Investigations Newsletter: DOJ Files Complaint in AWP False Claims Act Suit Against Pharmaceutical Ingredient Seller 

Arent Fox

Arent Fox

Headlines that Matter for Companies and Executives in Regulated Industries.

DOJ Files Complaint in AWP False Claims Act Suit Against Pharmaceutical Ingredient Seller

On November 8, 2021, the Department of Justice (DOJ) announced that it intervened in a qui tam suit and filed a False Claims Act (FCA) complaint in the Western District of Texas against Professional Compounding Centers of America Inc. (PCCA), a Houston-based company that sells pharmaceutical ingredients and other products and services to compounding pharmacies.

The government alleges that PCCA reported fraudulent and inflated Average Wholesale Price (AWP) information for its ingredients that bore no relationship to the actual prices at which it sold the ingredients to its pharmacy customers, which caused the pharmacies to submit inflated compound prescription claims to TRICARE. As an example, the government alleged that, in 2014, PCCA typically sold one chemical to its top customers for between $135 and $197 per gram, but it reported an AWP for that ingredient of $3,630.90 per gram, which is approximately 18 to 27 times the actual selling price. The government alleges that PCCA marketed its inflated AWPs and resulting profit potentials to induce pharmacies to purchase PCCA ingredients. The pharmacies then made tens of thousands of false claims to TRICARE, the government alleges. The case began with a whistleblower complaint filed under the qui tam provisions of the FCA. 

The DOJ press release can be found here, and the complaint can be found here.

Florida Medical Device Company Agrees to Pay $16 Million to Resolve False Claims Act and Kickback Allegations

On November 8, 2021, DOJ announced that Arthrex Inc., a Florida-based medical device company, agreed to pay $16 million to resolve allegations that it paid kickbacks to a Colorado-based orthopedic surgeon that led to the submission of false claims to Medicare, in violation of the Anti-Kickback Statute and False Claims Act. The government alleged that Arthrex agreed to make royalty payments purportedly for the surgeon’s contributions to certain Arthrex products, when in reality the remuneration was intended to induce the surgeon’s use and recommendation of Arthrex’s products. The government alleged that the scheme resulted in the submission of false or fraudulent claims to Medicare, which were tainted by the unlawful kickback scheme. The case began when a whistleblower filed suit under the qui tam provisions of the False Claims Act in U.S. District Court for the District of Massachusetts. The whistleblower will receive $2.5 million under the FCA’s bounty provisions. Arthrex also agreed to enter into a Corporate Integrity Agreement with HHS-OIG as part of the settlement. 

The DOJ press release can be found here, and the settlement agreement can be found here.

Bribery Sting Nets Three-Year Prison Sentence for Florida Businessman

On November 9, 2021, DOJ announced that a federal district court in the Northern District of Florida sentenced a defendant for bribing former Tallahassee City Commissioner Scott Maddox and for making false statements to the FBI. Following a 15-day jury trial, the defendant was convicted of extortion, honest services fraud, use of an interstate facility to promote bribery, and making false statements to the FBI. The government presented evidence at trial that the defendant and the city official engaged in a multi-year extortion, fraud, and bribery scheme, during which they extorted bribe payments from undercover FBI agents who were posing as real estate developers and entrepreneurs, according to DOJ. The undercover agents agreed to pay $10,000 per month in exchange for official acts that would benefit their development company. When asked about the alleged payments, the defendant made false statements to FBI agents about the scheme, the government reported. 

The DOJ press release can be found here.

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