Pharma Distributor Pays $13.1M to Settle FCA Allegations

Cardinal Health became the target of whistleblowers who alleged that the Ohio-based pharmaceutical distributor recruited new customers by offering and paying cash bonuses to physicians to purchase drugs from them instead of its competitors for use on Medicare and Medicaid patients in violation of the Anti-Kickback Statute and False Claims Act.

As a result, the company recently agreed to pay $13.1 million to settle the allegations. The statute prohibits pharmaceutical distributors from offering or paying compensation to encourage physicians to purchase drugs for use on Medicare and Medicaid patients.

When a pharmaceutical distributor sells drugs to a physician practice to be administered in an outpatient setting, the distributor legally can offer commercially available discounts to its customers, but only under certain circumstances permitted by the Office of Inspector General for the Department of Health and Human Services (HHS-OIG).

However, upfront discount arrangements present significant kickback concerns unless they are tied to specific purchases and distributors must maintain appropriate controls to ensure that discounts are clawed back if the purchaser ultimately does not purchase enough product to earn the discount.

Cardinal Health failed to meet these requirements because the upfront discounts it provided to customers were not attributable to identifiable sales or were rebates Cardinal Health’s customers had not actually earned.

“Cardinal Health thought it hit upon a surefire moneymaker by paying kickbacks to doctors, which cost health benefit programs millions of dollars in potentially fraudulent claims,†said Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Division.

The whistleblowers who brought the cases in 2018 and 2019, Omni Healthcare, Inc. and three individuals, will receive $2.6 million of the recovery.

As we recently wrote about, last year the government paid out $237 million to whistleblowers who exposed fraud. There were 598 qui tam suits filed in the last fiscal year – that’s an average of 11 new cases a week!

The Health Law Offices of Anthony C Vitale represents clients in matters relating to healthcare fraud and violations of the False Claims Act. The firm also is known for its representation of whistleblowers, as well as its ability to defend those who become the target of a whistleblower action. For information call 305-358-4500 or email info@vitalehealthlaw.com.