This settlement among the United States, the States, and pharmaceutical companies Mallinckrodt plc and its subsidiary Mallinckrodt ARD LLC resolved allegations that Mallinckrodt violated the federal and state False Claims Acts by knowingly underpaying Medicaid rebates for its high-priced drug Acthar. The total settlement amount is $233,707,865 (plus interest). The United States will receive $123,642,146, and States will receive $110,065,718.
Mallinckrodt knowingly misreported Acthar’s base Average Manufacturer Price (“base AMP”) from January 2013 through June 2020. By doing so, it reduced the rebates it paid to the Medicaid Drug Rebate Program (MDRP) by approximately $650 million. Mallinckrodt had increased Acthar’s price from approximately $50 per vial in 2001 to almost $40,000 per vial.
Where a drug’s price is increased above the rate of inflation, manufacturers must pay an additional rebate. To avoid meeting its increased rebate obligations, Mallinckrodt began reporting Acthar’s base AMP as if it had been approved in 2010 (after the enormous price increases). Acthar, however, had been approved in 1952.
Our client, James Landolt, served as Mallinckrodt’s Director of Internal Controls, Gross to Net Accounting and Government Reporting from November 2015 until July 2017. In that position, he learned that Mallinckrodt had been misreporting the base AMP for Acthar and had underpaid the MDRP by hundreds of millions of dollars.
Mr. Landolt resigned from Mallinckrodt in 2017 and filed a qui tam action in 2018 alleging that Mallinckrodt’s knowing failure to pay correct rebates for Acthar violated federal and state False Claims Acts. In March 2020, the United States intervened in his lawsuit. In June 2020, twenty-eight states, the District of Columbia, and Puerto Rico also intervened.
While the False Claims Act was still under seal, Mallinckrodt sued the Center for Medicare and Medicaid Services (CMS) in federal court in the District of Columbia. Mallinckrodt sought a ruling that it was correctly reporting Acthar’s base AMP and did not have to comply with instructions from CMS to correct its reporting and pay what it owed. In March 2020, the District Court rejected Mallinckrodt’s argument. Two months later, it rejected Mallinckrodt’s motion for reconsideration and for a preliminary injunction.
In October 2020, Mallinckrodt filed for bankruptcy, which stayed the pending False Claims Act case. On March 2, 2022, the bankruptcy court confirmed Mallinckrodt’s plan of reorganization, which included this $234 million settlement.
As part of the settlement, Mallinckrodt entered into a five-year Corporate Integrity Agreement with HHS-OIG that requires, among other things, an independent review organization to annually review multiple aspects of the company’s practices relating to the Medicaid Drug Rebate Program. Mallinckrodt began reporting the correct base AMP for Acthar in June 2020 after losing its case in United States Court in D.C.
Mr. Landolt will receive a 20% share of amounts paid under the federal and state False Claims Acts. Whistleblowers like Mr. Landolt are critical in the fight against fraud. Under the False Claims Act, a private citizen-relator who suspects or knows of fraud against the government can file a sealed complaint on behalf of the government. In successful cases, the relator is entitled to a share of the government’s recovery.
Our firm is proud to be a member of the legal team representing the whistleblower in a recent municipal bond fraud settlement. The $70 million qui tam settlement was with eight of the nation’s largest banks. It is the largest reported settlement ever under the Illinois False Claims Act.
Our client, Edelweiss Fund LLC, alleged that various affiliates of eight large banks engaged in widespread fraud and collusion in the fees they charged and the interest rates they set for tax-exempt municipal bonds known as VRDOs. The defendant banks included: Bank of America, Barclays, Citigroup, JPMorgan Chase, Morgan Stanley, Fifth Third Bancorp, BMO, and William Blair.
Specifically, Edelweiss alleged that, while Illinois hired the defendant banks to market and price the bonds at the lowest possible interest rates, they instead engaged in a scheme to inflate the rates to collect millions in fees without providing the services for which they were retained. Edelweiss further alleged that the banks did this, among other reasons, to avoid having the bonds tendered back to them.
Edelweiss has brought similar lawsuits alleging the same municipal bond fraud scheme. Three additional cases — in California, New York, and New Jersey — are continuing.
Edelweiss’s principal is Johan Rosenberg. He has more than 30 years’ experience advising municipalities on VRDOs and other types of municipal bonds.
I am gratified by the settlement and hopeful we will obtain similar results for the other states. My goal continues to be securing for my clients and other state and local governments the lowest-cost municipal bond financing possible to maximize the overall benefit the public receives from the critical government projects these VRDOs fund.
–Johan Rosenberg
Under the Illinois False Claims Act and numerous other states, whistleblowers can bring lawsuits on behalf of the government against those committing fraud against the government. In return, successful whistleblowers can receive up to 30% of what the government recovers from the lawsuit.
For its successful settlement in Illinois, Edelweiss received the maximum reward of 30% of the government’s $48 million portion of the settlement. The remaining $22 million went towards Edelweiss’ legal fees and expenses in bringing the suit.
Edelweiss is represented in these matters by a large team of lawyers across the country. In addition to Whistleblower Law Collaborative LLC, the firms include Constantine Cannon, Schneider Wallace Cottrell Konecky LLP, McKool Smith, Behn & Wyetzner, DiCello Levitt LLP, Steyer Lowenthal Boodrookas Alvarez & Smith LLP, Stone & Magnanini LLP, and Howard Law. Erica Blachman Hitchings and David Lieberman are the WLC attorneys working on the Edelweiss matters.
The Securities and Exchange Commission (SEC) awarded more than $17 million to a whistleblower represented by Whistleblower Law Collaborative’s Suzanne Durrell and Bob Thomas. The whistleblower client submitted a tip under the SEC Whistleblower Program. The tip and subsequent information and assistance led to monetary sanctions in an SEC enforcement action and a related action. The SEC awarded our client 30% of the monetary sanctions collected, the highest percentage award allowed under the SEC Whistleblower Program.
[This] award underscores the SEC’s commitment to rewarding meritorious whistleblowers who provide valuable information and exemplary cooperation that advance the agency’s enforcement efforts,
–Creola Kelly, Chief of the SEC’s Office of the Whistleblower in announcing the award.
Attorneys Bob Thomas and Suzanne Durrell emphasized: “We and our client are very gratified that the SEC recognized and rewarded the extraordinary contributions of our client. We applaud the SEC for its impressive skill and dedication in prosecuting this matter, and for its highly successful track record in working with whistleblowers and their attorneys.”
The SEC program operates somewhat differently than the False Claims Act and other qui tam statutes. SEC provides a very helpful graphic on the process:
In general, a whistleblower files a “Tip, Complaint, or Referral” form (TCR) with the SEC office of the whistleblower. The SEC then investigates and at its choice may pursue claims based on the tip. SEC periodically posts “notices of covered action.” These notices detail any results potentially subject to whistleblower rewards. Then, whistleblowers must file to claim their share of the recovery. Notably, the program does not give the whistleblower the right to pursue their own claims if the SEC does not.
The SEC may award between 10-30% of the monetary recoveries to an eligible whistleblower. It uses several factors in deciding how much to award. Here, the SEC noted that the highest possible award was appropriate because:
The SEC Whistleblower Program has been very successful. Since the program began, enforcement matters brought using information from meritorious whistleblowers have resulted in orders for nearly $5 billion in total monetary sanctions. This money is returned to the Investor Protection Fund for the benefit of taxpayers, defrauded investors, and others harmed by marketplace misconduct.
Since 2012, the SEC has awarded approximately $1.3 billion to over 275 individual whistleblowers. Importantly, the SEC provides all awards from the Investor Protection Fund. As a result, no money is taken or withheld from harmed investors to pay whistleblower awards.
Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action. Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.
Further, as in this matter, the SEC protects the confidentiality of whistleblowers and does not disclose any information that could reveal a whistleblower’s identity.
The Whistleblower Law Collaborative has secured awards for clients in several SEC whistleblower cases. It also represents whistleblowers in ongoing SEC investigations.
Whistleblower Law Collaborative LLC, based in Boston, devotes its practice entirely to representing clients nationwide in bringing actions under the federal and state whistleblower laws and programs, False Claims Acts and other whistleblower programs. We have extensive experience representing whistleblowers in False Claims Act and SEC matters.
If you are considering submitting a tip, complaint, or referral to the SEC or are aware of other types of fraud, contact us for a free, confidential consultation.
The United States has settled a federal False Claims Act qui tam case brought by a client of Whistleblower Law Collaborative LLC against Arthrex, Inc., a Florida-based medical device maker primarily to the orthopedic surgery industry. The settlement announced today by the Department of Justice and the United States Attorney for the District of Massachusetts involves allegations that Arthrex paid kickbacks to market two of its surgical products.
In announcing the settlement, Acting United States Attorney Nathaniel R. Mendell said:
Paying bribes to physicians to distort their medical decision-making corrupts the health care system. This settlement demonstrates our dedication to ensuring that taxpayers and patients get a health care system that is on the level. Kickbacks have no place anywhere in our health care system, and we will continue to identify and punish this illegal conduct.
Under the terms of the settlement, Arthrex has agreed to pay the United States $16 million plus interest to resolve allegations that it defrauded Medicare by paying illegal remuneration to Dr. Peter Millett, a Colorado based orthopedic surgeon, to induce him to purchase, order, or recommend the purchasing or ordering of Arthrex medical devices. Arthrex has also entered into a Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General (HHS-OIG).
According to the settlement agreement with DOJ, the United States contends that in 2006, Arthrex had denied Dr. Millett’s request for royalties for his claimed contributions to the development of the SutureBridge and SpeedBridge kits—two Arthrex product lines that surgeons use in joint repair surgery. However, when Dr. Millett threatened to realign his loyalty to an Arthrex competitor in 2010, Arthrex not only acquiesced to Dr. Millett’s royalty request but also agreed to pay him royalties for past and future sales of SutureBridge and SpeedBridge kits at a higher percentage rate than was the company’s ordinary royalty practice. Pursuant to this agreement, Arthrex paid Dr. Millett millions of dollars.
The United States further contends that one purpose of Arthrex’s payments was to induce Dr. Millett to purchase, order, or recommend the purchasing or ordering of Arthrex medical devices, in violation of the federal Anti-Kickback Statute. Consequently, associated claims submitted to the Medicare program were false or fraudulent in violation of the False Claims Act.
Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Division explained that
Arthrex may have believed it could increase profits by paying millions of dollars in kickbacks to a physician, under the guise of royalty payments, to increase the use of its products. But today’s $16 million settlement makes it clear that its unscrupulous scheme backfired. Anyone involved in, or entertaining, similar activity should know that health care fraud is a priority for the FBI, and we will pursue anyone trying to misuse this country’s vital health care system.
Acting Assistant Attorney General Brian M. Boynton for the Justice Department’s Civil Division emphasized:
The Department of Justice will continue to pursue medical device manufacturers that pay kickbacks to boost their profits. Such arrangements can improperly influence physicians’ decision-making and result in the misuse of critical federal health care program funds.
Arthrex also entered into a five-year Corporate Integrity Agreement (CIA) with HHS-OIG setting forth requirements for future compliance. HHS-OIG Special Agent Philip M. Coyne stressed that “Medical device manufacturers who engage in such kickback schemes undermine the integrity of federal health care programs.” He further noted that HHS-OIG will continue to work closely with its law enforcement partners “to protect patients and taxpayers by holding accountable companies that engage in unlawful activities.”
Our client brought Arthrex’s fraud to the attention of the government by filing a qui tam complaint under the False Claims Act. Under the False Claims Act, a private citizen (known as a “relator”) who suspects or knows of fraud against the government can act as a whistleblower and file a sealed complaint on behalf of the government. If the case is successful, the relator is entitled to a share – between 15% and 30% – of the government’s recovery.
I’m happy to have contributed to the Government’s awareness and investigation of this issue. Everyone involved in it did a great job, including the government attorneys and agents and my own attorneys. I’m glad that this came to a successful conclusion.
Whistleblower Law Collaborative LLC attorneys Bob Thomas, Suzanne Durrell, and David W.S. Lieberman commended the outstanding efforts of the government and applauded their client’s willingness to risk coming forward. Mr. Lieberman stressed the skillful work done by Assistant U.S. Attorneys David Derusha and Charlie Weinograd of the District of Massachusetts, and Department of Justice Trial Attorney Andrew J. Jaco. “The United States moved quickly and worked collaboratively with us to obtain this settlement.”
The Whistleblower Law Collaborative is also grateful for the assistance provided by their co-counsel, David Suny of McCormack Suny LLC in Boston, Massachusetts.
Cardinal Health has agreed to pay the United States and the states $ 13.125 million plus interest to resolve allegations that it induced physician practices to purchase specialty pharmaceutical products from it by paying customers remuneration in advance of the practice making any drug purchases and not in connection with specific purchases. This arrangement violates the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b) because it represents an illegal inducement to alter physicians’ decision-making. The practices submitted claims for payment to Medicare and Medicaid programs that were tainted by these kickbacks. Cardinal Health will also enter into a Corporate Integrity Agreement. This is a kind of Compliance program that ensures Cardinal will follow the law in the future.
Our clients were concerned by Cardinal’s payment of these kickbacks. So we helped them bring valuable knowledge about the fraud to the attention of government prosecutors. Health care fraud is handled by prosecutors at the Department of Justice and the United States Attorneys’ offices. In 2019, we filed a qui tam complaint under the False Claims Act. Together with our clients we helped government prosecutors put a stop to the illegal conduct.
We are grateful to our attorneys at Whistleblower Law Collaborative and to the government investigators and attorneys. Together they were able to help and protect a very vulnerable patient population and will set a good precedent for the industry.
-Our Clients
Whistleblower Law Collaborative commends the bravery and outstanding efforts of their clients and the government prosecutors. Attorney Suzanne Durrell praised her clients “willingness to risk coming forward. Our clients not only recognized the fraud, but because of their knowledge of industry practices, could explain it clearly and persuasively to the government prosecutors.”
Attorney David W.S. Lieberman stressed the speed and tenacity of the government prosecutors Evan Panich and Lindsey Ross. “These prosecutors immediately recognized a complex fraudulent scheme for what it was and moved forward with alacrity achieving a significant settlement in under two years.”
Cardinal Health recruited new customers by offering and paying cash bonuses in violation of the Anti-Kickback Statute and False Claims Act. Kickback schemes, such as this one, have the potential to pervert clinical decision-making and are detrimental to our federal health care system and taxpayers,
United States Attorney Rachael S. Rollins.
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. Anyone involved in, or entertaining, similar activity should know that health care fraud is a priority for the FBI, and we will pursue anyone trying to profit from this country’s vital health care system.
The Whistleblower Law Collaborative LLC is based in Boston. It devotes its nationwide practice to representing whistleblowers bringing actions under the federal and state False Claims Acts and other whistleblower programs. Under the False Claims Act, a private citizen who knows of fraud against the government can file a sealed complaint on behalf of the government. If the case is successful, the relator is entitled to a share of the government’s recovery. Among the firm’s many successes is the government’s $885 million settlement with AmerisourceBergen, another pharmaceutical drug wholesaler, for illegal repackaging of injectable drugs into pre-filled syringes.
For more information, contact the Whistleblower Law Collaborative LLC at 617.366. 2800
The United States settled a False Claims Act case brought by one of our clients against BioTel and LifeWatch, two ambulatory heart monitoring companies. BioTel acquired LifeWatch in July 2017. Under the terms of the settlement, BioTelemetry, Inc. and LifeWatch Services, Inc. (“Defendants”) will pay $12,936.574, plus interest, for violating the False Claims Act by when billing federal health programs for mobile cardiac telemetry services.
Defendants market ambulatory heart monitoring devices and services to health care providers. These include cardiac event monitoring and mobile cardiac telemetry. Federal health insurance programs reimburse telemetry services at a much higher rate than event monitoring. One of Defendants’ products was LifeWatch’s MCT-3L device, which it marketed as capable of performing three different types of heart monitoring services – Holter, event monitoring, and telemetry. Our client’s complaint alleged that the online enrollment portal for the MCT-3L forced clinical staff to select telemetry even when doctors had ordered event monitoring, which was much less expensive. As a result, Defendants received the highest level of reimbursement regardless of medical necessity or reasonableness by submitting false claims to Medicare and other federal insurance programs.
The settlement agreement identifies ninety locations across the country where the United States contends Defendants improperly billed for telemetry services instead of event monitoring from July 1, 2014, through December 31, 2020. Our client was on the clinical staff at one of those locations. Despite making clear to Defendants on multiple occasions that physicians at his facility were ordering event monitoring and did not want telemetry, Defendants’ online portal nevertheless forced enrollments in telemetry. Even after clinical staff began including notes on the enrollments specifically requesting event monitoring, those notes were ignored.
Our client brought Defendants’ fraud to light by filing a complaint under the False Claims Act in July 2018 in U.S. District Court in New Jersey. Under the False Claims Act, a private citizen (known as a “relator”) who knows of fraud can act as a whistleblower and file a sealed complaint on behalf of the government. If the case is successful, the relator is entitled to a share of the government’s recovery. For his efforts, our client will receive $2.33 million from the government.
Our client explained why he became a whistleblower:
I was frustrated that Defendants ignored our instructions and billed for something the doctors didn’t want. It cost taxpayers money because telemetry was much more expensive, and it hurt patients because they often ended up with higher copayments.
He praised the government team and his attorneys for their work on the case:
Deciding to become a whistleblower was hard and the road was long, but I’m glad I spoke up. I couldn’t have done this without my attorney Linda Severin, who guided me every step of the way. I’m also extremely grateful to the government team for their hard work and tenacity investigating this case for several years. It’s very gratifying to see that the companies were held accountable.
Ms. Severin commended her client for coming forward.
He realized that Defendants’ practices led to unnecessary and expensive monitoring. And, by blowing the whistle, he helped put a stop to those abusive practices. Whistleblowers are essential to the fight against health care fraud.
This case resembles another successful case handled by Whistleblower Law Collaborative in which four cardiac monitoring companies and an executive agreed to pay over $13.4 million for having an enrollment portal that led providers to order telemetry for all patients, regardless of medical necessity or what the doctor intended to order.
In announcing this settlement, the Department of Justice and the U.S. Attorney’s Office for the District of New Jersey both stated that the False Claims Act is one of the government’s most powerful tools to combat health care fraud. In commenting on this case, the U.S. Attorney for the District of New Jersey emphasized:
Our health care system is based on doctors choosing the level of care appropriate for their patients. It undermines this system and costs taxpayers if companies design systems that make it harder for physicians to order only necessary services and also use their sales force to mislead health care practitioners, as we allege happened here.
– U.S. Attorney Philip R. Sellinger
Ms. Severin praised the outstanding work of the New Jersey U.S. Attorney’s Office and the Department of Justice, particularly DOJ Civil Fraud attorneys Amy Kossak and Jessica Sievert and Assistant U.S. Attorneys Paul Kaufman and Erin Lindgren. In addition, special agents from several government agencies assisted with the investigation, which identified false claims involving Medicare, TRICARE, the Federal Employees Health Benefits Program, and the Department of Veterans Affairs. These include Robert Basile and Paul Scott (Health and Human Services Office of Inspector General, Robert Lerario (Defense Criminal Investigative Services), Wendy Diamond (Office of Personnel Management Office of Inspector General), and Marc Walker (Veteran’s Administration Office of Inspector General).
Also key to the success of the case was the excellent support provided to Whistleblower Law Collaborative by its local counsel, Neil S. Cartusciello of Cartusciello & Kozachek, LLC in Bordentown, New Jersey.