04/29/2010

News / Schwarz Pharma Pays $22 Million to Settle False Claims Allegations Concerning Reimbursement for Unapproved Drugs

WASHINGTON – Schwarz Pharma Inc. will pay $22 million to resolve False Claims Act allegations that the company failed to advise the Centers for Medicare and Medicaid Services (CMS) that two unapproved products did not qualify for coverage under federal health care programs, the Justice Department announced today. Schwarz, now a subsidiary of Belgium-based UCB S.A., is alleged to have submitted false quarterly reports to the government related to a pair of drugs, Deponit and Hyoscyamine Sulfate Extended Release (Hyoscyamine Sulfate ER).

Deponit is a nitroglycerin skin patch that has been used to prevent angina. Hyoscyamine Sulfate ER is an antispasmodic medication that has been used to treat various stomach, intestinal, and urinary tract disorders that involve cramps, colic, or other painful muscle contractions. While the active ingredients in Deponit and Hyoscyamine Sulfate ER had been in products on the market for many years, the Food and Drug Administration made determinations in 1997 and 1999 that resulted in the drugs being ineligible for reimbursement by government health care programs such as Medicaid.

The United States alleges that Schwarz misrepresented the regulatory status of both drugs and failed to advise CMS that these unapproved drugs did not qualify for coverage under federal health care programs. As a result, the government contends, Schwarz knowingly caused false claims to be submitted for Deponit and Hyoscyamine Sulfate ER. Ultimately, neither Deponit nor Hyoscyamine Sulfate ER ever received full regulatory approval for safety and effectiveness, and neither product is currently on the market.

"Pharmaceutical companies must provide accurate and complete information to the government about the drugs they manufacture," said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. "There will be consequences for companies who provide false information to obtain taxpayer dollars for their drugs."

The settlement resolves allegations against Schwarz in two separate multi-defendant whistleblower actions captioned United States ex rel. Constance Conrad v. Schwarz Pharma, et al., No. 02-11738-NG (D. Mass.), and United States ex rel. James Conrad v. Schwarz Pharma et al., Civil No. 08-cv-428 (S.D. Tex.). The federal share of the settlement is $12,243,836 and the state Medicaid share is $9,756,164. The lawsuits were brought under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private parties with knowledge of fraud to sue on behalf of the United States and share in any recovery. Under the settlement,

the two whistleblowers will receive a total of $1,836,575 from the federal share and additional amounts from the state share.

"This False Claims Act agreement shows that the Department of Justice will not allow manufacturers to evade the drug approval process and expect the government to pay for less than effective drugs," said Carmen Ortiz, U.S. Attorney for the District of Massachusetts.

"We will continue to pursue companies that submit false information to obtain payment for unapproved drugs that are ineffective or on the market illegally," said Jose Angel Moreno, U.S. Attorney for the Southern District of Texas.

This case was investigated by the Justice Department’s Civil Division, the U.S. Attorneys’ Offices for the District of Massachusetts and the Southern District of Texas, and the Office of Inspector General of the Department of Health and Human Services.

This settlement is part of the government’s emphasis on combating health care fraud. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover approximately $2.38 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 have topped $3 billion.

http://www.justice.gov/opa/pr/2010/April/10-civ-499.html

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