Whistleblowers to receive $46,469,978 in Cephalon Civil Settlement.
$425 Million Cephalon Civil Settlement and Criminal Fine in America's Largest Biotechnology Medicaid Fraud Case. Whistleblower Paccione will receive $46,469,978 from the federal share of the settlement amount, and those proceeds will be shared by plaintiffs under a separate agreement.
Qui Tam Whistleblower Attorney Brian P. Kenney Filed First Complaint With Client's Off-Label Marketing Allegations In 2003; Additional Complaints Were Filed; $375 Million Civil Settlement, $50 Million Corporate Criminal Fine Today.
PHILADELPHIA, Sept. 29 /PRNewswire/ -- Biotech drug manufacturer Cephalon,Inc. ("Cephalon") flouted federal regulations on a grand scale for years byoff-label marketing its first three prescription drugs far beyond the cancerpain, epilepsy and narcolepsy specialists for whose patients those drugs hadbeen FDA-approved. Instead, Cephalon focused its national marketing muscle onunapproved uses, targeting medical specialists with bigger patientpopulations, according to a Complaint filed in 2003 by Philadelphia qui tamwhistleblower attorney Brian P. Kenney, Esq. The complaint was unsealed todaywith Cephalon's $375 million nationwide Medicaid fraud settlement and $50 million corporate criminal plea.
Kenney, lead partner of Philadelphia-based, Kenney Egan, McCafferty &Young, P.C., represents whistleblowers across the U.S. His whistleblowerclient is a former medical sales representative, area trainer andinstitutional representative for the Frazer, Pennsylvania-based drugmanufacturer, one of Cephalon's original 27 sales hires in 1994. In 2003, onher behalf, Kenney brought the Government the first qui tam whistleblower Medicaid fraud allegations against Cephalon.
Kenney's filing, under seal as required by law, was the first complaintfiled in the federal-state government investigation that resulted in today'snational settlement and corporate criminal plea. A total of fourwhistleblower Complaints were unsealed today by the U.S. Attorney's Office forthe Eastern District of Pennsylvania, along with the filing of a new federalComplaint, settlement agreement, and corporate integrity agreement, whichsettle all four whistleblower cases, Kenney explained.
Additionally, Cephalon entered a corporate criminal plea and paid a $50 million fine. The criminal case was based upon information provided byrelators in the civil case, Kenney noted.
The first drugs on which Cephalon started its business are the threeprescription medicines listed in Kenney's client's Complaint, thewhistleblower attorney noted. Today, Cephalon's Web site presents ninemedications, including those original three: Actiq(R), Gabatril(R), andProvigil(R).
Under FDA rules, prescription drug manufacturers and marketers may onlypromote their products for approved uses. Physicians are free to prescribedrugs for conditions beyond those for which approval has been received butmarketing to induce off-label, unapproved use is not permitted.
Under Medicaid, the state-and-federally underwritten program forlow-income and disabled Americans, reimbursement is allowed only for theFDA-approved use of a drug, not for off-label use, Kenney, a former federal prosecutor, explained.
Among many schemes to support off-label marketing alleged in the relators'and Government Complaints are:
-- Intensively marketing Actiq to physical medicine and rehabilitation,and pain management specialists;
-- Encouraging sales reps to make false statements about the efficacy ofGabatril, and providing dosing recommendations when none have been determinedfor depression;
-- Leaving "huge doses of Gabatril" with psychiatrists when no approveduse or dosage existed for psychiatrists;
-- Encouraging sales representatives to recruit psychiatrists by payingthe physicians honoraria in return for recommending Gabatril to otherpsychiatrists; and
-- Assisting physicians in securing Medicaid reimbursement for Actiq whenoff-label use was ineligible for Medicaid payment.
Federal and state False Claims Acts allow private citizens with knowledgeof fraud to help the government recover ill-gotten gains and additional civilpenalties. These statutes allow the government to collect up to three timesthe amount defrauded, in addition to civil penalties of $5,500 to $11,000 perfalse claim. Kenney noted that whistleblowers, legally known as "qui tamrelators," can receive between 15 and 30 percent of the Government's recovery.
In executing the False Claims Act Settlement Agreement, Cephalon deniedliability, wrongdoing or improper conduct.
US DEPARTMENT OF JUSTICE - For Immediate Release
Biopharmaceutical Company, Cephalon, to Pay $425 Million & Enter Plea to Resolve Allegations of Off-Label Marketing
Whistleblowers to receive $46,469,978 in Cephalon Civil Settlement.
WASHINGTON – Cephalon Inc. will enter a criminal plea and pay $425 million to resolve claims that it marketed three drugs for uses not approved by the Food and Drug Administration (FDA), the Justice Department announced today.
The lawsuits were brought by former Cephalon employees and filed under the qui tam provisions of the False Claims Act. The suits alleged that Cephalon engaged in a scheme to market Gabitril, Actiq and Provigil for unapproved uses in violation of the Food, Drug and Cosmetic Act, which requires a company to specify the intended uses of a product in its new drug application to the FDA. Once approved, the drug may not be marketed or promoted for so-called "off label" uses - any use not specified in an application and approved by FDA.
The suits against the company alleged that, as a result of Cephalon’s off-label marketing campaign, false claims for payment were submitted to federal insurance programs such as Medicaid and the Federal Employee Health Benefits Program which did not provide coverage for such off-label uses. A criminal information also filed by the Justice Department alleges that, between approximately January 2001 and 2006, Cephalon also promoted the drugs for uses other than what the FDA approved. The company is charged with one count of Distribution of Misbranded Drugs: Inadequate Directions for Use, a misdemeanor offense.
The FDA approved Actiq for use only in opioid-tolerant cancer patients. Between 2001 and 2006, Cephalon allegedly promoted the drug for non-cancer patients to use for such maladies as migraines, sickle-cell pain crises, injuries, and in anticipation of changing wound dressings or radiation therapy. Cephalon also promoted Actiq for use with patients who were not opioid tolerant.
Gabitril was approved by the FDA for use as an anti-epilepsy drug in the treatment of partial seizures. From 2001 to 2005, Cephalon allegedly promoted the drug as a remedy for anxiety, insomnia and pain. In 2005, following reports of seizures in patients taking Gabitril who did not have epilepsy, the FDA required Cephalon to send a warning letter to doctors advising of the connection between off-label Gabitril use and seizures. The company then ceased promotion of the drug.
Provigil was first approved to treat excessive daytime sleepiness associated with narcolepsy, then expanded the label to include treatment of excessive sleepiness associated with sleep apnea and shift work sleep disorder. From 2001 through 2006, Cephalon allegedly promoted Provigil as a non-stimulant drug for the treatment of sleepiness, tiredness, decreased activity, lack of energy and fatigue. In 2002, the FDA sent Cephalon a letter warning the company not to continue to promote Provigil off-label.
Cephalon undertook its off-label promotional practices via a variety of techniques, such as training its sales force to disregard restrictions of the FDA-approved label, and to promote the drugs for off-label uses.
For example, the Actiq label stated that the drug was for "opioid tolerant cancer patients with breakthrough cancer pain, to be prescribed by oncologist or pain specialists familiar with opioids." Using the mantra "pain is pain," Cephalon instructed the Actiq sales representatives to focus on physicians other than oncologists, including general practitioners, and to promote this drug for many uses other than breakthrough cancer pain.
In the case of Gabitril, which had been approved for use for epilepsy, Cephalon told the sales force to visit not just neurologists, but also psychiatrists, and to promote the drug for anxiety and other psychiatric indications. Cephalon also structured its sales quota and bonuses in such a way that sales representatives could only reach their sales goals if they promoted and sold the drugs for off-label uses.
Cephalon employed sales representatives and retained medical professionals to speak to doctors about off-label uses of the three drugs. The company funded continuing medical education programs, through millions of dollars in grants, to promote off-label uses of its drugs, in violation of the FDA’s requirements.
In a plea agreement with the United States, Cephalon agreed to pay $50 million to resolve this Information, of which $40 million will be applied to a criminal fine, and $10 million will be applied as substitute assets to satisfy the forfeiture obligation.
In a separate civil settlement executed contemporaneously with this guilty plea agreement, Cephalon will pay $375 million, plus interest, to resolve False Claims Act allegations arising from claims to Medicaid, Medicare and other federal programs, including TRICARE, the Federal Employees Health Benefits program, the Postal Worker’s Compensation Program, the Federal Employees Compensation Act Program, the Every Employees Occupational Illness Compensation Program, Department of Veterans Affairs, Defense Logistics Agency, Bureau of Prisons and the Public Health Service Entities. The state Medicaid programs of California, Delaware, Florida, Hawaii, Illinois, Louisiana, Massachusetts, Nevada, New Hampshire, New Mexico, Texas, Tennessee, Virginia and the District of Columbia will share $116 million of the civil settlement.
"This settlement is further evidence of the Department’s willingness to prosecute cases involving violations of the FDCA and to recover taxpayer dollars used to pay for drugs sold as a result of illegal marketing campaigns," said Gregory G. Katsas, Assistant Attorney General for the Justice Department’s Civil Division. "The Department takes off-label marketing of drugs very seriously because of the potential for patient harm arising from promoting drugs for uses not approved by the FDA."
The civil settlement resolves four qui tam actions filed in the Eastern District of Pennsylvania. Three of those cases were filed by former Cephalon sales representatives. Relator Paccione will receive $46,469,978 from the federal share of the settlement amount, and those proceeds will be shared by plaintiffs under a separate agreement.
"These are potentially harmful drugs that were being peddled as if they were, in the case of Actiq, actual lollipops instead of a potent pain medication intended for a specific class of patients," said Laurie Magid, acting U.S. Attorney for the Eastern District of Pennsylvania. "This company subverted the very process put in place to protect the public from harm, and put patients’ health at risk for nothing more than boosting its bottom line. People have an absolute right to their doctors’ best medical judgement. They need to know the recommendations a doctor makes are not influenced by sales tactics designed to convince the doctor that the drug being prescribed is safe for uses beyond what the FDA has approved."
As part of the resolution of these allegations, the HHS Inspector General and Cephalon have entered into a five year Corporate Integrity Agreement, which requires Cephalon to send doctors a letter advising of this resolution, that it post payments to doctors on its web site and that its board and top management regularly certify that the company is in compliance with all applicable requirements.
"OIG’s compliance agreement with Cephalon will enhance accountability for compliance and improve transparency for patients and physicians," said Department of Health and Human Services Inspector General Daniel R. Levinson. "The agreement requires the company to provide physicians a means to report questionable conduct of sales representatives, requires that payments to physicians be publicly disclosed, and holds the company’s board of directors and managers responsible for living up to the compliance agreement." The case was investigated by the U.S. Attorney’s Office in Philadelphia, the Justice Department’s Civil Division, the FDA’s Office of Criminal Investigation, the Department of Health and Human Services’ Office of the Inspector General, the Postal Service Office of the Inspector General, and the Office of Personnel Management Office of Inspector General.
Assistance was provided by representatives of the National Association of Medicaid Fraud Control Units and the Connecticut Attorney General’s Office.
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Whistleblower Receives $7.25 million award for blowing whistle!
Friday, April 30, 2004
By JAKE ELLISON
SEATTLE POST-INTELLIGENCER REPORTER
The University of Washington has agreed to pay $35 million to settle a federal lawsuit alleging widespread Medicare and Medicaid overbilling -- a trial-averting deal that gives the man who blew the whistle more than $7 million.
The settlement will be made final today, putting the 5-year-old fraud investigation to rest, an attorney involved in the negotiations said yesterday. Stephen Meagher, the San Francisco lawyer representing whistle-blower Mark Erickson, said the agreement was circulated yesterday afternoon and is scheduled to be signed by all parties this morning. UW attorney Dan Dubitsky wouldn't comment on the settlement, citing a judge's gag order. U.S. Attorney John McKay couldn't be reached for comment.Both sides are expected to hold news conferences today to discuss the settlement.
Before filing the suit in 1999, Erickson had been a compliance officer in one of the university's physician-billing groups. Under the federal False Claims Acts, citizens who help the government fight fraud are entitled to between 15 percent and 25 percent of settlements. Erickson's share -- $7.25 million -- is higher than the national average of 17 percent because he worked with the government for more than a year, poring over UW records, Meagher said. Erickson left the UW shortly after filing the suit.
"It's been a very long haul for him," Meagher said of his client, who still lives in Seattle. After Erickson gets his cut and the state of Washington takes roughly $2 million, the rest of the $35 million will go back into the national Medicare trust fund. University officials haven't said specifically where the settlement money will come from, but the bulk of it is expected to come from revenue generated by UW Physicians.The university wasn't on the Department of Justice's radar for overbilling violations until Erickson made his allegations, the attorney said. The lawsuit is finally scheduled to be unsealed today in U.S. District Court in Seattle. "No other remedy against fraud works this well," said Jim Moorman, president of Taxpayers Against Fraud, a non-profit organization in Washington, D.C., that provides resources for whistle-blowers and their attorneys.
Eighty-five percent of fraud cases brought by the government start with whistle-blowers, he said. "They make better cases than government auditors." Before seeking a civil settlement with the UW, federal prosecutors pursued criminal charges for nearly four years. Federal sources claim the UW overbilled the government "well in excess of $100 million" from 1991 to 2001, with much of that happening years after the nation's teaching hospitals were told to expect federal audits. "We categorically deny that the amount of overbilling was anywhere close to that number," John Pettit, UW Medicine's associate vice president for business and legal affairs, said yesterday.
Pettit and Dubitsky declined to say how much the university did overcharge the government, citing the gag order. The government issued its first major warnings to teaching hospitals in December 1995, when the University of Pennsylvania agreed to pay a $30 million penalty for overbilling Medicare. Other warnings followed, as teaching hospitals elsewhere paid tens of millions of dollars in fines. The UW adopted rigorous safeguards against overbilling only after federal agents swooped onto the Seattle campus in November 1999. During the criminal phase of the case, two prominent UW doctors were convicted of felonies. Dr. Richard Winn, an internationally known brain surgeon and former head of neurosurgery, pleaded guilty to obstruction of justice in 2002. Dr. William Couser, the former nephrology chief, admitted to committing fraud in 2003.
Besides the $35 million penalty -- the largest ever paid by a U.S. teaching hospital -- the UW has had to spend about $27 million to defend itself and School of Medicine employees during the investigation. Since the investigation began, the UW has removed 17 of the 22 top administrators who ran UW Physicians. It has reorganized and created an Office of Regulatory Compliance with 11 new positions, costing $800,000 a year.
Whistleblower Receives $8.1 million award for blowing whistle!
San Antonio whistleblower rewarded $8.1 million in exposing HealthSouth fraud.
San Antonio Express-News (San Antonio, Texas) (via Knight-Ridder/Tribune Business News); 1/14/2005 Byline: Guillermo Contreras
Jan. 14, 2005--James DeVage spent 17 years with the Internal Revenue Service in San Antonio scrutinizing numbers for anything fishy. That eye for fraud helped him long after he retired, as he became the first whistleblower to file a lawsuit alleging that the country's largest provider of rehabilitative health-care services violated the False Claims Act by cheating taxpayers.
More than half a decade later, DeVage, 83, has the satisfaction of knowing that his complaints helped result in Alabama-based HealthSouth Corp. agreeing to pay $325 million to settle claims that it defrauded Medicare and other federal health care programs. ealthSouth's deal with the Justice Department came just as the suit against the company was scheduled for trial in San Antonio on Tday. DeVage, who had no claim against the company, is to receive an $8.1 million bounty -- the largest award of a handful going to whistleblowers in the case. "I am very elated, because I was finally able to put a stop to some of this stuff," DeVage said Thursday. "The reward for me is that I did something that some other people should have been doing. ... Someone had to pick up the ball and go forward with it."
DeVage's involvement began in 1996, when a doctor he visited regarding back pain referred him to HealthSouth for physical therapy. His therapy, paid for largely by Medicare, consisted of group sessions in a swimming pool. When he got his explanation of benefits, he questioned why the bills totaled $5,300 for 60 days of therapy. "Being a sharp-eyed and prudent fellow, he wanted to know why the government was being charged so much," said John Clark, part of a team of lawyers that represented DeVage. His lawyers filed suit in 1998. Court records say HealthSouth billed for each session as if it were one-on-one between each patient and a therapist instead of billing at the group rate.
DeVage's complaints and those lodged by other whistleblowers resulted in a Justice Department investigation. The department alleged that HealthSouth made false claims to Medicare and other federal programs, and that it sought reimbursement for unallowable costs, including "lavish entertainment and certain travel costs for HealthSouth's annual administrators' meeting at Disney World." "When a company defrauds our nation's health care programs, it steals from the American taxpayers," U.S. Assistant Attorney General Peter Kaisler said in a news release. "HealthSouth's fraud on Medicare was driven both by longstanding business practices in its outpatient physical therapy business and improprieties in its inpatient rehabilitation business," Kaisler said.
HealthSouth said in a statement that it wants to put the issue to rest. "The resolution of this matter is an important step toward moving forward and resolving the issues inherited by our new management team," HealthSouth President and CEO Jay Grinney said.
Additional Sample Whistleblower Recoveries Awarded to Individuals under the Federal Government's False Claim Act.
The following recoveries for the federal goverment were initiated all initiated by Whistleblowers under the False Claim Act. The False Claims Act (31 U.S.C. Sections 3729-33) allows a private individual or "whistleblower", with knowledge of past or present fraud on the federal government, to sue on behalf of the government to recover stiff civil penalties and triple damages.The False Claims Act, also called the "Lincoln Act," or the "Qui Tam statute," was enacted during the Civil War. Qui Tam is shorthand for the Latin phrase "qui tam pro domino rege quam pro seipse", meaning "he who sues for the king as for himself." The law was targeted at stopping dishonest suppliers to the Union military at a time when the war effort made it all but impossible for the government to investigate and prosecute the fraud itself.
Today it serves a similar purpose because of the enormous size of the federal government and the variety or programs under which it expends taxpayer funds. The person bringing the suit is formally known as the "Relator." If the suit is successful, it not only stops the dishonest conduct, but also deters similar conduct by others and may result in the Relator’s receipt of a substantial share of the government’s ultimate recovery as much as 30 percent of the total.
Whistleblower Keeth receives $22.5 million dollar reward.
United Technologies Corporation billed the Federal Government for work on military helicopters at the Sikorsky division that it had not yet performed. The whistleblower was the executive vice president the company and he blew the whistle on this activity by filing a lawsuit in the United States District court. The Federal Government settled the case for $150 million dollars. Keeth was awarded $22.5 million for blowing the whistle.
Whistleblowers Stache and Muelhasen receive $18.5 million dollar reward.
Teledyne Incorporated settled a whistleblower claim involving relays and systems for a total of $112.5 million. The Federal Government accused Teledyne of faking the testing of components and of fraud in its accounting for costs. A quality control employee named Stache and a test lab manager named Muelhasen received a total of $18.5 million dollars for blowing the whistle.
Whistleblower Copeland receives $18.4 million dollar reward.
Lucas Industries, a British corporation and two U.S. subsidiaries (LWI) paid the Government $88 million to settle a whistleblower suit filed by Frederick Copeland, a machinist who formerly worked for the company. Copeland accused LWI of falsifying gear charts for a key component of the Navy's F/A18 Hornet and major defects in gearboxes for the Army's Multiple Launch rocket system. One of the subsidiaries, Lucas Western, pleaded guilty to 37 counts of making false certifications to the Department of Defense that the gearboxes for Navy fighter jets and Army rocket launchers had been fully inspected in accordance with contractual requirements when they had not. The investigators had suggested that the gearboxes supplied by Lucas were responsible for aborted missions, system failures and engine fires. A criminal fine of $18.5 million was paid by Lucas Western, and Lucas Industries was barred from receiving new Government contracts. Mr. Copeland, the machinist received $18.4 million for blowing the whistle.
Whistleblowers Kirchoff and Killingsworth receive $4.6 million dollar reward.
Teledyne Incorporated settled a whistleblower claim brought on by two employees involving inflated cost data and then certified that the data were accurate, current and complete. Teledyne employees Kirchoff and Killingsworth, received a total of $4.6 million for blowing the whistle.
Whistleblower Nearregarder receives $2.8 million dollar reward. FMC Corp inflated military contracts that including amounts for independent research and development. The company paid the Federal Government $13 million to settle the whistleblower lawsuit. Robert Nearegarder blew the whistle and received $2,860,000.00.
Whistleblower Byrne receives $9 million dollar reward.
Damon Clinical Laboratories, Inc. fraudulently billed Medicare, Medicaid and CHAMPUS by bundling medically unnecessary tests not knowingly ordered by doctors. The Government recovered $83,700,000 from the claim and Jeanne Byrne, one of three whistleblowers received $9 million for blowing the whistle.
Whistleblower Flynn receives $5.5 million dollar reward.
Blue Cross Blue Shield of Michigan paid $27,600,000 in a whistleblower action for submitting false documentation and fraudulent billing. The fraud occurred when the Government tried to review a specific set of audits and BCBS backdated their audits to hide what it had done. A gentleman named Mr. Flynn that had performed audits for Blue Cross Blue Shield blew the whistle and was rewarded $5.5 million.
Whistleblower Johnson receives $1.7 million dollar reward.
General Electric Company agreed to pay the Federal Government $7.18 million to settle a whistleblower claim filed by Ian Johnson, an electrical engineer who worked for the company. General Electric was accused of failing to satisfy electrical bonding requirements in its contracts, thereby creating a safety risk in the engines of commercial planes and military aircraft such as the F-16 fighter and B-1B bombers of not having undergone proper testing for resistance to electrical interference. Although the Air Force and FAA found no safety problems, the company was still liable under the False Claims Act. Mr. Johnson, the whistleblower was rewarded with $1.7 million.
Whistleblower Woodward receives $891,000 dollar reward.
Teledyne Incorporated allegedly missed jet engine parts under an Air Force repair contract and altered and destroyed records in a cover-up. Teledyne paid $4.75 million to the Federal Government and the relator Gerald Woodward got $831,250.
Whistleblower Mayman receives $795,000 dollar reward.
Lockeed Martin, Incorporated and the Martin Marietta Corporation overcharged the Department of Defense when it underbid on a contract then boosted research and development costs. Lockeed and Martin Marietta paid $5.3 million and the whistleblower Jerry Mayman received $795,000.
Whistleblower Wagner and Dehner received $833,458 reward.
Allied Clinical Laboratories, Inc. paid the Federal Government $4.9 million to settle a whistleblower lawsuit that charged the company put in false claims for reimbursement for laboratory tests to Medicare. Medicare does not pay for "limited coverage" blood tests unless a physician certifies that they are medically necessary and Allied Clinical had inserted false diagnoses into the diagnosis codes of many of the Medicare billings. Ramona Wagner and Jeanine Dehner, billing clerks for the company blew the whistle and were rewarded with a 17 percent share of the proceeds totaling $833,458.00.
New York State employee received $4.5 million for blowing the whistle.
The New York State Department of Social Services and New York State colleges paid $26.9 million for over billing and misuse of funds it charged the Federal Government for training of social workers. A former New York State employee received $4.05 million for blowing the whistle.
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