Three Major Drug Firms Pay $421 Million in Settlement with Justice Department

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The Justice Department announced a $421 million settlement against three pharmaceutical companies on Tuesday for their alleged involvement in a scheme to drastically inflate the price of drugs --sometimes by a whopping 1000% -- which was reimbursed by Medicare and Medicaid and ultimately the U.S. taxpayer.

The settlements were reached in three False Claims Act cases filed against Abbott Laboratories, B. Braun Medical Inc. and Roxane Laboratories. Both B. Braun and Roxane are U.S. subsidiaries of German pharmaceutical firms. Under the settlement agreements, Abbott Laboratories agreed to pay $126.5 million in fines, B. Braun Medical agreed to pay $14.7 million, and Roxane will pay $280 million for making Medicare and Medicaid pay the allegedly inflated reimbursements.

Read about other Medicare fraud cases HERE and HERE.

The investigation into the companies' activities followed a whistleblower lawsuit filed by Ven-A-Care, a home infusion company based in southern Florida. A civil complaint against Abbott filed by Ven-A-Care in 2007 noted that Abbott was charging huge mark-ups on the price of their drugs when they sought reimbursement from the government.

The civil complaint filed by Ven-A-Care against Abbott noted, "Over the course of several years, Abbott reported inflated pharmaceutical prices that it knew Medicare and Medicaid relied upon to set reimbursement rates for Abbott's pharmaceutical products. Abbott's actual sales prices for its pharmaceutical products were far less than the prices reported by Abbott. By knowingly reporting inflated prices -- often 1000% higher than Abbott's actual prices -- Abbott ensured its customers received inflated reimbursement and profits from Medicare and Medicaid."

At a press conference in Washington on Tuesday Assistant Attorney General for the Civil Division, Tony West said, "We've alleged that these companies engaged in a complicated and complex scheme to market their drugs in an unlawful pricing arrangement that amounted to kickbacks funded for by taxpayer dollars."

Over $9 Billion Collected in Justice Department Actions

West said the cases were the latest in a string of health care-related fraud cases. Since January 2009, the Justice department has collected over $9 billion in civil and criminal fines related to false claims and fraud against the government, with over $5 billion coming from health care fraud cases. In September 2009 the Justice Department reached a $2.3 Billion settlement with Pfizer for illegal promotion and marketing of the company's drugs.

Tuesday, the companies in the current action denied any wrongdoing and said they agreed to the settlement to avoid a protracted legal battle with the government and Ven-A-Care.

In a company statement, a B. Braun spokeswoman said, "The settlement resolves all disputes between B. Braun and the federal government, and after 15 years, B. Braun is happy to have this matter behind it. B. Braun denies all allegations of wrongdoing and has entered into the settlement agreement to avoid excessive ongoing legal costs. B. Braun complies with government laws and regulations and operates under a robust compliance program to ensure continual compliance."

Contacted about the settlement, Adelle Infante, a spokeswoman for Abbott said, "We continue to believe that we have complied with all laws and regulations and have entered into this agreement to eliminate the uncertainty associated with continued litigation."

A spokeswoman for Roxane told The Associated Press, "The company at all times complied with laws, regulations and customary industry practices. Roxane employees can now focus all their efforts on providing patients with high quality, low cost medicines that treat important health conditions and improve patients' lives. It is for these reasons Roxane has chosen to settle."

Ven-A-Care and its principals are expected to receive an estimated $88 million from the whistleblower lawsuits.