Whistleblower Claim Leads to $48 Million Settlement for Marketing Unapproved Drug

Earlier this month, Healthpoint Ltd., a Fort Worth pharmaceutical company, agreed to pay $48 million to settle allegations that it caused false claims to be submitted to the federal government. According to the agreement, the company will pay $28 million immediately and another $20 million should its ownership change within three years. Now that the acquisition of a large share of the company by Smith & Nephew has been announced, it appears that the full $48 million  must be paid.

Healthpoint manufactures wound care and infection prevention products and medications, among which is Xenaderm, an ointment used primarily to treat bedsores. According to the government, beginning in 2002, Healthpoint began to market Xenaderm despite FDA findings decades earlier that its active ingredient was less than effective. Executives were aware of the lack of any clinic evidence that Xenaderm was effective, yet as internal emails show, they made the decision to market the drug to healthcare providers as reimbursable by Medicare and Medicaid.

When hospitals use over-the-counter medications, these costs must be absorbed by providers or patients because they cannot be billed to the government. When Healthpoint marketed Xenaderm to physicians as reimbursable, this meant they could avoid paying for wound care ointments by using Xenaderm and billing the cost to the government. This misrepresentation of Xenaderm’s eligibility for Medicare and Medicaid reimbursement extended to reports filed by Healthpoint with the government, and as a result the government did in fact pay for the drug. Healthpoint’s knowing misrepresentations about Xenaderm thus caused numerous false claims to be submitted to the government and tens of millions of taxpayer dollars to be spent on unapproved medication.

Healthpoint is not the only company to have marketed drugs not approved by the FDA as reimbursable. The whistleblower who uncovered Healthpoint’s fraud, Constance Conrad, also filed whistleblower lawsuits against 22 other pharmaceutical companies that have used similar schemes. Conrad has been described as an individual with 30 years’ experience in the healthcare industry, but no details of her employment or identity have been released. Although the multi-defendant lawsuit was filed in 2002, it was only last year Conrad’s name was released.

Successful whistleblowers are often industry insiders with years of experience and the ability to make sense of complex data, seeing fraud that may be undetectable to others. The False Claims Act provides generous rewards—up to 30% of the total recovered—to those whistleblowers who successfully bring suit against violators on behalf of the government. Moreover, the FCA protects whistleblowers from employer and industry retaliation by concealing their names for an extended period as well as providing legal grounds to sue if employers retaliate. If you have knowledge of fraud or false claims against the government, our experienced whistleblower attorneys can help protect your professional interests while preparing the strongest possible case against those who would defraud taxpayers.

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