Life Science Compliance Update

August 03, 2017

Celgene Settles Cancer Drug Whistleblower Suit


Celgene Corporation has settled a whistleblower lawsuit for $280 million, alleging that the pharmaceutical company committed fraud promoting Thalomid, a cancer drug allegedly promoted for uses not approved by the United States Food and Drug Administration (FDA). The settlement will be broken up between the United States and twenty-eight states and Washington, D.C. California will receive the largest state sum, $4.7 million.

The payment is equivalent to about two weeks’ worth of sales of Revlimid, which generated $6.97 billion in revenue for Celgene last year, according to data compiled by Bloomberg.

The settlement, initiated by a suit filed by a sales manager with Celgene, Beverly Brown, resolved allegations that Celgene promoted Thalomid and Revlimid – both cancer drugs – for uses that were not approved by the FDA and were not covered by federal healthcare programs.

According to the lawsuit, Brown was officially an "immunology specialist," trained by Celgene to promote Thalomid and Revlimid drugs for cancer treatments that had not been approved by the U.S. Food and Drug Administration.

Brown, who worked at Celgene for a decade, alleged the company paid doctors and hired ghostwriters to tout uses for Thalomid beyond the product’s approval, including treating blood cancer, years before it was authorized by regulators. Brown said the company used similar tactics to promote Thalomid’s successor, Revlimid.

Thalomid, a drug prescribed for morning sickness in the 1950s and 1960s that caused severe birth defects, was approved by the agency in 1998 for treating leprosy.

The lawsuit noted that the FDA contacted Celgene and sent letters warning about its promotional efforts and for failing to warn about potential fatal risks from the toxic drugs. Because Thalomid would only be useful to a fraction of the few hundred leprosy cases diagnosed in the U.S. each year, the company developed a plan to promote the drug for cancer, the lawsuit said.

Included in the allegations were that "false and misleading statements" were used to promote the drugs, and kickbacks were paid to physicians to compel them to prescribe the drugs. The lawsuit also claimed Celgene violated the laws of 28 states and the District of Columbia by submitting fraudulent claims to state healthcare programs, including California's Medi-Cal program.

A judge threw out the kickbacks allegation last year, but allowed the lawsuit to proceed. Under the False Claims Act, Brown can receive 25 percent to 30 percent of the settlement. She would have been eligible for a smaller share if the government had intervened to take over the case.

Celgene denied wrongdoing and settled to avoid uncertainty, distraction and expensive litigation, the company said in a statement. Celgene does not have to enter into a corporate integrity agreement as part of the settlement.

July 19, 2017

Largest Fraud Takedown Announced by AG Sessions


On Thursday, July 13, 2017, United States Attorney General Jeff Sessions and Department of Health and Human Services (HHS) Secretary Tom Price, M.D., announced the largest ever health care fraud enforcement action by the Medicare Fraud Strike Force. The action charged 412 defendants across forty-one federal districts for their alleged participation in health care fraud schemes involving $1.3 billion in false billings.

The 412 defendants include 115 doctors, nurses, and other licensed professionals. Of the 412 defendants, over 120 of them were charged for their roles in prescribing and distributing opioids and other dangerous narcotics. HHS also has initiated suspension actions against 295 providers, including doctors, nurses, and pharmacists.

The charges target schemes that bill government health insurance programs (Medicare, Medicaid, and TRICARE) for medically unnecessary prescription drugs and compounded medications that often were never even purchased and/or distributed to beneficiaries.

The charges also involve individuals contributing to the opioid epidemic, with a particular focus on medical professionals involved in the unlawful distribution of opioids and other prescription narcotics, a particular focus for the Department.

According to court documents, the defendants allegedly participated in schemes to submit claims to Medicare, Medicaid and TRICARE for treatments that were medically unnecessary and often never provided. In many cases, patient recruiters, beneficiaries and other co-conspirators were allegedly paid cash kickbacks in return for supplying beneficiary information to providers, so that the providers could then submit fraudulent bills to Medicare for services that were medically unnecessary or never performed.

The number of medical professionals charged is particularly significant, because essentially every health care fraud scheme requires a corrupt medical professional to be involved for Medicare or Medicaid to pay the fraudulent claims.  Aggressively pursuing corrupt medical professionals not only has a deterrent effect on other medical professionals, but also ensures that their licenses can no longer be used to bilk the system.

“Too many trusted medical professionals like doctors, nurses, and pharmacists have chosen to violate their oaths and put greed ahead of their patients,” said Attorney General Sessions. “Amazingly, some have made their practices into multimillion dollar criminal enterprises. They seem oblivious to the disastrous consequences of their greed. Their actions not only enrich themselves often at the expense of taxpayers but also feed addictions and cause addictions to start. The consequences are real: emergency rooms, jail cells, futures lost, and graveyards.  While today is a historic day, the Department's work is not finished. In fact, it is just beginning. We will continue to find, arrest, prosecute, convict, and incarcerate fraudsters and drug dealers wherever they are.”

“Healthcare fraud is not only a criminal act that costs billions of taxpayer dollars - it is an affront to all Americans who rely on our national healthcare programs for access to critical healthcare services and a violation of trust,” said Secretary Price. “The United States is home to the world’s best medical professionals, but their ability to provide affordable, high-quality care to their patients is jeopardized every time a criminal commits healthcare fraud. That is why this Administration is committed to bringing these criminals to justice, as President Trump demonstrated in his 2017 budget request calling for a new $70 million investment in the Health Care Fraud and Abuse Control Program. The historic results of this year’s national takedown represent significant progress toward protecting the integrity and sustainability of Medicare and Medicaid, which we will continue to build upon in the years to come.”

State-by-State Breakdown


In the Northern and Southern Districts of Alabama, three defendants were charged for their roles in two health care fraud schemes involving pharmacy fraud and drug diversion.


In the Eastern District of Arkansas, 24 defendants were charged for their roles in three drug diversion schemes that were all investigated by the DEA.


In the Northern and Southern Districts of California, four defendants, including a physician, were charged for their roles in a drug diversion scheme and a health care fraud scheme involving kickbacks.


In the District of Connecticut, three defendants were charged in two health care fraud schemes, including a scheme involving two physicians who fraudulently billed Medicaid for services that were not rendered and for the provision of oxycodone with knowledge that the prescriptions were not medically necessary. 


In the Northern and Southern Districts of Georgia, three defendants were charged in two health care fraud schemes involving nearly $1.5 million in fraudulent billing.

In the Southern District of Illinois, five defendants were charged in five separate schemes to defraud the Medicaid program.


In the Northern and Southern Districts of Indiana, at least five defendants were charged in various health care fraud schemes related to the unlawful distribution and dispensing of controlled substances, kickbacks, and services not rendered.


In the Southern District of Iowa, five defendants were charged in two schemes involving the distribution of opioids. 


In the Western District of Kentucky, 11 defendants were charged with defrauding the Medicaid program.  In one case, four defendants, including three medical professionals, were charged with distributing controlled substances and fraudulently billing the Medicaid program.


In the District of Maine, an office manager was charged with embezzling funds from a medical office.


In the Eastern and Western Districts of Missouri, 16 defendants were charged in schemes involving over $16 million in claims, including 10 defendants charged as part of a scheme involving fraudulent lab testing.


In the District of Nebraska, a dentist was charged with defrauding the Medicaid program. 


In the District of Nevada, two defendants, including a physician, were charged in a scheme involving false hospice claims. 

New York

In the Northern, Southern, and Western Districts of New York, five defendants, including two physicians and two pharmacists, were charged in schemes involving drug diversion and pharmacy fraud.



In the Southern District of Ohio, five defendants, including four physicians, were charged in connection with schemes involving $12 million in claims to the Medicaid program.

Puerto Rico

In the District of Puerto Rico, 13 defendants, including three physicians and two pharmacists, were charged in four schemes involving drug diversion, Medicaid fraud, and the theft of funds from a health care program.


In the Eastern District of Tennessee, three defendants were charged in a scheme involving fraudulent billings and the distribution of opioids.


In the Eastern, Northern, and Western Districts of Texas, nine defendants were charged in schemes involving over $42 million in fraudulent billing, including a scheme involving false claims for compounded medications. 


In the District of Utah, a nurse practitioner was charged in connection with fraudulently obtaining a controlled substance, tampering with a consumer product, and infecting over seven individuals with Hepatitis C.  


In the Eastern District of Virginia, a defendant was charged in connection with a scheme involving identify theft and fraudulent billings to the Medicaid program.

Other States

In addition, in the states of Arizona, Arkansas, California, Delaware, Illinois, Iowa, Louisiana, Massachusetts, Michigan, Minnesota, Mississippi, New York, Oklahoma, Pennsylvania, Rhode Island, South Dakota, Texas, Utah, Vermont, Washington and Wisconsin, 96 defendants have been charged in criminal and civil actions with defrauding the Medicaid program out of over $31 million. Each state’s respective Medicaid Fraud Control Units investigated these cases. In addition, the Medicaid Fraud Control Units of the states of Alabama, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Missouri, Nebraska, New York, North Carolina, Ohio, Texas, and Utah participated in the investigation of many of the federal cases discussed above.

A list of unsealed court documents can be found here, separated by the districts in which the cases were filed.

Remarks provided by Attorney General Jeff Sessions at the press conference announcing the takedown can be found here.

Effectiveness, The Holy Grail of Compliance - Both the DOJ & OIG Weigh In


Measuring the effectiveness of compliance programs is no easy task since governing agencies have not published a template that will work in all cases; compliance measurements are unique to each company’s size, operations, resources and risks factors. Although there is no “one size fits all” program, both the DOJ and the OIG (in conjunction with the Health Care Compliance Association (“HCCA”)) recently issued guidelines and recommendations for healthcare organizations to design, implement, evaluate and improve their compliance programs. Unfortunately, this may have been done in a vacuum as neither agency appeared to have consulted with one another. There are similarities, differences, and ambiguities between the two agencies’ point of views. This article serves to compare and contrast the compliance guidelines as set forth by the DOJ and OIG within weeks of each other.

More than 25 years have passed since U.S. Sentencing Commission put forth the now infamous seven elements of an effective compliance program. Since then, Compliance Officers continue to chase the “holy grail” of effectiveness. Unfortunately, determining whether a compliance program is effective and how to measure for effectiveness has proven both elusive and difficult. Compounding the challenge is that in the historical period, compliance program guidance has been limited and infrequent. But in the first quarter of 2017, in an unprecedented move, both the United States Department of Justice (“DOJ”) and Department of Health and Human Services (“HHS”) Office of Inspector General (“OIG”) issued guidance on compliance programs.

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