A.G. Schneiderman Announces $350 Million Federal And Multi-State Agreement With Shire Plc Subsidiaries To Resolve Investigation Into Unlawful Kickbacks

News from Attorney General Eric T. Schneiderman

FOR IMMEDIATE RELEASE
January 11, 2017

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A.G. SCHNEIDERMAN ANNOUNCES $350 MILLION FEDERAL AND MULTI-STATE AGREEMENT WITH SHIRE PLC SUBSIDIARIES TO RESOLVE INVESTIGATION INTO UNLAWFUL KICKBACKS 

NY’s Medicaid Program To Receive Over $1 Million In Restitution

Schneiderman:  Pharmaceutical Companies Must Promote Their Products With Patients’ Best Interests In Mind—Not Their Bottom Line

NEW YORK - Attorney General Eric T. Schneiderman announced today that New York has reached an agreement in principle along with 37  states and the District of Columbia to join the federal government in a settlement with Shire Pharmaceuticals LLC and other subsidiaries of Shire plc (Shire). The agreement settles allegations that Shire and the company it acquired in 2011, Advanced BioHealing (ABH), employed kickbacks and other unlawful methods to improperly promote Dermagraft, a bioengineered human skin substitute approved by the FDA for the treatment of diabetic foot ulcers. Shire plc is a multinational pharmaceutical company headquartered in Ireland, with its United States operational headquarters in Lexington, Massachusetts. Shire will pay the federal government $350 million dollars, of which $14.5 million will go to the Medicaid program, to resolve allegations that Shire’s improper promotion and marketing of Dermagraft caused false claims to be submitted to government health care programs.  The States will receive $6,104,000 for the State share of the Medicaid program.  New York’s Medicaid recovery will be $1,127,558.  Shire sold the assets associated with Dermagraft in early 2014.

“Illegal kickback schemes such as these interfere with a physician’s independent judgment in providing healthcare to their patients,” Attorney General Schneiderman said. “Pharmaceutical companies must promote their products with patients’ best interests in mind—not their bottom line.”

Specifically, the agreement will resolve allegations that between January 1, 2007 and January 16, 2014, Dermagraft salespersons unlawfully induced clinics and physicians with lavish dinners, drinks, entertainment and travel; medical equipment and supplies; unwarranted payments for purported speaking engagements and bogus case studies; and cash, credits and rebates, to induce the use of Dermagraft. The federal Anti-Kickback Statute prohibits, among other things, the payment of remuneration to induce the use of medical devices covered by Medicare, Medicaid and other federally-funded health care programs. Claims filed in violation of the Anti-Kickback Statute are considered false or fraudulent under the False Claims Act. 

The settlement resolves the allegations asserted in six qui tam actions brought by whistleblowers in, or transferred to, the United States District Court for the Middle District of Florida. Two of the qui tam actions named New York and other states and included allegations that Shire submitted or caused to be submitted false claims to the Medicaid program under federal and state False Claims Acts. 

In addition to the kickback allegations, the agreement also resolves allegations that Shire and its predecessor (ABH) unlawfully marketed Dermagraft for uses not approved by the FDA, made false statements to inflate the price of Dermagraft, and caused improper coding, verification, or certification of Dermagraft claims and related services.

A multi-state team led by New York’s Medicaid Fraud Control Unit participated in the investigation and conducted the settlement negotiations with Shire on behalf of the states. The State Team also included representatives of the Florida, Illinois and Ohio Medicaid Fraud Control Units. The states coordinated their investigation in conjunction with the Department of Justice’s Civil Division’s Commercial Litigation Branch, and the U.S. Attorneys’ Offices for the Middle District of Florida, District of Columbia and Eastern District of Pennsylvania.

Working on the investigation for New York’s Medicaid Fraud Control Unit were Principal Auditor Investigator Meghan Collins, Senior Auditor Investigator Olga Yanulevich, Chief of the Civil Enforcement Division Carolyn Ellis, and Special Assistant Attorney General Gerri Gold. MFCU is led by Director Amy Held and Assistant Deputy Attorney General Paul Mahoney.

The claims resolved by the settlement are allegations only, and there has been no determination or admission of liability by Shire. 

 

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