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Post date: January 9 2014

A.G. Schneiderman Announces $40m Settlement Resolving Fraud Allegations Against Health Care Giant Carefusion

New York’s Medicaid Program To Be Reimbursed $2M Of The Multi-State Settlement With California Supplier Of Medical And Surgical Supplies And Devices; Agreement Resolves Civil Charges Of Unlawful Marketing And Kickbacks Aimed At Promoting Sales

Schneiderman: Illegal Acts By Health Care Companies Is Dangerous To New York’s Health

NEW YORK - Attorney General Eric T. Schneiderman today announced that New York has joined with 49 other states, the District of Columbia and the federal government in a global settlement with CareFusion, a California manufacturer of medical and surgical supplies and medical devices, resolving civil allegations of unlawful marketing practices and the payment of kickbacks aimed at promoting sales of CareFusion’s surgical preparation solution, Chloraprep.

San Diego-based CareFusion, a corporation spun off from Cardinal Health in 2009, allegedly promoted and marketed the solution for uses that were not approved by the U.S. Food and Drug Administration (FDA) and for uses that were not medically appropriate. Under the terms of agreement, unsealed today in U.S. District Court in Kansas, CareFusion will pay $40.1 million to the states and the federal government. 
New York’s share is $2,067,976.04, plus accrued interest. 

“Illegal schemes by health care companies and pharmaceutical corporations have a direct impact on New Yorkers and on precious taxpayer funds that go to support New Yorkers in need,” Attorney General Schneiderman said. “My office is watching, and we will work with our partners in law enforcement across the state and the country to protect our citizens.”  

Once the FDA approves a surgical solution such as Chloraprep as safe and effective, its manufacturer cannot market or promote it for an “off-label” use, i.e., any use not specified on the FDA-approved product label. Chloraprep was approved by the FDA for specific inpatient hospital procedures, including the preparation of a patient’s skin prior to surgery or injection, but the FDA explicitly rejected its use for intravenous preparation and suture care. 

The states and the federal government charged that between September 1, 2009, and August 31, 2011, CareFusion illegally promoted Chloraprep for use with intravenous preparation and suture care, which went beyond the FDA-approved label uses for Chloraprep. CareFusion also allegedly disseminated unsubstantiated claims about other uses for Chloraprep solutions. 

The governments further charged that in 2008, over a period of several months, CareFusion’s predecessor corporation entered into agreements, for which CareFusion assumed legal and financial responsibility, for the payments of monies to an entity known as Health Care Concepts, Inc. (HCC). The payments were allegedly made in order to conceal kickbacks to the physician-owner of HCC, for the purpose of promoting and inducing providers to use Chloraprep. Those payments were in violation of various federal and state anti-kickback statutes. 

CareFusion’s alleged unlawful conduct caused false claims to be submitted to, or caused purchases by, government-funded health care programs, including state Medicaid programs. 

The settlement resolves a whistleblower lawsuit filed in United States District Court for the District of Kansas, under the provisions of the federal False Claims Act and state False Claims statutes.

A team from the National Association of Medicaid Fraud Control Units (NAMFCU) worked closely with the federal government on the investigation and conducted the settlement negotiations with CareFusion on behalf of the states. Team members included representatives from the Offices of the Attorneys General for New York, California, Idaho, Maryland, North Carolina and Texas. 

The investigation was assisted by Special Assistant Attorney General Jill Brenner, and by NAMFCU team members Associate Special Auditor Investigator Deowattie Persaud and Assistant Chief Auditor Investigator Michael LaCasse of New York’s Medicaid Fraud Control Unit. They worked under the supervision of Acting Medicaid Fraud Control Unit Director Amy Held and Executive Deputy Attorney General of the Division of Criminal Justice Kelly Donovan.

A copy of today’s agreement can be read here.

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