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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).