In a noteworthy settlement, Pfizer Inc. has agreed to pay nearly $60 million to resolve allegations under the Anti-Kickback Statute (AKS) and False Claims Act for improper physician payments related to its Nurtec ODT (rimegepant) product. These allegations highlight critical lessons for healthcare industry players, especially around the importance of robust due diligence when acquiring other companies and ensuring full compliance with healthcare fraud regulations, such as the AKS.
The Allegations: Kickbacks in the Promotion of Nurtec ODT Resulting in False Claims
The settlement stems from allegations related to Pfizer’s acquisition of Biohaven Pharmaceuticals, the company responsible for developing Nurtec ODT, a prescription medication used to treat migraines. According to the Department of Justice (DOJ), prior to Pfizer’s acquisition of Biohaven in 2022, Biohaven engaged in improper payments to physicians in connection with promoting Nurtec ODT. These payments were made to induce the physicians to prescribe the drug in violation of the AKS.
The AKS prohibits offering, paying, soliciting, or receiving any remuneration to induce or reward making or arranging for referrals or other business that is reimbursed by federal healthcare programs. In this case, payments were made to physicians to incentivize prescription ordering of Nurtec ODT.
Between March 2020 and September 2022, Biohaven allegedly provided improper remuneration to physicians under the guise of legitimate consulting and speaking engagements. Prescribers were selected to be part of speaker programs with the intent to induce these providers to prescribe Nurtec ODT. Compensation for the speaker arrangements ranged from tens of thousands of dollars to more than a hundred thousand dollars. Additionally, Biohaven allowed prescribers to attend multiple programs on the same topic (resulting in no educational benefit), while Biohaven paid for the attendees’ expensive meals and drinks. This fact in particular has been flagged by an OIG Special Fraud Alert as a suspect activity, as attending the same event or speaking to the same audience repeatedly provides little educational value and is a suspect referral incentive.
Importantly, violation of the AKS can result in the submission of a false claim under the federal False Claims Act because any claims for reimbursement that are submitted as a result of illegal kickbacks are considered to be false or fraudulent, as they are tainted by improper financial incentives.
The Role of the Whistleblower
This case highlights the role of the “qui tam relator,” or the whistleblower, who flagged Biohaven’s program. In this instance, the former Biohaven sales representative filed the qui tam lawsuit, alleging that the company had made improper payments to physicians. Qui tam actions allow individuals with knowledge of fraud to bring a lawsuit on behalf of the government under the False Claims Act. The whistleblowers are then entitled to a percentage of the government’s recovery. In this case, the whistleblower stands to receive approximately $8.4 million as her share of the $60 million settlement, which serves as both an incentive for exposing fraud and a warning to companies that whistleblowers continue to serve as a significant source of exposure. Companies must be vigilant in ensuring that their practices are compliant with healthcare regulations and must work proactively to mitigate violations or risk potential qui tam actions or other forms of whistleblower litigation.
The Impact of the Settlement
The $60 million settlement serves as a clear reminder of the government’s continued focus on healthcare fraud enforcement, particularly related to kickbacks and improper financial arrangements. Moreover, even though the suspect activities occurred before Pfizer’s acquisition of Biohaven, and Pfizer promptly terminated the problematic program upon acquisition, Pfizer’s corrective action did not shield it from facing the penalties associated with the pre-acquisition misconduct. This outcome sends an important message to healthcare companies: diligence is critical when acquiring other businesses. Even with strong indemnification clauses in acquisition agreements, companies should not assume that such clauses will protect them from penalties or public scrutiny if the acquired company has engaged in unlawful activities. Thorough diligence and proactive compliance measures are essential to avoid significant legal and financial exposure. Additionally, the case illustrates the critical role of whistleblowers in identifying and exposing fraudulent practices.
How Frier Levitt Can Help
As the DOJ continues to prioritize healthcare fraud enforcement, this case serves as an important reminder that the penalties for violations of the AKS can be substantial, and even large, publicly traded companies can face significant consequences. Whether you are considering a healthcare acquisition that requires due diligence, in need of an overall compliance check-up (particularly of your marketing practices), or if you are a potential whistleblower seeking information on next steps, contact Frier Levitt for assistance.
