On January 31, 2022, the United States Department of Justice (DOJ) announced a $13 million settlement with Cardinal Health, Inc., over its practice of paying “upfront discounts” to its physician practice customers.
Background
According to the settlement, Omni Healthcare, Inc. filed a qui tam suit against Cardinal Health in October 2018. Then, three individuals filed a separate qui tam suit against Cardinal Health in December 2019. All relators allege, among other things, that Cardinal Health induced physician practices to buy specialty pharmaceutical products from Cardinal Health instead of its competitors by paying those physician practice customers remuneration before they made any drug purchases. The remuneration paid by Cardinal Health were completely disconnected from any specific purchases. The government contends that Cardinal Health made those payments from February 1, 2013, through January 15, 2022.
According to the Department of Health and Human Services Office of Inspector General (HHS OIG), providing upfront discount arrangements “present significant kickback concerns unless they are tied to significant purchases” and that distributors have “appropriate controls to ensure that discounts are clawed back if the purchaser ultimately does not purchase enough product to earn the discount.”
In this situation, as indicated above, Cardinal Health failed to meet those specific requirements as the upfront discounts were not attributed to identifiable sales or were purported rebates which the physician practices had not actually earned.
Settlement
To resolve the allegations, Cardinal Health agreed to pay a total of $13,125,000, including $8,750,000 in restitution. As part of the settlement, Cardinal Health acknowledge the facts underlying the Covered Conduct and agreed not to make any public statements denying or contesting them.
All relators involved in the suit will receive roughly $2.5 million of the recovery, paid to Omni Healthcare, who is then responsible for paying the individual Relators in the other qui tam case their portion of the total amount, pursuant to written instructions provided by their attorneys.
Cardinal Health also agreed to pay nearly $1 million in attorneys fees, $625,000 to Omni’s attorneys and $306,257.03 to the individual Relators’ attorneys fees.
Corporate Integrity Agreement
Cardinal Health 108, LLC, the subsidiary Specialty Pharmacy Distribution for Cardinal Health involved in this settlement, has entered into a Corporate Integrity Agreement with HHS OIG. However, as of the time of writing this article, the CIA had not yet been made public.
Government Comments
“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,” said United States Attorney Rachael S. Rollins. “We commend Cardinal Health for resolving this matter cooperatively.”
“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,” said Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Division. “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.”