In The News

Whistleblower Files suit Against a NE Ohio Rehabilitation Center Alleging Medicare Fraud

Late last month whistleblower Lynn Roycroft, a former clinical supervisor, at Abraxas Ohio – a 100 bed Residential Treatment Center for adolescent males owned by GEO Group, Inc. – filed a federal lawsuit alleging that the facility had falsely and fraudulently billed Medicare for counseling sessions that did not occur. The GEO Group, Inc. is a Florida-based, private prison company that specializes in corrections, detention and mental health treatment. It is currently one of the largest private prison companies in the nation. According to Medicaid officials, Abraxas has received more than $33 million in payments from the program since 2012.

 

Roycroft also alleges that men and women who otherwise had no prior education or experience in counseling were hired by Abraxas, given a week of training and then granted positions as counselors for the 100 boys who are housed at the facility. Roycroft further alleges that in addition to the financial and billing irregularities that existed at Abraxas Ohio, that teenage boys were often restrained rather than being given counseling for their drug and/or alcohol abuse. “The philosophy of the institution was to get as many kids in there as you could and bill Medicaid your three hours of group counseling a day, whether the groups happened or not,” Roycroft said. “To me, it’s just blatant fraud.” A representative for, GEO Group, Inc. – Pablo Paez -has denied all allegations and says that his company will “vigorously” defend itself against these charges.
The lawsuit, which was filed in U.S. District Court, is pending. Roycroft as a whistleblower is seeking unspecified damages. The case aligns with the government’s ongoing efforts at combating health care fraud via its Health Care Fraud Prevention and Enforcement Team (HEAT) which was announced back in May of 2009 by the Attorney General and the Secretary of Health and Human Services. The result is that since January 2009 the Justice Department has recovered more than $31.4 billion through False Claims Act cases. Moreover, whistleblowers have been able to utilize a qui tam lawyer to share in settlements that have come about as a result of the government’s efforts. If you have chosen to disclose False Claims Act violations to the government it is also advised that you contact qui tam lawyers. A Qui tam attorney can advise you in such matters and will work to protect your rights under the law.


Two Vessel Engineers Convicted of Environmental Crimes and of Obstruction

The government’s pursuit of fraud and abuse often involves the collaboration of seemly disparate agencies such as the Coast Guard and the Justice Department. This was proven to be the case when the Department of Justice announced late last month that a federal jury in Charleston, South Carolina Court had convicted two chief engineers of the vessel T/V Green Sky of falsifying documents in order to conceal the illegal discharge of oily bilge waste. The two were also convicted of obstruction. Herbert Julian – who served as chief engineer of the ship – was convicted of two felony counts for obstruction of justice. Panagiotis Koutoukakis – chief engineer from February 1 to August 3, 2015 – was also convicted of two felony counts, one for Act to Prevent Pollution from Ships (APPS) violations plus another for falsifying records. It was also revealed at the time that Aegean Shipping Management, S.A., had previously pleaded guilty to a violation of the APPS and obstruction of justice.

“With Charleston serving as one of the largest ports on the Eastern seaboard, working vessel pollution cases with the Environmental Crimes Section is an important focus for our office,” said U.S. Attorney Beth Drake, District of South Carolina. “Through criminal charges, we can deter those who would dump oily wastes into the world’s oceans and use false documents to cover it up.” The Green Sky is a chemical tanker flagged in Liberia. It generates large amounts of oil-contaminated waste water. This contaminated bilge waste is required to be removed from the vessel before it fills up the bottom of the Engine Room and causes damage to equipment and jeopardizes ship safety. Nevertheless, the law forbids oceangoing vessels from discharging this oily waste water directly into the sea.

 

The evidenced showed that the Green Sky regularly pumped contaminated, oily water directly overboard into the sea. Moreover, not only did the discharges go undisclosed, the records of the Green Sky were alleged to have been falsified in order to cover up these activities. The Green Sky falsified these activities using several methods: the first was that it omitted illegal bypass operations. The second was that it claimed that an oil water separator was used that had not been. Finally, the record books of the Green Sky were falsified with erroneous entries in order to further the cover-up. While nearly all of the discharges occurred in international waters, at least two occurred within the Exclusive Economic Zone of the United States.

 

Further evidence presented at the trial showed that the chief engineers covered up illegal overboard discharged through a “magic” hose and “magic” valve system that was apparently designed to bypass the ship’s oil water separator. Both Koutoukakis and Julian are said to have falsified the oil record books in order to hide the illegal discharges. These falsified records were ultimately presented to the U.S. Coast Guard during an inspection of the vessel. The Coast Guard was alerted to the deception by three whistleblowers that came forward to report the crimes. Testimony given at Julian’s trial revealed that he had hidden the log prior to the Green Sky’s arrival in Charleston and then lied to the Coast Guard about the vessel having a sounding log.

 

Prior to the trial, the Green Sky’s operator, Aegean Shipping Management, S.A., pleaded guilty to one APPS violation for illegally discharging waste into the sea and one count of obstruction. Moreover, unsealed documents revealed that the operating company agreed to pay a $2 million penalty. Aegean Shipping was also sentenced to probation and made to follow an environmental compliance plan. A second engineer, Nikolaos Bounovas, was acquitted of all charges against him. The case was investigated by the U.S. Coast Guard Sector Charleston and the Coast Guard Investigative Service. The case was prosecuted with the help of the U.S. Department of Justice’s Environmental Crimes Section and several other agencies. If you know of abuse that has been committed against the government or one of its agencies you are encouraged to report it and to contact a qui tam lawyer. An expert in qui tam law will be able to advise you in such matters and will work to protect your rights.


Four Pennsylvania-Based Companies and Two Individuals Agree to Pay $3 Million to Resolve Alleged False Claims Act and Customs Violations

Occasionally, the government’s crackdown on fraud touches businesses that have an international clientele. This was shown last February when the Department of Justice announced that three Pennsylvania-based importers – Ameri-Source International Inc., Ameri-Source Specialty Products Inc., Ameri-Source Holdings Inc. – and their owners, Ajay Goel and Thomas Diener, had agreed to pay $3 million to resolve violations of the False Claims Act. The lawsuit alleged that – among other things – the companies had engaged in a scheme to evade custom duties on small diameter graphite electrodes from the People’s Republic of China (PRC). (Small diameter electrodes are used as fuel in electric arc and ladle furnaces which are used in the production of steel.) Imports of PRC-manufactured small-diameter graphite electrodes have been subject to antidumping duties since Aug. 21, 2008. “This settlement shows that the Department of Justice is committed to pursuing claims against anyone involved in a scheme to seek an unfair advantage in U.S. markets by evading duties on imported goods, including the individuals who run the companies and knowingly participate in such schemes,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division at the time.

 

The settlement resolved allegations that from December 2009 to March 2012 Ameri-Source International Inc. evaded anti-dumping duties on 15 shipments of small diameter electrodes it had imported from the PRC. Moreover, the government alleged that Ameri-Source and other companies conspired in a scheme to evade duties on these imports. Ameri-Source International would later plead guilty to two counts of smuggling based on the charges. It also admitted to misrepresenting the size of the graphite rods. The corporation was sentenced to pay a $250,000 criminal fine within 10 days. “This settlement underscores one of HSI’s primary efforts, which is to ensure a level playing field for companies engaged in legitimate trade and commerce with the United States,” said Special Agent in Charge John Kelleghan of Homeland Security Investigations (HSI) Philadelphia. “HSI special agents will continue to protect the revenue of the United States and aggressively investigate individuals and companies who attempt to operate outside our laws and regulations.”

 

The allegations that were resolved by the settlement were brought about by a whistleblower at Graphite Electrode Sales Inc. under the provisions of the False Claims Act. This act permits private parties to sue on behalf of the government in cases of False Claims Act violations and to share in any recover that comes as a result of the lawsuit. Graphite Electrode Sales Inc. received approximately $480,000 as its share of the settlement. If you know of abuse that has been committed against the government or one of its agencies you are encouraged to report it and to contact a qui tam lawyer. A qui tam attorney can advise you in such matters and will work to protect your rights under the law.


Appeals Court Rules that the Settlement in the Quest Diagnostic Qui Tam case can be Publicly Revealed.

Earlier this month, the U.S. Court of Appeals for the 3rd Circuit in Pennsylvania ruled that a shared agreement between two qui tam claimants who brought suits against Quest Diagnostics can be made available for public view. The Court ruled in the case of Fair Laboratory Practices Associates v. Riedel that making the settlement agreement available for public viewing would not result in personal harm and that allowing its disclosure was also in the public interest. The suit arose from a qui tam suit brought against Quest Diagnostics (QDI) in a California state court by plaintiffs Riedel and Hunter Laboratories. Both parties filed numerous suits against QDI and other laboratories in the case. Under the qui tam provisions of the False Claims Act, private parties can sue on behalf of the government in cases of False Claims Act violations and share in any recover that comes about as a result of the lawsuit.

According to court documents, Fair Laboratory Practices Associates and Hunter entered into a qui tam sharing agreement and agreed to share in their respective suits against QDI and other laboratories. Appellate Judges Thomas Ambro, Patty Shwartz and Julio Fuentes ruled for a seal reversal, saying that that the district court had, “too quickly discounted the public’s interest,” in the case. (In 2009 Quest Diagnostics agreed to pay the U.S. $302 million to resolve allegations that a subsidiary sold misbranded test kits. In 2015, Quest Diagnostics agreed to pay the United States $1.79 million to resolve False Claims Act allegations)

The case is a part of the government’s ongoing efforts at combating health care fraud via its Health Care Fraud Prevention and Enforcement Team (HEAT) which was announced back in May of 2009 by the Attorney General and the Secretary of Health and Human Services. The result is that since January 2009 the Justice Department has recovered more than $31.4 billion through False Claims Act cases. If you have chosen to disclose False Claims Act violations to the government it is also advised that you contact qui tam lawyers. Qui tam attorneys can advise you in such matters and will work to protect your rights under the law.


TeamHealth Holdings Agrees to Pay $60 Million to Settle Medicare and Medicaid False Claims Act Allegations

When it comes to companies that are alleged to have defrauded the government, overbilling seems to be a recurring theme. This was shown to be the case when earlier this month, the Justice Department announced that hospital service provider, TeamHealth Holdings had agreed to resolve allegations that it violated the False Claims Act by billing Medicare, Medicaid, the Defense Health Agency and the Federal Employees Health Benefits Program for higher and more expensive levels of medical care than were actually performed. (This practice is known as “up-coding.”) Under the terms of a settlement agreement, TeamHealth will pay more than $60 million. “This settlement reflects our ongoing commitment to ensure that health care providers appropriately bill government programs vital to patient health care,” said acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division.

 

The government alleged that TeamHealth knowingly encouraged false billing by its hospitals. Specifically, the Justice Department charged that TeamHealth encouraged hospitals to bill for higher levels of service than were actually provided to their customers. These efforts to improperly maximize billing allegedly included pressure on hospitals with lower billing levels to match the billing levels of their peers. “When health care companies boost their profits by misrepresenting the services they bill to taxpayer-funded health care programs, our office will make sure they are held accountable for their deceptive schemes and that they make changes to bill these programs appropriately,” said Special Agent in Charge Lamont Pugh of HHS-OIG.

 

TeamHealth has also entered into a five-year Corporate Integrity Agreement (CIA) with the U.S. Department of Health and Human Services and Human Services Office of Inspector General (HHS-OIG). The CIA – which is a part of the $60 million settlement – is designed to improve the company’s accountability and transparency in order to avoid a repetition of these kinds of acts. “Medical providers who fraudulently seek payments to which they are not entitled will be held accountable,” said U.S. Attorney Zachary T. Fardon for the Northern District of Illinois. “False documentation of treatment is not just flawed patient care; it is illegal.”

 

The settlement came about as the result of a lawsuit that was filed by Dr. Bijan Oughatiyan, a physician formerly employed by TeamHealth as a hospitalist. The suit was filed under the qui tam, or whistleblower, provisions of the False Claims Act. This act permits private parties to sue on behalf of the government for false claims and to share in any recovery. Dr. Oughatiyan is scheduled to receive approximately $11.4 million. If you know of abuse that has been committed against the government or one of its agencies you are encouraged to report it and to contact a qui tam lawyer. A Qui tam attorney can advise you in such matters and will work to protect your rights under the law.


Princess Cruise Lines Agrees to Pay $40 Million to Resolve Allegations of Deliberate Waste Dumping

The government’s crackdown on fraud and abuse sometimes has international import as was demonstrated last month when a spokesperson for the Department of Justice announced that Princess Cruise Lines Ltd. (Princess) had agreed to plead guilty to seven felony charges that it deliberately polluted the seas and had then intentionally tried to cover it up. The company agreed to pay the largest criminal penalty ever involving deliberate vessel pollution. Princess also pled guilty to charges that it dumped oil and waste from its Caribbean Princess cruise ship into the sea. As part of the plea agreement, cruise ships from eight Carnival cruise line companies are now being held under a court supervised Environmental Compliance Program (ECP) for five years. As a requirement of the ECP, Princess and its eight cruise lines will be required to have an outside entity and a court appointed monitor its compliance with pollution regulations.

 

An investigation of Princess began when a whistleblower provided information to the U.S. Coast Guard and the British Maritime and Coastguard Agency (MCA), that the Cruise line had hired an engineer who was using a “magic pipe” to illegally discharge oil waste off the coast of England. This whistleblower later quit his job. The chief engineer and senior first officer were ordered to cover-up this illegal dumping and to order subordinates to do the same. The U.S. Coast Guard conducted an investigation of the Caribbean Princess in late September 2013 during which crew members continued to lie in compliance with the instructions they were given by their superiors.

 

According to court papers, the Caribbean Princess had been engaging in illegal dumping since 2005. Indeed, an August 26, 2013 waste discharge by the ship involved approximately 4,227 gallons, 23 miles off the coast of England. At that time, its engineers ran seawater through its equipment in order to create a false digital record that covered up such activity. Other illegal dumping methods utilized by Caribbean Princess included the use of an unauthorized bypass pipe to discharge waste off the coast of England. When the Justice Department ordered the removal of this valve they found that it contained black oil. A final practice that the Caribbean Princess and its lines used to circumvent pollution regulations was that it opened a salt water valve when bilge waste was being processed by the oily water separator and oil content monitor. This resulted in waste being pumped back into the graywater system rather than being processed as oily bilge waste.

 

“This shows just how well the U.K. and U.S. can work together on these kinds of cases,” said Jeremy Smart, head of enforcement at the Maritime & Coastguard Agency of the United Kingdom. “It also sends a clear message to the industry that this kind of pollution practice will not be tolerated anywhere in the world.  It also shows that we will always take any information we are given by those who report such practices to us very seriously and will act upon it.”

 

Princess also admitted – among other violations – to the following:

 

  • Illegal discharges took place on the Caribbean Princess dating back to 2005
  • Senior ship engineers dismantled the bypass pipe and instructed crew members to lie
  • Prior to the MCA boarding, the chief engineer and senior first engineer ordered crew members to lie

 

Remedial measures have been taken against Princess as a result of the government’s investigation. Princess must now upgrade its oily water separators and oil content monitors. The cruise line has also instituted many new policies that are designed to help it comply with pollution regulations. The government sought approval that $10 million of the $40 million dollar criminal penalty be devoted to projects that benefit the maritime environment. Parts of the penalty are also scheduled to help other environmental efforts in the UK and in South Florida.

 

If you know of potential violations of the False Claims Act, you are encouraged to contact a qui tam lawyer. Qui tam lawyers will be able to advise you as to your legal options. They will also be able to further educate you about this Act.


Former Tenet Healthcare Corporation Exec Charged for Allegedly Attempting to Defraud the Government of $400 Million – False Claims Act

The government, in its pursuit of fraudulent activities committed by private institutions, often encounters executives who are alleged to have violated not just the False Claims Act but also other laws as well. This was shown to be the case when last week the Department announced that a former senior executive of Tenet Healthcare Corporation had been indicted for his alleged role in scheming to defraud the government of $400 million. The Department alleges that the scheme targeted not only the U.S. government but the Georgia and South Carolina Medicaid Programs and prospective patients of Tenet hospitals. The executive – John Holland – was charged in an indictment filed on January 24, 2017 with one count of mail fraud, one count of health care fraud and two counts of major fraud against the United States. His initial appearance on the charges was on Feb 1 before a judge in the Southern District of Florida. False Claims Act

The indictment alleges that from 2000 through 2013, Holland engaged in a plan to defraud the US government and the Georgia and South Carolina Medicaid Programs by causing the payment of bribes and kickbacks to be made in exchange for patient referrals to several Tenet owned facilities. From approximately 2007 through 2013, Tenet maintained billing several centers located in Boca Raton, Florida. These centers processed Medicaid billings for Tenet hospitals. Holland – it is alleged – attempted to conceal the scheme by circumventing internal account controls and by falsifying Tenet’s books, records and reports. As a result of his scheme, Tenet was able to bill Georgia and South Carolina Medicaid Programs over $400 million. Moreover, the indictment alleges that Tenet obtained more than $149 million in Medicare funds based on the patient referrals that came about as a result of kickbacks and bribes.

The indictment also alleges that Holland made false statements to the HHS-OIG in connection with a 2006 Corporate Integrity Agreement (CIA) that Tenet entered into in 2006. The government says that Holland falsely stated that they were in compliance with the CIA when in fact he knew that Tenet was paying for illegal patient referrals. Finally, the indictment alleges that from 2007 through 2011, Tenet received over $10 billion in payment from federal health care programs. These monies would not have been received by Tenet had they been excluded from participation in federal health care programs. “Medicaid patients have the right to seek healthcare without fearing that care is tainted by bribes and illegal kickbacks,” said Special Agent in Charge for FBI’s Atlanta Division LeValley. “Not only did patients suffer because of these alleged actions, but this kind of alleged abuse threatens to drive up the cost of healthcare for everyone.  The FBI is committed to ensuring that federal laws related to the healthcare industry are enforced, and this case is an example of that commitment.”

 

In late 2016, North Fulton Medical Center Inc. and Atlanta Medical Center Inc. both pleaded guilty to conspiring to defraud the United States in violation of the Anti-Kickback Statute. Tenet and its subsidiary Tenet HealthSystem Medical Inc (THSM) entered into a non-prosecution agreement (NPA) with the government at that time. Under the terms of the agreement, THSM and Tenet will avoid prosecution if they cooperate with the government’s investigation and enhance their compliance with an ethics program and certain internal controls. Tenet agreed to have an independent compliance monitor address and to reduce any reoccurrence of the incidences that are alleged to have occurred in the indictment. Tenet has also agreed to pay over $513 million to resolve the criminal charges and civil claims arising from the matter

Since its inception in March 2007, the Medicare Fraud Strike Force now operates in nine locations across the country. The Strike Force has charged nearly 3,000 defendants who have collectively billed the Medicare program for more than $11 billion. If you know of abuse that has been committed against the government or one of its agencies you are encouraged to report it and to contact a False Claims Act lawyer. A False Claims Act attorney can advise you in such matters and will work to protect your rights under the law.  False Claims Act


Shire Pharmaceuticals LLC and its Subsidiaries Agree to Pay $350 Million to Settle Alleged False Claims Act Violations

Unfortunately, many of the cases involving fraudulent activities committed against the government by private companies involve kickbacks that have allegedly been made to the guardians of public health – health care providers. This was shown to be the case when earlier this month the Department of Justice announced that Shire Pharmaceuticals LLC and several of its subsidiaries including a company it acquired back in 2011 – Advanced BioHealing (ABH) – will pay $350 million to resolve False Claims Act violations involving kickbacks and other unlawful inducement it made to physicians and clinics. The alleged kickbacks and other unlawful inducements involve its product “Dermagraft,” an FDA approved, bioengineered human skin substitute used to treat diabetic foot ulcers. Shire sold the assets connected with Dermagraft in early 2014. “This settlement represents the largest False Claims Act recovery by the United States in a kickback case involving a medical device,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.

 

The settlement resolves allegations that Dermagraft salespersons unlawfully induced clinics and physicians with lavish dinners, entertainment and other incentives in an attempt to get them to use their product – Dermagraft. The Anti-Kickback Statue prohibits the payment of remunerations to induce the use of medical devices covered by Medicare, Medicaid and other federally-funded health care programs. Additionally, the Anti-Bribery State and the Federal Acquisition Regulations prohibits bribes to government officials and employees for the purpose of obtaining a contract or favorable treatment under a supply contract. The United State alleges that ABH and Shire submitted hundreds of millions of dollars of false claims for Dermagraft. “Flagrant and systemic kickback activity of the type at issue in this case is designed to impair and undermine a physician’s independent medical judgment, and will not be tolerated,” said U.S. Attorney A. Lee Bentley III for the Middle District of Florida (MDFL). The MDFL has obtained criminal convictions of three high-level executive who supervised the illegal kickback scheme as well as several health care providers who received the kickbacks.

 

“Giving kickbacks and gratuities to healthcare providers corrupts medical treatment by interjecting personal financial incentives into decisions that should focus on what is best for a particular patient,” said U.S. Attorney Channing D. Phillips for the District of Columbia. In addition to the alleged kickbacks, the settlement also resolved allegations that Shire and ABH unlawfully marketed Dermagraft for uses not approved by the FDA. They were also accused of making false states to inflate the price of Dermagraft. The allegations resolved by this settlement were brought about as the result of six lawsuits that were filed under the qui tam or whistleblower provisions of the False Claims Act. These provisions allow private parties to sue on behalf of the government for false claims and to share in any judgment or settlement. The whistleblower shares in this case remain undetermined. Shire has entered into a Corporate Integrity Agreement (CIA) with the HHS which was implemented in late 2014. If you have knowledge of potential fraud, waste, abuse and mismanagement you are encouraged to contact a qui tam lawyer and the Department of Health and Human Services, at 800-HHS-TIPS (800-447-8477).


Ambulance Company Agrees to Pay $12.7 Million to Resolve False Claims Act Allegations Involving Inflated Medicare Claims and Unnecessary Transport Services

The government’s crackdown on fraud and abuse sometimes leads investigators to defendants who are allegedly more interested in profits than they are with patient health. This was the case when the Department of Justice announced earlier this month that Medstar Ambulance Inc and its four subsidiary companies including its two owners – Nicholas and Gregory Melehov – agreed to pay $12.7 million to resolve allegations that they knowingly violated the False Claims Act. “We expect those who participate in the Medicare program to provide services, including ambulance services, based on the medical needs of patients rather than their desire to maximize profits,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “The Department of Justice is committed to ensuring that those who abuse the Medicare program will be held accountable for their actions.”

 

The government alleges that from January 1, 2011 through Oct. 31. 2014, Medstar violated the False Claims Act by routinely billing for services that did not qualify for reimbursement because the transports were medically unnecessary. This meant that Medstar could bill for higher levels of services than were required by patient conditions and for higher levels of services than were actually provided. “While we recognize that Medicare does and should pay for medically necessary ambulance services, it is our job to ensure that ambulance providers do not take advantage of the system or the patients. This settlement is part of the office’s ongoing effort to eradicate health care fraud, and return money to the taxpayers,” said U.S. Attorney Carmen Ortiz for the District of Massachusetts. As part of the settlement, Medstar agreed to enter into a corporate integrity agreement (CIA) with the U.S. Department of Health and Human Services (HHS).

 

The settlement came about as the result of a lawsuit that was filed by Dale Meehan, a former employee in Medstar’s billing office, under the whistleblower provisions of the False Claims Act. These provisions allow private individuals to sue on behalf of the government in cases of fraud and to then share in the proceeds of any such settlement or judgment. Meehan is scheduled to receive approximately $3.5 million.

 

The settlement demonstrates the government’s ongoing efforts at combating health care fraud via its Health Care Fraud Prevention and Enforcement Team (HEAT) which was announced back in May of 2009 by the Attorney General and the Secretary of Health and Human Services. The result is that since January 2009 the Justice Department has recovered more than $31.4 billion through False Claims Act cases. If your firm is accused of False Claims Act violations it is advised that you contact a False Claims Act lawyer. If you have knowledge of potential fraud, waste, abuse and mismanagement you are encouraged to contact the Department of Health and Human Services, at 800-HHS-TIPS (800-447-8477).


Baxter Healthcare Corporation Agrees to Pay the Government More than $18 Million Dollars to Settle Claims that it failed to follow Good Manufacturing Practices

The endangerment of patient health seems to be a recurring theme when it comes to the government’s efforts to crackdown on fraud. An example of this came last week when the Department of Justice announced that Baxter Healthcare Corporation (Baxter) had agreed to pay $18.158 million to resolve criminal and civil violations arising from Baxter’s failure to follow Good Manufacturing Practices (cGMP) with its drugs products. The resolution reached last week includes a deferred prosecution agreement and penalties and forfeiture totaling $16 million plus a civil settlement under the False Claims Act. This civil settlement totals more than $2 million. Baxter is headquartered in Deerfield, Illinois and has facilities all throughout the US and the world.

The criminal charges state that between July 2011 and November 2012, Baxter introduced into the interstate commerce drugs that violated the Federal Food, Drug and Cosmetic Act (FDCA) because the company did not follow cGMP practices when they were being manufactured. At its North Cove facility (Marion, North Carolina), Baxter manufactured sterile intravenous (IV) solutions in a clean room that were exposed to the presence of mold. According to an employee there, this was determined by the presence of mold on a HEPA filter. Baxter is alleged to have continued to manufacture these IV solutions for months after this problem was identified. Testing of the filters by an unannounced inspection from the U.S. Food and Drug Administration (FDA) also confirmed the presence of several mold species on the HEPA filters. The FDA found no proof that the IV solutions themselves were actually contaminated by the mold.

As part of the deferred prosecution agreement, Baxter admitted that it distributed products that were in violation of the FDCA. As a result of this agreement, Baxter will pay a total of $16 million and will implement enhanced compliance provisions. It must, for example, certify to the government periodically that it is implementing these manufacturing provisions. (The deferred prosecution agreement must be accepted by the U.S. District Court in order to become final.) “FDA’s manufacturing standards are designed to ensure the quality, safety, and efficacy of drugs distributed to American consumers, and FDA expects pharmaceutical companies to correct deficiencies in an expedited manner,” said Special Agent in Charge Justin Green of FDA’s Office of Criminal Investigations, Miami Field Office. “We will remain vigilant in our efforts to protect the U.S. public health from potentially dangerous products.” Additionally, Baxter will pay approximately $2.158 million to the Department of Veterans Affairs based on its failure to follow cGMPs and its violations of the False Claims Act.

 

The civil settlement resolves a lawsuit that was filed by Christopher Wall, an employee of Baxter, under the Whistleblower provisions of the False Claims Act. This provision permits private parties to sue on behalf of the government in cases of false claims and to share in any monetary recovery. Mr. Wall is scheduled to receive $431,535.99 from the proceeds of the civil settlement. The settlement illustrates the government’s ongoing efforts to combat health care fraud which it has accomplished through its Health Care Fraud Prevention and Enforcement Action Team (HEAT). A powerful aid in achieving this goal has been the Whistleblower provisions of the False Claims Act. Whistleblower Medicare cases alone have resulted in millions in payouts to individuals who have reported illegal activities committed by private firms. If you believe you have a qui tam Medicare case, you should contact a Whistleblower law firm for advice.