September 23, 2005
GlaxoSmithKline Settles Medicare Fraud Claims for $150 Million While Serono Gets Ready to Pony Up $700 Million
The Department of Justice announced a settlement of a civil false claims act suit against GlaxoSmithKline PLC for inflating the price of two of its drugs that counter nausea for cancer patients undergoing chemotherapy and radiation treatments. The company agreed to pay a $150 million civil penalty, according to a DOJ press release (here), for the following:
The United States alleged in settlement documents that GlaxoSmithKline-one of the world’s largest pharmaceutical manufacturers-engaged in a scheme to set and maintain fraudulent and inflated prices for Zofran and Kytril knowing that federal healthcare programs established reimbursement rates based on those prices. The difference between the reimbursement rate of the federal health care programs and the actual price paid by healthcare providers for a drug is commonly known as the “spread.” The larger the spread on a drug, the larger the profit or return on investment for the provider. GlaxoSmithKline allegedly used the spread to market, promote, and sell the drugs to existing and potential customers. Because reimbursement from federal programs was based on the fraudulent, inflated prices, the United States contended that GlaxoSmithKline caused false and fraudulent claims to be submitted to federal healthcare programs.
Meanwhile, Swiss biotech company Serono AG is close to settling a criminal investigation into the sales of the company's drug to treat AIDS wasting, Serostim. According to a Wall Street Journal story (here), Serono will pay approximately $700 million in criminal and civil fines to the federal and state governments for defrauding Medicare in the pricing of the drug. A group of Serono sales executives were indicted earlier this year related to a program to pump up Serostim prescriptions called the "$6m[illion]-6 day plan" by offering doctors a free trip to an AIDS conference in Cannes, France (earlier post here). The drugs can cost upwards of $80,000 a year, so this isn't something you pick up at your corner pharmacy. It's not clear from the Journal story whether the company or one of its units will have to enter a guilty plea, or whether the Department will enter into a deferred prosecution agreement. Because of the automatic exclusion rules for those guilty of Medicare fraud, any guilty plea will have to avoid triggering a ban on the company's products from government health care programs. (ph)
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