Life Science Compliance Update

March 26, 2018

Alere Settles False Claims Act Allegations for $33.2 Million


Massachusetts-based medical device manufacturer Alere (acquired by Abbott Laboratories in 2017) and its subsidiary Alere San Diego recently entered into a settlement agreement with the federal government to pay $33.2 million. The settlement stems from allegations that Alere’s faulty diagnostic devices misinformed clinicians, and therefore, led to unnecessary medical care.

According to the United States Department of Justice (DOJ), from 2006 to 2012, Alere sold its Triage-branded devices to hospitals, even though the company was on the receiving end of many customer complaints warning of erroneous results. Those devices were then used in emergency departments to diagnose acute coronary syndromes, heart failure, drug overdoses, and other serious conditions.

Using a sample of a patient’s blood, clinicians could use certain Triage devices to diagnose cardiac conditions. Other devices were used for toxicology testing by collecting a urine sample. According to the government, some of Alere’s devices specifications differed materially from the product labeling, which resulted in certain devices having less precision than was indicated.

One of the issues the DOJ took with Alere was that the company failed to take appropriate corrective actions to solve the problem, though Alere personnel were aware of the issue and the fact that the decreased precision put the company at a considerable regulatory and financial risk. It wasn’t until a United States Food and Drug Administration (FDA) inspection and subsequent recall in 2012 that Alere heeded the warnings.

In that inspection, FDA personnel allegedly identified (1) statistically significant disparities between the actual cardiac Triage Device coefficient of variation (CV) specifications and the CV specifications marketed to clinicians on the product labeling; (2) an unacceptably high degree of variability when conducting quality control testing of the cardiac Triage Devices; and (3) changes to the manufacturing and release specifications for toxicology Triage Devices that resulted in the release to market of certain product lots containing products that potentially had significantly decreased precision. After that inspection, Alere recalled the devices.

According to a settlement agreement, Alere denied the allegations. In a statement, Abbott disclaimed any liability by noting that Alere had agreed to settle this case prior to its acquisition. As is typical, the DOJ noted that the claims resolved are “allegations only, and there has been no determination of liability.”

“Physicians who work to treat patients with suspected myocardial infarctions rely upon devices such as Alere’s Triage Cardiac products for quick and accurate readings," said Stephen M. Schenning, Acting United States Attorney for the District of Maryland. "When manufacturers such as Alere make changes to the specifications that affect the product’s reliability without informing physicians or the FDA, patient care is put at substantial risk.”

Of the total $33.2 settlement, $28.4 million will go to the federal government while nearly $4.9 million will be returned to individual states that jointly funded claims for Triage devices submitted to state Medicaid programs. Amanda Wu, a former senior quality control analyst for Alere and the whistleblower who filed the suit, will receive approximately $5.6 million.

Wu’s attorneys, Nolan Auerbach & White, released a statement, which in part read, “Previous medical device qui tam cases have exposed manufacturers that sold defective products or marketed their products for unapproved uses. However, in this case, Alere San Diego allegedly knowingly sold unreliable diagnostic devices.”

February 27, 2018

Watson Pharmaceuticals – Now Part of Teva – to Pay $33 Million to Mississippi


On January 29, 2018, Mississippi Attorney General Jim Hood announced a $33 million settlement with pharmaceutical manufacturer, Watson, Inc., which is now part of Teva Pharmaceuticals.

AG Hood had hired attorneys to sue Watson in a series of suits claiming the company wrongly inflated prescription drug prices paid by the state-federal Medicaid health insurance program.

The State’s Supreme Court upheld a trial court decision that found Watson defrauded the taxpayers of Mississippi by an estimated $7 million when reporting its Average Wholesale Prices. Inflated prices varied from drug to drug, in some cases as much as 1,000 percent. As a result of this fraud, the trial court awarded the state statutory and punitive damages for a total of $33,408,546.72. The Watson case was one of dozens brought against other drug companies that also inflated drug prices causing Mississippi Medicaid to pay too much for prescription drugs.

According to AG Hood, “Of all the companies we have done battle with, Watson Pharmaceuticals is one of the worst offenders. The trial court found they overcharged the state by 1,000 percent on some drugs. A chancery judge in Rankin County issued a $20 million punitive damage verdict, which was upheld by the Mississippi Supreme Court. These types of corporate robbers get away with it unless an attorney general holds them accountable.”

Hood is now using this settlement to disparage current legislative proposals that would limit his power to sue. Mississippi House Bill 1238, recently passed by the House, would bar him from suing under the state’s consumer protection law if the practices are permitted by other Mississippi or federal regulators.

In his press release announcing the settlement, AG Hood also released a statement,

“Should HB 1238 pass, it would be devastating to the protection of Mississippians,” said General Hood. “Much of the successes in our office have been protecting consumers from corporate wrongdoers, and the people of Mississippi deserve more than their lawmakers stripping those protections.”

According to local reports, it is unclear whether the measure will survive in the Senate.

The total settlement is $33,408,546.72, of which $8,143,572.49 are compensatory damages to the Medicaid unit of Mississippi, $5,241,000.00 are civil penalties, and $20,023,974.23 are punitive damages.  

February 23, 2018

New Limitations on Guidance Documents Expected to Have Heavy Effect on Industry


The Trump Administration recently adopted new limits on the use of “guidance documents” issued by federal agencies. Various industries use the applicable guidance documents to better understand the government’s interpretation of laws, and as such, this may have a sweeping effect on industry compliance measures.

The revised policy piggybacks off of a previous memo issued by Attorney General Jeff Sessions that prohibited the Agency from issuing guidance documents that effectively bind the public without undergoing the notice-and-comment rulemaking process. This means that the DOJ was unable to issue guidance documents that effectively created rights or obligations that were binding on those outside of the Executive Branch, or to create binding standards by which the DOJ determines compliance with already existing statutory or regulatory requirements.

Under the revised policy, issued by Rachel L. Brand at the Department of Justice (DOJ), the Agency will not “use its enforcement authority to effectively convert agency guidance documents into binding rules.” Guidance documents are not permitted to “create binding requirements that do not already exist by statute or regulation.” Additionally, DOJ lawyers representing the government in court “may not use noncompliance with guidance documents as a basis for proving violations of applicable law,” a common tactic previously used.

The guidance documents may be used for “proper purposes” in cases, such as by using them to explain or paraphrase legal mandates from existing statutes or regulations, or to use evidence that a party read such a guidance document to help prove that the party had requisite knowledge of the mandate.

Brand goes on to note that the DOJ “should not treat a party’s noncompliance with an agency guidance document as presumptively or conclusively establishing that the party violated the applicable statute or regulation.” Just because a party does not comply with the agency guidance that expands upon a statutory or regulatory requirement does not mean that the party violated those underlying legal requirements – agency guidance documents are not permitted to create any additional legal obligations.

This policy applies to future actions brought by the DOJ and – wherever practicable – to any matters pending as of January 25, 2018.

As such, defense attorneys seem to be pleased with this change, saying that it gives them a tool to help fend off wrongdoing allegations against their clients.

Benjamin C. Mizer, a former DOJ official, said that the new policy “may significant affect cases involving the health care and life science industries” because the Food and Drug Administration (FDA) and the Centers for Medicare and Medicaid Services (CMS) heavily rely on guidance documents in court proceedings and other allegations of wrongdoing.

Lindsey E. Gabrielson, a lawyer in the Boston office of Foley & Lardner, stated that the government will now “face serious hurdles” in enforcement actions based on violations of health care guidance documents. Barry L. Goldstein, a lawyer based in Oakland, California, referred to the shift as “extraordinary.”


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