This week, two subsidiary companies of the major pharmaceutical company Sanofi have reached a settlement agreement with the Department of Justice over allegations that the company paid illegal kickbacks to promote its drug Hyalgan. The company will pay $109 million to the government, of which Mark Giddarie—the whistleblower who filed suit against Sanofi—will receive $18.5 million.
Sanofi manufactures Hyalgan (Hyaluronate), a fluid injected into the knee to alleviate friction and pain when other non-surgical options have not succeeded. When the company was threatened by another manufacturer of Hyaluronate, instead of lowering prices to compete fairly, Sanofi directed its sales force to give illegal kickbacks to physicians to encourage them to prescribe its drug. The kickbacks primarily took the form of sample Hyalgan units (given upon purchase of a certain number of units) and expensive dinners for the physicians and their staffs. By promoting its drug through the illegal samples rather than through lower prices, Sanofi was able to better compete with its competition while at the same time keeping the market price of Hyalgan high. The information filed in this case names three sales representatives in California, Texas, and New York who are alleged to have provided the illegal samples.
When pharmaceutical companies wish to have their drugs reimbursed by government insurance programs such as Medicare and Medicaid, they must submit average sale price reports to the programs. These reports inform the government of the standard retail price of a drug so that it can determine the appropriate rate to reimburse doctors and pharmacies for covered drugs. But when Sanofi provided doctors with large numbers of Hyalgan samples, the average sale prices reported to the government did not actually match the true prices physicians were paying for the drug. By submitting the sale price reports to the government, Sanofi certified that the contents were true. And when false statements in the reports caused the government to overpay on claims from physicians, the false statements and kickbacks became violations of the False Claims Act.
Anti-Kickback laws prohibit payments in exchange for referrals or purchases of goods that are paid for by the federal government. In the healthcare industry, these laws seek to prevent physicians and hospitals from making patient-care decisions based on non-medical bases and to ensure that taxpayer funds are used only to pay for medically necessary services and medications, and not for physicians’ or hospitals’ financial gains at patients’ expense.
Another prohibited form of kickbacks are physician self-referrals. Under the Stark Law, it is illegal for a physician to refer patients covered by Medicare, Medicaid, or other federal insurance programs to healthcare facilities with which the physician has a financial relationship. The rationale for this law is that if hospitals provide financial incentives to physicians for patient referrals, this may cause physicians to refer patients for personal gain rather than actual medical need.
Whether an illegal kickback or self-referral has occurred can be complex question. If you believe you have evidence of this or any other type of healthcare fraud against the federal government, an experienced whistleblower lawyercan evaluate the strength of your case. If violations are present, whistleblowers who bring evidence of the fraud to the government and sue violators on its behalf may earn substantial rewards.