False Claims Act Round-Up — DOJ Continues Aggressive Prosecution of Healthcare Fraud

The Biden Administration warned the healthcare industry that it would aggressively prosecute fraud cases.  The Justice Department is executing on that promise and doing so with great success.  Week after week, we read about False Claims Act settlement with multi-million dollar penalties.  We barely hear much about healthcare compliance innovation and strategies — the industry is clearly treading water when it comes to proactive compliance efforts.

Here is a summary of some of the more significant enforcement actions in the past few weeks:

Philips RS (formerly Respironics), a manufacturer of durable medical equipment paid of $24 million to resolve False Claims Act violations.  Philips paid kickbacks to DME suppliers to increase sales of ventilators, oxygen concentrators, and other respiratory-related medical equipment. Respironics gave DME suppliers physician prescribing data free of charge to assist in their marketing efforts to physicians.

Philips will pay $22.62 million to the United States and $2.13 million to various states.  Philips also entered into a five-year Corporate Integrity Agreement with HHS-OIG. The CIA requires Philips to implement a robust compliance program that includes review of arrangements with referral sources and monitoring of its sales force.  The CIA requires Philips to retain an independent monitor, selected by the OIG, to assess the effectiveness of Philips’ compliance systems. The investigation was initiated by a whistleblower, who was awarded $4.3 million dollars of the federal settlement amount.

Bayer Corporation, an Indiana manufacturer, agreed to pay $40 million to resolve False Claims Act and False Statement violations arising from the drugs Trasylol, Avelox and Baycol.  The claims arose from two separate whistleblower lawsuits filed by Laurie Simpson, a former marketing employee.  Simpson was awarded $11 million from the settlement.

In one lawsuit, Bayer paid kickbacks to hospitals and physicians to increase use of drugs Trasylol (used to control bleeding in heart surgeries) and Avelox (an antibiotic), and marketed these drugs for off-label uses.  In addition, Bayer downplayed the safety risks of Trasylol.

As alleged in the second lawsuit, Bayer misrepresented the risks of rhabdomyolysis from use of Baycol.  Bayer also misrepresented the efficacy of Baycol and fraudulently induced the Defense Logistics Agency to renew contracts relating to Baycol.  Subsequently, Trasylol and Baycol were withdrawn from the market for safety reasons.

Bayer agreed to pay $38.86 million to the United States and $1.13 million to 20 states and the District of Columbia.

Mark Schena and Arrayit Corporation were convicted of misleading investors, healthcare fraud and paying illegal kickbacks relating to the submission of over $77 million in false and fraudulent claims for COVID-19 and allergy testing. 

Schena engaged in a scheme to defraud Arrayit investors by claiming he had invented revolutionary technology to test for virtually any disease using a few drops of blood.  Schena falsely claimed he was the “father of microarray technology” and falsely stated he was on the shortlist for the Nobel Prize.  He also falsely represented to investors that Arrayit was valued at $4.5 billion based on purported revenues of $80 million per year.

Schena failed to release SEC disclosures and concealed that Arrayit was on the verge of bankruptcy.  To address investor concerns, Schena conducted private meetings and issuing false press releases and tweets.

Schena also orchestrated an illegal kickback and fraud scheme by submitting fraudulent claims for unnecessary allergy testing.  Arrayit ran allergy screening tests on every patient for 120 different allergens (ranging from hornet strings to codfish). Schena paid kickbacks to marketers and orchestrated a deceptive marketing plan.  As his business crumbled, Schena claimed that Arrayit had developed an effective test for COVID-19 based on its blood-testing technology.

Schena is scheduled to be sentenced in January 2023.

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