Mallinckrodt Agrees to Pay $15.4 Million to Resolve Alleged False Claims Act Liability for “Wining and Dining” Doctors

On September 4, 2019, the United States Department of Justice (DOJ) announced that drug maker Mallinckrodt agreed to pay $15.4 million to resolve claims that its predecessor Questcor Pharmaceuticals paid illegal kickbacks to doctors to induce prescriptions of Questcor’s drug H.P. Acthar Gel from 2009 to 2013. The Government intervened in these two whistleblower suits entitled United States of America ex rel. Strunck et al. v. Mallinckrodt ARD, Inc., No. 12-CV-0175 (E.D. Pa.) and United States of America ex rel. Clark v. Questor Pharmaceuticals, Inc., No. 13-CV-1776 (E.D. Pa.), alleging that 12 Questcor sales representatives, marketing Acthar, provided illegal remuneration to health care providers. The prohibited remuneration took the form of lavish meals and entertainment. The Government further alleged that the company provided this in-kind remuneration with the intent to induce referrals of Acthar for Medicare Beneficiaries, resulting in a violation of the Anti-Kickback Statute (AKS) and the submission of false claims to Medicare. Significantly, despite the settlement, the Government is continuing to pursue claims in these two lawsuits alleging that Mallinckrodt violated the False Claims Act (FCA) by using a foundation as a conduit to pay illegal kickbacks in the form of copay subsidies for Acthar. 

The AKS prohibits pharmaceutical manufacturers from offering or paying, directly or indirectly, any remuneration (money or anything of value) with the intent to induce a health care provider to prescribe a drug reimbursed by a federal health care program, including Medicare. This prohibition extends to such practices as “wining and dining” doctors to induce them to write Medicare prescriptions of a company’s products. The FCA prohibits submission of false claims to a Federal health care program. The FCA prohibits knowingly presenting (or causing to be presented) to the Federal Government a false claim or fraudulent claim for payment or approval. 

These two cases serve to illustrate the Government’s increased scrutiny of drug manufacturers’ compensation arrangements with prescribers of their products, and a marked increase in the Government’s efforts to fight healthcare fraud. These cases and other high-profile enforcement actions highlight the necessity for health care providers to create robust compliance programs and for manufacturers to maintain internal guidelines for interactions with health care professionals (HCPs). Pharmaceutical companies should further review applicable state and federal laws and regulations concerning interactions with HCPs, including the federal AKS, state-specific anti-kickback statutes, the federal Stark Law and the FCA before entering into arrangements with providers to avoid civil liability or potential government criminal enforcement actions as well as potential exclusion from participation in federal health care programs.     

Frier Levitt represents a broad array of health care stakeholders, including physician groups, innovative drug and device manufacturers, emerging biotechnology companies, private equity and other industry participants in healthcare transactions, self-disclosures and government investigations. Additionally, Frier Levitt advises manufacturers and healthcare providers, on the proper structuring of arrangements. Contact Frier Levitt to speak with a regulatory attorney to ensure compliance with legal and ethical guidelines when interacting with one another.

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