Former Big Pharma President Indicted For Nationwide Kickback Scheme

warner chillcotOn October 29, 2015, the Department of Justice announced that New Jersey-based Warner Chilcott U.S. Sales LLC, a subsidiary of pharmaceutical manufacturer Warner Chilcott PLC, agreed to plead guilty to a felony charge of health care fraud in federal court in Boston. The company admitted to paying kickbacks to doctors throughout the U.S. and also admitted to manipulating marketing claims for drugs so insurance provided by federal healthcare programs would authorize payments for prescriptions in violation of the False Claims Act. The company is the manufacturer of drugs that include Actonel®, Asacol®, Atelvia®, Doryx®, Enablex®, Estrace® and Loestrin®.

Also on Thursday, the DOJ unsealed an indictment charging W. Carl Reichel, former Warner Chilcott president with one count of conspiring to pay kickbacks to doctors across the United States. Mr. Reichel was arrested Thursday in Boston.

The DOJ said Reichel’s strategy was for sales representatives to provide doctors with free dinners, phony speaker fees, and entertainment so they would prescribe Warner Chilcott drugs. The sales representatives were given unlimited expense accounts to entertain doctors, spouses and others at expensive restaurants. Referred to internally as “Medical Education Events” or “med eds”, Reichel allegedly required sales representatives to meet a quota of two such events per week.

Under the federal Anti-Kickback law, it is illegal to offer or pay remuneration to physicians to induce them to refer individuals to pharmacies for the dispensing of drugs for which payments are made under a federal health care program including Medicare, Medicaid and TRICARE.  The indictment alleges that Warner Chilcott sales representatives, at the direction of management, provided payments, meals and other remuneration associated with so-called “Medical Education Events.”  These events, which were often held at expensive restaurants, often contained minimal or no educational component and were instead used to pay physicians in an attempt to gain a “competitive advantage” over other companies.  Warner Chilcott also enlisted high-prescribing physicians as “speakers” for the company when in fact, the “speakers” often did not speak and, instead, the payments were intended to induce prescriptions.  For instance, Warner Chilcott informed “speakers” who were not prescribing at a high volume that they would not be paid for subsequent events unless their prescribing habits increased.

In addition, the indictment alleges that Warner Chilcott sales representatives knowingly submitted false, inaccurate, or misleading prior authorization requests and other coverage requests to federal healthcare programs for the osteoporosis medications Atelvia® and Actonel®, in violation of the False Claims Act. The false information was provided in order to get around formulary restrictions that favored less expensive osteoporosis drugs.  As detailed in the indictment, Warner Chilcott sales representatives filled out numerous prior authorizations for Atelvia®, using “canned” medical justifications which often were inconsistent with the patients’ medical conditions.  In some instances, Warner Chilcott sales representatives submitted these prior authorizations directly to insurance companies, holding themselves out to be physicians.  In other cases, sales representatives coached doctors about which medical justifications would result in an approved prior authorization, whether or not the justification was true for a particular patient.

“The Justice Department is committed to protecting the integrity of physician prescribing decisions and ensuring that financial arrangements in the healthcare marketplace comply with the law,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Department will continue to hold companies and responsible individuals accountable when they use improper incentives, like those alleged here, to promote their products.”

“Doctors’ medical judgment should be based on what is best for the patient, and not clouded by expensive meals and other pharmaceutical company kickbacks,” said U.S. Attorney Carmen M. Ortiz for the District of Massachusetts.  “Pharmaceutical company executives and employees should not be involved with treatment decisions or submissions to a patient’s insurance company.  Today’s enforcement actions demonstrate that the government will seek not only to hold companies accountable, but will identify and charge corporate officials responsible for the fraud.”

Warner Chilcott agreed to pay $125 million to resolve its criminal and civil liability arising from the illegal marketing activities. Under the terms of the plea agreement, the company will pay a criminal fine of $23 million and in the civil settlement, the company will pay an additional $102 million to the federal government and states to resolve allegations it violated the federal Anti-Kickback Statute. The federal share of the civil settlement is $91.5 million, and the state Medicaid share is $10.6 million.

The civil settlement resolved a lawsuit (United States ex rel. Alexander, et al. v. Warner Chilcott plc, et al., Civil Action No. 11-CA-1121 (D. Mass.) filed under the whistleblower provisions of the False Claims Act. The DOJ said the whistleblowers who filed suit will receive $22.9 million and declined to say how many whistleblowers were involved.

Also in the case prior to Thursday, two individuals pled guilty to criminal offenses in the case and two others had been charged. Former Warner Chilcott district managers Jeffrey Podolsky of New York and Timothy Garcia of California pled guilty to conspiracy to commit healthcare fraud and violations of the Health Insurance Portability and Accountability Act (HIPAA). Former district manager, Landon Eckles of North Carolina was charged for criminal HIPAA violations related to the alleged insurance authorization scheme and Dr. Rita Luthra of Massachusetts was charged with accepting free meals and speaker fees from Warner Chilcott in return for prescribing its osteoporosis drugs.

For further information on the subject matter of this alert, please contact the following FisherBroyles attorneys.

Brian E. Dickerson

Nicole Hughes Waid