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Pharmaceutical Heist: $421M Scam Unraveled
Washington — In a stunning display of greed, three major pharmaceutical manufacturers have agreed to pay $421.2 million to settle False Claims Act allegations, the Justice Department announced today. Abbott Laboratories Inc., B. Braun Medical Inc. and Roxane Laboratories Inc. n/k/a Boehringer Ingelheim Roxane Inc. and affiliated entities have been accused of engaging in a scheme to report false and inflated prices for numerous pharmaceutical products, knowing that federal healthcare programs relied on those reported prices to set payment rates.
The actual sales prices for the products were far less than what defendants reported, resulting in a massive ‘spread’ that allowed healthcare providers and pharmacists to reap enormous profits from government reimbursements. The government alleges that Abbott, Roxane and Braun created artificially inflated spreads to market, promote and sell the drugs to existing and potential customers.
The ‘spread’ refers to the difference between the resulting inflated government payments and the actual price paid by healthcare providers for a drug. The larger the spread, the larger the profit for the healthcare provider or pharmacist who gets reimbursed by the government.
Roxane is paying $280 million to resolve claims against it and related entities, including Boehringer Ingelheim Corp. and Boehringer Ingelheim Pharmaceuticals Inc. The United States intervened and filed suit against Roxane on Jan. 18, 2007, alleging that Roxane reported false prices for the following drugs: Azathioprine, Diclofenac Sodium, Furosemide, Hydromorphone, Ipratropium Bromide, Oramorph SR, Roxanol, Roxicodone and Sodium Polystyrene Sulfonate.
Abbott is paying $126.5 million to resolve the claims against it in two qui tam cases. In the first, the United States intervened and filed suit against Abbott in May 2006, alleging violations of the False Claims Act with respect to its pricing of dextrose solutions, sodium chloride solutions, sterile water and vancomycin. The second lawsuit was filed by a whistleblower, and involved Abbott’s pricing of the drug erythromycin, an oral antibiotic.
B. Braun Medical Inc., a U.S. subsidiary of German pharmaceutical company, B. Braun Melsungen AG, has agreed to pay $14,744,000 to resolve allegations that it created artificially inflated spreads to market, promote and sell the drugs to existing and potential customers.
These significant settlements are a part of the Attorney General’s aggressive effort to combat fraud on the federal treasury, said Assistant Attorney General for the Civil Division Tony West. Since January of 2009, the Justice Department’s Civil Division and the U.S. Attorneys around the nation have recovered more than $9 billion in cases alleging false claims, fraud against the government, and violations of the Food, Drug and Cosmetic Act.
Key Facts
- State: Federal
- Category: Drug Trafficking|Fraud & Financial Crimes|White Collar Crime
- Source: DOJ Press Release ↗
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