Life Science Compliance Update

March 10, 2017

Sanofi Settles Vaccine Antitrust Dispute

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Sanofi Pasteur Inc., has agreed to pay $61.5 million in a five-year long class action brought by doctors alleging that the drug company violated antitrust laws with contracts for its pediatric vaccines, according to an agreement filed in federal court in New Jersey in late January. Specifically, the plaintiffs claimed the drug company held a dominant position in five pediatric vaccine markets, including a complete monopoly with quadrivalent meningococcal vaccine Menactra from 2005 to February 2010, when a competitor was introduced. At that point, Sanofi began bundling Menactra with other pediatric vaccines and substantially increasing the prices. 

According to the suit, Sanofi customers who bought a certain percentage of all four pediatric vaccines received a “loyalty discount” that reduced prices back to where they had been prior to the entry of the Novartis’ vaccine onto the market. Customers who did not buy enough of the four vaccines allegedly paid much more, according to the suit.


The lawsuit class was composed for 25,000 physician practices, 1,000 hospitals, 2,000 pharmacies, and 100 wholesalers. The suit received class certification in September 2015. The class was defined as anyone who purchased Menactra directly from Sanofi or its subsidiaries such as VaxServe Inc. 

Buyers in exclusive contracts for Sanofi vaccine bundles faced a penalty if they used Menveo instead of Menactra, the suit claimed. The penalty—ranging from 15.8% to 34.5%—would then apply to all the Sanofi vaccines a particular customer bought. The vaccines Sanofi put in those bundles included its Hib vaccines Pentacel and ActHIB, "for which there are no reasonably adequate medical substitutes," the suit claimed.

Sanofi defended its bundled sales approach in court documents, however. The company's "contracting and pricing practices did not constitute anticompetitive bundling,” Sanofi said in a court filing. Instead, the bundles helped competition and “benefited consumers by, among other things, lowering vaccine prices.” Sanofi also argued that Novartis was “both a profitable and successful competitor.”

The class action, on the other hand, said the practice “unfairly” hurt Novartis’ ability to compete with its meningococcal entrant, according to the complaint.

Sanofi fought the case for years, and even filed a counterclaim, but finally agreed to pay $61.5 million (and abandon the counterclaim) to settle and wrap up the lawsuit. The counterclaim argued that the class “engaged in unlawful collective action through membership” in physician buying groups, “purportedly causing vaccine prices to fall below competitive levels.” A Sanofi spokesperson said the company “has vigorously denied and continues vigorously to deny the plaintiffs’ claims and any allegation of wrongdoing.” The settlement does not require Sanofi to admit any fault.

“Despite Sanofi’s strong defenses, [our company] recognizes that continued litigation is likely to be extraordinarily expensive and time-consuming and thus has agreed to enter into this Settlement Agreement to avoid the further expense, inconvenience, risk and distraction of burdensome and protracted litigation,” according to a statement by Sanofi.


The potential settlement comes in advance of a trial, and has yet to receive approval. 

March 08, 2017

Former Tenet Healthcare Executive Charged

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John Holland, former senior executive of Tenet Healthcare Corporation, was recently indicted for his alleged role in a $400 million scheme to defraud. The indictment alleges that the scheme to defraud victimized not only the U.S. government, but also the Georgia and South Carolina Medicaid programs, and prospective patients of Tenet hospitals.

The indictment was filed on January 24, 2017, in the Southern District of Florida, and charges Holland with one count of mail fraud, one count of health care fraud, and two counts of major fraud against the United States.

Holland previously served as a senior vice president of operations for Tenet Healthcare Corporation’s Southern States Region, and as chief executive officer of North Fulton Medical Center, Inc., in Roswell, Georgia. The indictment alleges that from roughly 2000 through 2013, Holland engaged in a scheme to defraud the United States (as well as Georgia and South Carolina Medicaid programs), by causing the payment of bribes and kickbacks in return for the referral of patients to North Fulton Medical Center, Inc., and other Tenet hospitals in the Southern States Region, including Atlanta Medical Center, Inc., Spalding Regional Medical Center, Inc., and Hilton Head Hospital.

From roughly 2007 through 2013, Tenet maintained and operated an affiliated billing center in Boca Raton, Florida, that assisted in processing for payment Medicaid billings for the aforementioned hospitals. Holland allegedly took affirmative steps to conceal the scheme, including circumventing internal accounting controls and falsifying Tenet’s books, records, and reports. These kickbacks and bribes helped Tenet bill the Georgia and South Carolina Medicaid programs over $400 million, and Tenet obtained more than $149 million in Medicaid and Medicare funds, based on the resulting patient referrals.

According to the allegations, Holland, among other things, made false and fraudulent statements to the Department of Health and Human Services Office of Inspector General (HHS-OIG) in connection with Tenet’s 2006 Corporate Integrity Agreement (the CIA), in which he falsely certified to HHS-OIG that Tenet was in compliance with the terms of participation in the Medicare and Medicaid Programs and the terms of the CIA, when in fact he knew that Tenet was paying for illegal patient referrals. Holland’s certifications were included as part of Tenet’s yearly annual reports that were mailed to the HHS-OIG monitor located in Miami Lakes, Florida. Throughout the duration of the CIA from 2007 through 2011, Tenet received over $10 billion in payments from federal health care programs – monies that Tenet would not have received had the company been excluded from participation in federal health care programs, the indictment alleges.  

On Oct. 19, 2016, North Fulton Medical Center, Inc. and Atlanta Medical Center, Inc. both pled guilty to conspiring to defraud the United States and to violating the Anti-Kickback Statute (AKS). Tenet subsidiary Tenet HealthSystem Medical, Inc. (and its subsidiaries (THSM)) also entered into a non-prosecution agreement (NPA) with the government at that time. Under the terms of the NPA, THSM and Tenet will avoid prosecution if they, among other requirements, cooperate with the government’s ongoing investigation and enhance their compliance and ethics program and internal controls. 

Tenet also agreed to retain an independent compliance monitor to address and reduce the risk of any recurrence of violations of the AKS by any entity owned in whole, or in part, by Tenet. Tenet and its subsidiaries also agreed to pay over $513 million to resolve the criminal charges and civil claims arising from the matter. Holland is the first executive from Tenet to face the charges individually.

“These charges underscore our continued commitment to holding both individuals and corporations accountable for their fraudulent conduct,” said Acting Assistant Attorney General Blanco.  “We will follow the evidence where it takes us, including to the corporate executive ranks.”

February 06, 2017

Department of Justice Increases FCA Civil Penalties, Again

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On February 3, 2017, the Department of Justice (DOJ) announced that False Claims Act (FCA) penalties will once again be increasing, effective immediately. Pursuant to the 2015 budget bill, which requires annual re-indexing of FCA penalties for inflation, the minimum per-claim penalty will increase from $10,781 to $10,957 (it jumped from $5,500 to $10,781 last year). The maximum per claim penalty will increase to $21,916 (after jumping from $11,000 to $21,563 last year). The penalties will continue to be adjusted each year to reflect changes in the inflation rate, required to be done no later than January 15th of every year. Each agency is to publish regulations in the Federal Register that note the adjustment of civil monetary penalties (CMP) within its jurisdiction.

As we have previously written about in our sister publication, Life Science Compliance Update, the Bipartisan Budget Act of 2015 requires all federal agencies to increase the civil monetary penalties within their purview, an annual “cost-of-living-adjustment.” Prior to last year, the last time FCA penalties were adjusted was in 1986.

The cost-of-living adjustment is the percentage (if any) for each CMP by which the Consumer Price Index (CPI) for the month of October preceding the date of the adjustment (January 15) exceeds the CPI for the month of October in the previous calendar year.

These increases apply to any FCA penalties assessed, starting last Friday, for FCA violations that occurred on or after November 2, 2015. Violations that occurred from November 3, 2015 to February 2, 2017, will be assessed at last year’s rates. For any violations that occurred prior to November 2, 2015, the $5,500-$11,000 penalty range still applies.

While many predicted that the previous increase in FCA civil penalties created a situation ripe for constitutional challenges, we have not seen that play out. While this year’s increase is smaller than last year’s (i.e., doesn’t almost double from one year to the next), it is certainly still possible to see some court action on this move.  

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