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There Is a New Sheriff in Town—Just Ask Warner Chilcott’s President

In our recent post about the tentative Novartis settlement we questioned if it would be business as usual at the Department of Justice despite the Yates Memo earlier this year.  The answer came swiftly, when the DOJ and the Boston U.S. Attorney’s Office announced last week a $125 million criminal and civil health care fraud settlement with the Allergan unit of Warner Chilcott AND the indictment and arrest of its President, W. Carl Reichel.  Maybe the handwriting was on the wall when three former Warner Chilcott district managers pleaded guilty or agreed to plead guilty to conspiracy to commit health care fraud and criminal violations of HIPAA (the health information privacy statute) and a Springfield, Mass. physician was indicted for taking kickbacks, violating HIPAA, and obstruction of justice.  But it is a big step to haul in the President of a company.

The settlement with the company included a criminal plea agreement and criminal fine of almost $23 million, as well as a $102 million civil settlement under the whistleblower provisions of the federal and state False Claims Acts (FCA).  (See also criminal information.)  The whistleblowers who initiated the FCA case will receive a reward of over $23 million. Resolved in the settlement were charges that the company used various means to illegally promote the use of its drugs, including  Actonel®, Asacol®, Atelvia®, Doryx®, Enablex®, Estrace®, and Loestrin® as well as various formulations of these drugs. The illegal activities included paying kickbacks to influence doctors to prescribe these drugs; using protected patient health information to fill out prior authorization forms; employees holding themselves out as doctors in submitting such forms to insurance companies so that the more expensive Warner Chilcott osteoporosis drugs (Atelvia® and Actonel®) would be authorized instead of their competitor’s less expensive drugs; and, making false statements about the superiority of the drug Actonel®.

The company’s President, Mr. Reichel, was indicted on one count of conspiracy to pay kickbacks.  The indictment alleges that between 2009-2012, he was the mastermind of a sales and marketing strategy that provided lavish kickbacks to doctors.  If convicted, he faces a sentence of no greater than five years in prison, three years of supervised release, and a fine of $250,000.   No doubt he will vigorously fight the charges, and we shall wait and see if the DOJ can make the charges stick in a jury trial where the burden of proof on the government will be beyond a reasonable doubt.

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