The U.S. Justice Dept. said yesterday that Shire (NSDQ:SHPG) and its subsidiaries will cough up $350 million to settle allegations that Shire and the company it acquired in 2011, Advanced BioHealing, gave kickbacks to clinics and physicians in exchange for using its bioengineered human skin substitute, Dermagraft.
“This settlement represents the largest False Claims Act recovery by the United States in a kickback case involving a medical device,” principal deputy assistant attorney general Benjamin Mizer said in prepared remarks. “Kickbacks by suppliers of healthcare goods and services cast a pall over the integrity of our health care system. Patients deserve the unfettered, independent judgement of their health care professionals.”
The federal and state False Claims Act allegations accuse the company of providing lavish dinners, drinks, entertainment, travel and more to clinics and physicians in the hopes that they would use Dermagraft in their practices. The United States said that the company violated anti-kickback statutes and anti-bribery statutes, therefore submitting hundreds of millions of dollars of false claims to federally-funded health care programs 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 judgement, and will not be tolerated,” Middle District of Florida’s U.S. Attorney A. Lee Bentley III said. “This lawsuit and today’s historic settlement demonstrate our office’s vigilant and on-going efforts to safeguard federal health care program beneficiaries from the effects of such illegal and deplorable conduct.”
The middle district of Florida has obtained criminal convictions for 3 Shire executives and a number of healthcare providers who received kickbacks as a part of the scheme, according to the U.S. Justice Dept.
“U.S. Dept. of Veterans Affairs healthcare providers are obligated to render care free of any improper financial influences” Dept. of Veterans Affairs’ special agent in charge Michael Seitler said. “This is particularly important at VA, since we care for many of this nation’s heroes who have sacrificed their own welfare for our freedom. In this case, ABH saw a dramatic rise in its sales to the VA during the period of time it provided illegal inducements to multiple VA clinicians across the country. These corrupt practices served to erode the public trust in our healthcare system. The VA [office of inspector general] is committed to investigating, and bringing to justice, those who engage in these illegal practices.”
The settlement also resolved allegations that Shire and Advanced BioHealing made false statements to inflate the price of Dermagraft and marketed it for uses that are not approved by the FDA.
“Patients must be able to trust that decisions made by their doctors are based on unbiased professional judgement and not personal gain,” HHS inspector general’s chief counsel Gregory Demske said. “The office of the inspector general will continue to monitor Shire’s compliance with federal healthcare programs through its oversight of Shire’s Corporate Integrity Agreement.”