxpayer dollars to federal and state governments.    The government’s success in these cases is also a strong deterrent to others who would misuse public funds, which means government programs designed to keep us safer, healthier and economically more prosperous can do so without the corrosive effects of fraud and false claims.”

The False Claims Act is the government’s primary civil remedy to redress false claims for government funds and property under government contracts, including national security and defense contracts, as well as under government programs as varied as Medicare, veterans benefits, federally insured loans and mortgages, transportation and research grants, agricultural supports, school lunches and disaster assistance.    In 1986, Congress strengthened the Act by amending it to increase incentives for whistleblowers to file lawsuits on behalf of the government, which has led to more investigations and greater recoveries.

Most false claims actions are filed under the Act’s whistleblower, or qui tam, provisions, which allow private citizens to file lawsuits alleging false claims on behalf of the government.  If the government prevails in the action, the whistleblower, known as a relator, receives up to 30 perc  ent of the recovery.    The number of qui tam suits filed in fiscal year 2013 soared to 752 –100 more than the record set the previous fiscal year.    Recoveries in qui tam cases during fiscal year 2013 totaled $2. 9 billion , with whistleblowers recovering $345 million.

Health Care Fraud

The $2. 6 billion in health care fraud recoveries in fiscal year 2013 marks four straight years the department has recovered more than $2 billion in cases involving health care fraud.    This steady, significant and continuing success can be attributed to the high priority the Obama Administration has placed on fighting health care fraud.    In 2009, Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius announced the creation of an interagency task force, the Health Care Fraud Prevention and Enforcement Action Team (HEAT), to increase coordination and optimize criminal and civil enforcement.    This coordination has yielded historic results:   From January 2009 through the end of the 2013 fiscal year, the department used the False Claims Act to recover $12 .1 billion in federal health care dollars.    Most of these recoveries relate to fraud against Medicare and Medicaid.    Additional information on the government’s efforts in this area is available at StopMedicareFraud.gov, a webpage jointly established by the Departments of Justice and Health and Human Services.

Some of the largest recoveries this past fiscal year involved allegations of fraud and false claims in the pharmaceutical and medical device industries.    Of the $2. 6 billion in federal health care fraud recoveries, $1.8 billion were from alleged false claims for drugs and medical devices under federally insured health programs that, in addition to Medicare and Medicaid, include TRICARE, which provides benefits for military personnel and their families, veterans’ health care programs and the Federal Employees Health Benefits Program.    The department recovered an additional $443 million for state Medicaid programs.

Many of these settlements involved allegations that pharmaceutical manufacturers improperly promoted their drugs for uses not approved by the Food and Drug Administration (FDA) – a practice known as “off-label marketing.”    For example, drug manufacturer Abbott Laboratories Inc. paid $1.5 billion to resolve allegations that it illegally promoted the drug Depakote to treat agitation and aggression in elderly dementia patients and schizophrenia when neither of these uses was approved as safe and effective by the FDA.    This landmark $1.5 billion settlement included $575 million in federal civil recoveries, $225 million in state civil recoveries and nearly $700 million in criminal fines and forfeitures.    In another major pharmaceutical case, biotech giant Amgen Inc. paid the government $762 million, including $598.5 million in False Claims Act recoveries, to settle allegations that included its illegal promotion of Aranesp, a drug used to treat anemia, in doses not approved by the FDA and for off-label use to treat non-anemia-related conditions.  For details, see Abbott, Abbott sentencing, and Amgen.

The department also settled allegations relating to the manufacture and distribution of adulterated drugs.    For example, generic drug manufacturer Ranbaxy USA Inc. paid $505 million to settle allegations of false claims to federal and state health care programs for adulterated drugs distributed from its facilities in India.  The settlement included $237 million in federal civil claims, $118 million in state civil claims and $150 million in criminal fines and forfeitures.    For details, see Ranbaxy.

Adding to its successes under the False Claims Act, the Civil Division’s Consumer Protection Branch, together with U.S. Attorneys across the country, obtained 16 criminal convictions and more than $1. 3 billion in criminal fines, forfeitures and disgorgement under the Federal Food, Drug and Cosmetic Act (FDCA).  The FDCA protects the health and safety of the public by ensuring, among other things, that drugs intended for use in humans are safe and effective for their intended uses and that the labeling of such drugs bears true, complete and accurate information.

In other areas of health care fraud, the department obtained a $237 million judgment against South Carolina-based Tuomey Healthcare System Inc., after a four-week trial, for violating the Stark Law and the False Claims Act.  The Stark Law prohibits hospitals from submitting claims to Medicare for patients referred to the hospital by physicians who have a prohibited financial relationship with the hospital.    Tuomey’s appeal of the $237 million judgment is pending.  If the judgment is affirmed on appeal, this will be the largest judgment in the history of the Stark Law.    For the court’s opinion, see Tuomey.

The department also recovered $26.3 million in a settlement with Steven J. Wasserman M.D., a dermatologist practicing in Florida, to resolve allegations that he entered into an illegal kickback arrangement with Tampa Pathology Laboratory that resulted in increased claims to Medicare.    Tampa Pathology Laboratory previously paid the government $950,000 for its role in the alleged scheme.    The $26.3 million settlement is one of the largest with an individual in the history of the False Claims Act.    For details, see Wasserman.

Procurement Fraud

Fiscal year 2013 was a record year for procurement fraud matters.    The department secured more than $887 million in settlements and judgments based on allegations of false claims and corruption involving government contracts.  Prominent among these successes was the department’s $664 million judgment against Connecticut-based defense contractor United Technologies Corp. (UTC).    A federal court found UTC liable for making false statements to the Air Force in negotiating the price of a contract for fighter jet engines.    In 2004, the department had won a smaller judgment after a three-month trial.  Both sides appealed, but the government’s arguments prevailed, resulting in the case being returned to the trial court to reassess damages.   The $664 million judgment, which UTC has appealed, is the largest judgment in the history of the False Claims Act and, if the appellate court affirms, will be the largest procurement recovery in history.    For details, see UTC.

The department also settled allegations of false claims with two companies in connection with their contracts with the General Services Administration (GSA) to market their products through the Multiple Award Schedule (MAS) program.    To be awarded a MAS contract, and thereby gain access to the broad government marketplace, contractors must provide GSA with complete, accurate and current information about their commercial sales practices, including discounts afforded to their commercial customers.    The government alleged that W.W. Grainger Inc., a national hardware distributor headquartered in Illinois, and Ohio-based RPM International Inc. and its subsidiary, Tremco Inc., a roofing supplies and services firm, failed to disclose discounts given to their commercial customers, which resulted in government customers paying higher prices.  The department recovered $70 million from W.W. Grainger in a settlement that also included allegations relating to a U.S. Postal Services contract and $61 million from RPM International Inc. and Tremco.  For details, see Grainger, RPM/Tremco.

Other Fraud Recoveries

A $45 million settlement with Japan-based Toyo Ink S.C. Holdings Co. Ltd. and its Japanese and United States affiliates (collectively Toyo) demonstrates the breadth of cases the department pursues.  This settlement resolved allegations that Toyo misrepresented the country of origin on documents presented to the Department of Homeland Security’s U.S. Customs and Border Protection to evade antidumping and countervailing duties on imports of the colorant carbazole violet pigment into the United States.    These duties protect U.S. businesses by offsetting unfair foreign pricing and foreign government subsidies.    For details, see Toyo.

The False Claims Act also is used to redress grant fraud.    In a significant case involving a grant from the Department of Education, Education Holdings Inc. (formerly The Princeton Review Inc.) paid $10 million to resolve allegations that the company fabricated attendance records for thousands of hours of afterschool tutoring of students that was funded by the federal grant.  For details, see Education Holdings.

Recoveries in Whistleblower Suits

Of the $3. 8 billion the department recovered in fiscal year 2013, $2. 9 billion related to lawsuits filed under the qui tam provisions of the False Claims Act.    During the same period, the department paid out more than $345 million to the courageous individuals who exposed fraud and false claims by filing a qui tam complaint.    (The average share paid to whistleblowers in fiscal year 2013 cannot be determined from these numbers because the awards paid to whistleblowers in one fiscal year do not always coincide with the fiscal year in which the case was resolved, and the fiscal year’s recoveries may include amounts to settle allegations outside the whistleblower’s complaint.)

Whistleblower lawsuits were in the range of three to four hundred per year from 2000 to 2009, when they began their climb from 433 lawsuits in fiscal year 2009 to 752  lawsuits in fiscal year 2013.    Due to the complexity of fraud investigations generally, the outcomes of many of the qui tam cases filed this past fiscal year are not yet known, but the growing number of lawsuits filed since 2009 have led to increased recoveries.    Qui tam recoveries exceeded $2 billion for the first time in fiscal year 2010 and have continued to exceed that amount every year since.    Qui tam recoveries this past fiscal year bring the department’s totals since January 2009 to $13.4 billion.    During the same period, the department paid out $1.98 billion in whistleblower awards.

“These recoveries would not have been possible without the brave contributions made by ordinary men and women who made extraordinary sacrifices to expose fraud and corruption in government programs,” said Assistant Attorney General Delery.    “We are also grateful to Congress and its continued support of strengthening the False Claims Act, including its qui tam provisions, giving the department the tools necessary to pursue false claims.”

In 1986, Senator Charles Grassley and Representative Howard Berman led successful efforts in Congress to amend the False Claims Act to, among other things, encourage whistleblowers to come forward with allegations of fraud.  In 2009, Senator Patrick J. Leahy, along with Senator Grassley and Representative Berman, championed the Fraud Enforcement and Recovery Act of 2009, which made additional improvements to the False Claims Act and other fraud statutes.    And in 2010, the passage of the Affordable Care Act provided additional inducements and protections for whistleblowers and strengthened the provisions of the federal health care Anti-Kickback Statute.

Assistant Attorney General Delery also expressed his deep appreciation for the dedicated public servants who investigated and pursued these cases.    These individuals include attorneys, investigators, auditors and other agency personnel throughout the Justice Department’s Civil Division, the U.S. Attorneys’ Offices, the Departments of Defense and Health and Human Services, the various Offices of Inspector General and the many other federal and state agencies that contributed to the department’s recoveries this past fiscal year.

“The department’s continued success in recovering fraudulent claims for taxpayer money this past fiscal year is a product of the tremendous skill and dedication of the people who worked on these cases and investigations and continue to work hard to protect against the misuse of taxpayer dollars,” said Delery.

MRI Diagnostic Testing Company, Imagimed LLC, and Its Former Owners and Chief Radiologist to Pay $3.57 Million to Resolve False Claims Act Allegations

New York-based Imagimed LLC, the company’s former owners, William B. Wolf III and Dr. Timothy J. Greenan, and the company’s former chief radiologist, Dr. Steven Winter, will pay $3.57 million to resolve allegations that they submitted to federal healthcare programs false claims for magnetic resonance imaging (MRI) services, the Justice Department announced today.  Imagimed owns and operates fifteen MRI facilities, located primarily in New York state, under the name “Open MRI.”

 Allegedly, from July 1, 2001, through April 23, 2008, Imagimed, Greenan, Wolf and Winter submitted claims to Medicare, Medicaid and TRICARE for MRI scans performed with a contrast dye without the direct supervision of a qualified physician.  Since a potential adverse side effect of contrast dye is anaphylactic shock, federal regulations require that a physician supervise the administration of contrast dye when it is used for an MRI.  Also, allegedly, from July 1, 2005, to April 23, 2008, Imagimed, Greenan, Wolf and Winter submitted claims for services referred to Imagimed by physicians with whom Imagimed had improper financial relationships.  In exchange for these referrals, Imagimed entered into sham on-call arrangements, provided pre-authorization services without charge and provided various gifts to certain referring physicians, in violation of the Stark Law and the Anti-Kickback Statute.

“The Department of Justice is committed to guarding against abuse of federal healthcare programs,” said Stuart F. Delery, Assistant Attorney General for the Civil Division.  “We will help protect patients’ health by ensuring doctors who submit claims to federal healthcare programs follow proper safety precautions at all times.”

U.S. Attorney for the Northern District of New York, Richard S. Hartunian said: “This case is an example of our commitment to using all of the remedies available, including civil actions under the False Claims Act, to ensure patient safety and combat health care fraud.  Stripping away the profit motive for circumventing physician supervision requirements has both a remedial and a deterrent effect.  The settlement announced today advances our critical interest in both the integrity of our health care system and the safe delivery of medical services.”

The allegations resolved by the settlement were brought in a lawsuit filed under the False Claims Act’s whistleblower provisions, which permit private parties to sue for false claims on behalf of the government and to share in any recovery.  The whistleblower in this case, Dr. Patrick Lynch, was a local radiologist and will receive $565,500.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $14.8 billion through False Claims Act cases, with more than $10.8 billion of that amount recovered in cases involving fraud against federal health care programs.

The investigation and settlement were the result of a coordinated effort among the U.S. Attorney’s Office for the Northern District of New York; the Justice Department’s Civil Division, Commercial Litigation Branch and the Department of Health and Human Services’ Office of Inspector General.

The case is United States of America ex rel. Lynch v. Imagimed LLC, et al. (N.D. N.Y.).  The claims released by the settlement are allegations only, and there has been no determination of liability.

Generic Drug Manufacturer Ranbaxy Pleads Guilty & Agrees to Pay $500 Million to Resolve False Claims Allegations, cGMP Violations and False Statements to the FDA

In the largest drug safety settlement to date with a generic drug manufacturer, Ranbaxy USA Inc. , a subsidiary of Indian generic pharmaceutical manufacturer Ranbaxy Laboratories Limited, pleaded guilty today to felony charges relating to the manufacture and distribution of certain adulterated drugs made at two of Ranbaxy’s manufacturing facilities in India, the Justice Department announced today.   Ranbaxy also agreed to pay a criminal fine and forfeiture totaling $150 million and to settle civil claims under the False Claims Act and related State laws for $350 million.

 

The federal Food, Drug and Cosmetic Act (FDCA) prohibits the introduction or delivery for introduction into interstate commerce of any drug that is adulterated.   Under the FDCA, a drug is adulterated if the methods used in, or the facilities or controls used for, its manufacturing, processing, packing, or holding do not conform to, or are not operated or administered in conformity with, current Good Manufacturing Practice (cGMP) regulations.   This assures that a drug meets the requirements as to safety and has the identity and strength, and meets the quality and purity characteristics, which the drug purports or is represented to possess.

 

Ranbaxy USA pleaded guilty to three felony FDCA counts, and four felony counts of  knowingly making material false statements to the FDA.   The generic drugs at issue were manufactured at Ranbaxy’s facilities in Paonta Sahib and Dewas, India. Under the plea agreement, the company will pay a criminal fine of $130 million, and forfeit an additional $20 million.

 

“When companies sell adulterated drugs, they undermine the integrity of the FDA’s approval process and may cause patients to take drugs that are substandard, ineffective, or unsafe,” said Stuart F. Delery, Acting Assistant Attorney General for the Civil Division of the Department of Justice.  “We will continue to work with our law enforcement partners to ensure that all manufacturers of drugs approved by the FDA for sale in the United States, both domestic and foreign, follow the FDA guidelines that protect all of us.”

 

“This is the largest false claims case ever prosecuted in the District of Maryland, and the nation’s largest financial penalty paid by a generic pharmaceutical company for FDCA violations,” said U.S. Attorney for the District of Maryland Rod J. Rosenstein.  “The joint criminal and civil settlement, which reflects many years of work by FDA agents and federal prosecutors, holds Ranbaxy accountable for a pattern of violations and should improve the reliability of generic drugs manufactured in India by Ranbaxy.”

 

Ranbaxy USA admitted to introducing into interstate commerce certain batches of adulterated drugs that were produced at Paonta Sahib in 2005 and 2006, including Sotret, gabapentin, and ciprofloxacin.   Sotret is Ranbaxy’s branded generic form of isotretinoin, a drug used to treat severe recalcitrant nodular acne; gabapentin is a drug used to treat epilepsy and nerve pain; ciprofloxacin is a broad-spectrum antibiotic.   In a Statement of Facts filed along with the Information, Ranbaxy USA acknowledged that FDA’s inspection of the Paonta Sahib facility in 2006 found incomplete testing records and an inadequate program to assess the stability characteristics of drugs.   “Stability” refers to how the quality of a drug varies with time under the influence of a variety of factors, such as temperature, humidity, and light.  Such testing is used to determine appropriate storage conditions and expiration dates for the drug, as well as to detect any impurities in the drug.

Ranbaxy also acknowledged that the FDA’s 2006 and 2008 inspections of the Dewas facility found the same issues with incomplete testing records and an inadequate stability program, as well as significant cGMP deviations in the manufacture of certain active pharmaceutical ingredients and finished products.   Ranbaxy USA also acknowledged that in 2003 and 2005 the company was informed of cGMP violations by consultants it hired to conduct audits at the Paonta Sahib and Dewas facilities.   Those cGMP violations resulted in the introduction into interstate commerce of some adulterated drugs.

Ranbaxy USA further admitted to failing to timely file required reports known to FDA as “field alerts” for batches of Sotret and gabapentin that had failed certain tests.   With respect to Sotret, Ranbaxy USA was aware in January 2003 that a batch of Sotret failed an accelerated dissolution stability test but continued to distribute the batch into the United States for another 13 months.   With respect to gabapentin, Ranbaxy USA was aware at various times between June and August 2007 that certain batches of gabapentin were testing out-of-specification, had unknown impurities, and would not maintain their expected shelf life.   Nevertheless, Ranbaxy USA did not notify FDA and institute a voluntary recall until October 2007.

Ranbaxy USA also admitted to making false, fictitious, and fraudulent statements to the FDA in Annual Reports filed in 2006 and 2007 regarding the dates of stability tests conducted on certain batches of Cefaclor, Cefadroxil, Amoxicillin, and Amoxicillin and Clavulanate Potassium, which were manufactured at the Dewas facility.   Ranbaxy USA was found to have conducted stability testing of certain batches of these drugs weeks or months after the dates reported to FDA.   In addition, instead of conducting some of the stability tests at prescribed intervals months apart, the tests were conducted on the same day or within a few days of each other.   This practice resulted in unreliable test results regarding the shelf life of the drugs.   Ranbaxy USA also acknowledged that drug samples waiting to be tested were stored for unknown periods of time in a refrigerator, which did not meet specified temperature and humidity ranges for an approved stability chamber, and that this was not disclosed to the FDA.

The criminal case is U.S. v. Ranbaxy USA, Inc., JFM-13-CR-0238 (D. Md.).

Under the civil settlement, Ranbaxy has agreed to pay an additional $350 million to resolve allegations that it caused false claims to be submitted to government health care programs between April 1, 2003, and September 16, 2010, for certain drugs manufactured at the Paonta Sahib and Dewas facilities.   The United States contends that Ranbaxy manufactured, distributed, and sold drugs whose strength, purity, or quality differed from the drug’s specifications or that were not manufactured according to the FDA-approved formulation.   The United States further contends that, as a result, Ranbaxy knowingly caused false claims for those drugs to be submitted to Medicaid, Medicare, TRICARE, the Federal Employees Health Benefits Program, the Department of Veterans Affairs, and the U.S. Agency for International Development (USAID), which administers the U.S. President’s Emergency Plan for AIDS Relief (PEPFAR).

The federal government’s share of the civil settlement amount is approximately $231.8 million, and the remaining $118.2 million will go to the states participating in the agreement.

The civil settlement resolves a lawsuit filed in U.S. District Court for the District of Maryland under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private citizens to bring civil actions on behalf of the United States and share in any recovery.   As part of today’s resolution, the whistleblower, Dinesh Thakur, a former Ranbaxy executive, will receive approximately $48.6 million from the federal share of the settlement amount.   The case is U.S. ex rel. Thakur v. Ranbaxy Laboratories Limited, Case No. JFM-07-962 (D. Md.).

With the exception of the allegations to which Ranbaxy pleaded guilty in the Criminal Information, there has been no determination of liability as to the claims settled by the civil agreement.

Last year, FDA and Ranbaxy agreed to an injunction that prevents drugs produced at the Paonta Sahib and Dewas facilities from entering the U.S. market until the facilities have been brought into full compliance with the FDCA and its implementing regulations.

Since September 16, 2008, when the FDA placed drugs from those facilities on an Import Alert, Ranbaxy has not imported drugs from those facilities into the U.S.   In addition, the injunction requires Ranbaxy to review and verify data contained in Ranbaxy’s past drug applications to the FDA.   United States v. Ranbaxy Laboratories, Ltd., et al. , Case No. JFM-12-250 (D. Md).

“The FDA expects that companies will comply with the cGMP requirements mandated by law so that consumers can be assured that their medical products are safe and pure,” said John Roth, director of the FDA’s Office of Criminal Investigations. “The investigation that led to this settlement uncovered evidence showing that certain lots of specific drugs produced at the Paonta Sahib facility were defective, in that their strength differed from, or their purity or quality fell below, that which they purported to possess. The FDA and its law enforcement partners will continue to aggressively pursue companies and their executives who erode public confidence in the quality and safety of medical products by distributing products that do not comply with the law.”

“I would like to express my appreciation for the exceptional work of our investigators and that of their FDA and Department of Justice partners,” said Michael G. Carroll, USAID Deputy Inspector General.   “This settlement represents the culmination of years of investigative effort and signals our continuing commitment to the integrity of U.S. government systems and our determination to hold those who seek to defraud or mislead to account.”

The criminal case was prosecuted by the U.S. Attorney’s Office for the District of Maryland and the Civil Division’s Consumer Protection Branch.   The civil settlement was negotiated by the U.S. Attorney’s Office for the District of Maryland and the Civil Division’s Commercial Litigation Branch.   The case was investigated by agents from the FDA’s Office of Criminal Investigations and USAID’s Office of Inspector General.   The FDA’s Office of Chief Counsel, HHS Office of Counsel to the Inspector General, Office of the General Counsel-CMS Division, and the National Association of Medicaid Fraud Control Units also provided assistance.

This criminal and civil resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover more than $10.3 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are over $14.3 billion.