Warner Chilcott Pleads Guilty to Healthcare Fraud Pays $125 Million Fine and Former President Arrested

Warner Chilcott has agreed to plead guilty to healthcare fraud and will pay the government $125 million to settle both civil and criminal allegations against it. Under the plea agreement, Warner Chilcott will pay a criminal fine of $22.9 million and a civil settlement of $102 million to the federal government and the states who made payments through Medicare, Medicaid, and other programs. The whistleblowers who sued Warner Chilcott under the False Claims Act in 2011 will receive approximately $22.9 million from the civil portion of the settlement.

The government alleged Warner Chilcott employees doctored prior authorization requests to insurance companies for their drugs using prepared explanations that often did not apply to the patient’s individual medical conditions. Warner Chilcott employees would doctor the requests either by pretending to be the physicians and submitting the justifications directly to the insurance companies, or other times, the employees would coach doctors about how to falsely fill authorization requests out.

The government had further alleged that Warner Chilcott paid kickbacks to prescribing doctors in connection with promotional “Medical Education Events”  and speaker programs, often held at expensive restaurants and involved little to no actual education, dubbing some of the events “nurses night out.” The government alleged that the speakers who were paid to attend did not usually speak about any clinic or scientific topics but earned between $600 and $1,200 just for attending. Part of the allegations were that some of the speakers were told they would not be paid for additional events unless they prescribed more of Warner Chilcott’s medication.

In addition to the Warner Chilcott financial settlement, the former president of Warner Chilcott, Carl Reichel, was arrested Thursday in Boston. He has been indicted and charged with conspiring to pay kickbacks. He has been indicted on one count of conspiring to violate the Anti-Kickback Law, and the Assistant United States Attorneys on the case have also asked that a forfeiture action be commenced.  The indictment outlines that Reichel believed that because Warner Chilcott was not a signatory to the PhRMA code of interaction with health professionals that they could commit practices his competitors were not permitted to do “Breakfasts, Lunches, Goodies,” because “Competitors cannot do this anymore-sets W.C. apart!”  They failed to recognize that there were solid legal reasons for limiting these practices.

The arrest of Reichel comes after the “Yates memo,” which was written in September and emphasized the importance of holding individuals accountable in cases involving illegal corporate conduct.

Marc Raspanti, an attorney who represents whistle-blowers and criminal defendants, believes that “the Department of Justice is not going to sign off on a case now until they have really vetted whether or not there’s any [individual] liability.”

In addition to Reichel’s arrest and the charges pending against him, other Warner Chilcott managers have entered guilty pleas, including two former district managers, Jeffrey Podolsky and Timothy Garcia, who pled guilty to conspiring to commit health care fraud, and violations of HIPAA. Another former district manager, Landon Eckles, was criminally charged earlier this month for alleged HIPAA violations relating to the allegations of falsified prior authorizations.

Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division stated, “The Justice Department is committed to protecting the integrity of physician prescribing decisions and ensuring that financial arrangements in the healthcare marketplace comply with the law. The Department will continue to hold companies and responsible individuals accountable when they use improper incentives, like those alleged here, to promote their products.”

According to United States Attorney Carmen M. Ortiz for the District of Massachusetts, “Doctors’ medical judgment should be based on what is best for the patient, and not clouded by expensive meals and other pharmaceutical company kickbacks. Pharmaceutical company executives and employees should not be involved with treatment decisions or submissions to a patient’s insurance company. Today’s enforcement actions demonstrate that the government will seek not only to hold companies accountable, but will identify and charge corporate officials responsible for the fraud.”

This settlement illustrates the government’s focus on looking for health care fraud, especially under the Health Care Fraud Prevention and Enforcement Action Team initiative, which was announced in May 2009. One of the most frequently-used tools in this effort is the False Claims Act – since January 2009, the Justice Department has recovered over $26.2 billion through False Claims Act cases. More than $16.4 billion of that involved fraud against federal health care programs.

This case will serve as a case study to emerging pharmaceutical companies who are buying up older products that the need for a comprehensive compliance program is essential for staying within the law.

Interestingly, the settlement does not seem to make mention of off-label promotion, a routinely hot-button topic lately, but instead is concerned with kickbacks. This could be a sign that the Food and Drug Administration and the Department of Justice are slowly beginning to back off of making off-label promotion claims, and instead starting a trend focused toward kickback claims.