Life Science Compliance Update

May 03, 2016

Pfizer/Wyeth Settlement Finalized and Signed: States Net Millions

The Department of Justice ("DOJ") recently entered into a settlement of a quit tam lawsuit against Pfizer, Inc. and Wyeth, LLC. We previously wrote about this settlement back in February, when an "agreement in principle" was reached between Pfizer and the United States government.

As a refresher, allegations were made by Lauren Kieff, a former hospital sales representative for AstraZeneca Pharmaceuticals, LP, and William St. John LaCorte, a physician, that Wyeth engaged in healthcare fraud from 2001 to 2006. These allegations covered two medications, both commonly used to treat acid reflux disease, Protonix Oral and Protonix I.V. Shortly after bringing Protonix I.V. to market, Wyeth found that it was not selling well and began to offer bundle sales on both of their PPI drugs if they were purchased together.

Allegedly, Wyeth thought that if patients were discharged from the hospital on Protonix Oral, they were likely to stay on the drug for long periods of time, rather than switch to competing Proton Pump Inhibitors (PPIs) of which there are many. While the patients remained on the drug after discharge, they, including Medicaid, would pay nearly full price for the drug.

The actions taken by Wyeth, prior to the Pfizer merger, allegedly included failing to inform Medicaid about the discounts that it was offering to its private purchasers, such as hospitals. Wyeth's failure to inform Medicaid about the bundled discounts it was offering and providing to its hospital customers, was a violation of the False Claims Act ("FCA"). Pharmaceutical companies are supposed to pay rebates to state Medicaid programs so that they receive the same discounts given to private customers.

Settlement Terms

The settlement requires Wyeth and Pfizer to pay $784.6 million, split between a Federal Settlement Amount ($413, 248,820) and a Medicaid State Settlement Amount ($371,351,180). The state settlements were negotiated by attorneys general in Indiana, Massachusetts, New York, and North Carolina, working with the United States Attorney's Office for the District of Massachusetts, the U.S. Department of Health and Human Services Office of Inspector General, and the United States DOJ.

As is typical in these types of settlements, the settlement does not include an admission of liability by Wyeth.

This settlement once again reinforces the emphasis the government has placed on combating healthcare fraud. The partnership between the DOJ and Health and Human Services has resulted in recoveries totaling more than $29 billion through False Claims Act cases, with more than $17.5 billion of that amount recovered in cases involving fraud against federal healthcare programs.

Another Payday for LaCorte

As we wrote in our previous article, Dr. LaCorte is notorious for bringing qui tam suits against pharmaceutical companies. He has brought at least twelve whistleblower cases, with 6 winning settlements, and one still pending. He, however, insists that he doesn't do it for the money and that the cases just fall into his lap.

This settlement will result in $98,058,190 being split between both relators, paid from the proceeds of the federal and state settlements. According to the settlement documents, Relator LaCorte will receive $64 million, as well as reasonable attorneys' fees and costs.

April 15, 2016

Toussaint Found Guilty: Faces 70 Years in Prison and Millions in Fines

Richard Toussaint, best known as a Dallas, Texas anesthesiologist and the co-founder of the recently-bankrupt hospital chain Forest Park Medical Center, was recently found guilty of seven counts of healthcare fraud and faces up to seventy years in prison.

Last May, Toussaint was indicted after investigators found that $10 million of false claims had been filed to many insurance companies, including, Blue Cross Blue Shield of Texas, UnitedHealthcare, and the Federal Employees Health Benefits Program. The scheme took place from 2009 to 2010, over an eighteen month period. The trial for Toussaint took just four days, and the federal jury spent only three hours deliberating before returning its verdict.

Toussaint was found to have billed for numerous procedures that he should not have billed for, as he was in another state or hospital, or even "undergoing surgery himself." In order to fraudulently bill, he created fake medial records as if he had participated in face-to-face medical procedures and was physically present during the "most demanding and risky aspects of the anesthesia plan," when in actuality, he was not. Court documents allege that not only would he sign his initials next to the claims, but if he wasn't able to, he would direct others to do the same. Going a step further, Toussaint would also pre-sign patients' medical records, representing that the services were provided and completed before the procedures even took place.

One of the red flags that caught Toussaint in this web was that his claims would sometimes overlap. One time, he billed for being present and medically directing six patients at two different hospitals. Also, as previously referenced, when he was under anesthesia himself, he filed claims for medically directing two patients.

The report also stated that when Toussaint was in the operating room, he would increase the amount of time it took to perform the procedures, and encourage/direct others to do the same.

While a sentencing date has not been set, Toussaint faces up to seventy years in prison (ten years for each of the seven counts) and a $1,750,000 ($250,000 for each of the seven counts) fine. Toussaint may also be forced to turn over several assets that were purchased using money from the fraud scheme – including eight luxury cars and any private aircrafts in his name.

His hospital chain, Forest Park Medical Center, has not been doing well, either. Just last month, the system filed for bankruptcy. The bankruptcy filing follows several physician kickback suit settlements over the past several years.

This indictment and subsequent guilty verdict are the most recent in a months-long string of similar cases. We bring these "horror stories" to our readers every now and then to serve as a reminder how important a thriving and successful compliance program is at every level in a company. This particular instance could have been avoided if the medical centers at which Toussaint practiced had strong compliance departments who could have noticed, for one, that Toussaint was billing for completing procedures when he was not present, or that he was billing for being present in overlapping procedures.

To keep your compliance officers "in the know," we encourage your company to sign up for a subscription to our sister publication, Life Science Compliance Update. Life Science Compliance Update covers important news and analysis, and includes monthly input from top compliance officers and attorneys across the industry.

March 09, 2016

Tenet Healthcare Settlement Offer


Tenet has been locked in a legal battle against allegations that four of its hospitals violated the Anti-Kickback Statute and the False Claims Act. Recently, in an attempt to settle the allegations, Tenet made an offer to pay $238 million.  

The criminal investigation into Tenet, which was initiated last year, arose out of a civil lawsuit filed under the qui tam provision of the False Claims Act. The lawsuit alleges that contractual arrangements between four of the Tenet hospitals and Georgia-based Hispanic Medical Management violated the Anti-Kickback Statute and the False Claims Act, specifically, that the hospitals paid illegal kickbacks to clinics that referred undocumented pregnant patients to them for deliveries paid for by Medicaid. This is an illegal kickback because while undocumented patients are not eligible for regular Medicaid coverage, they typically qualify for emergency medical assistance when they deliver their babies. The government alleged that the hospitals included the Medicaid-ineligible women when seeking additional Medicaid funds intended to support hospitals that treat a large number of low-income patients.

In a recent Securities and Exchange Commission (SEC) filing, Tenet said it began discussions with the Department of Justice and the State of Georgia in January, attempting to resolve both the criminal investigation and the civil litigation. Initially, in December 2013, Tenet made an offer of approximately $20 million to settle the case, reflecting the "low end of the range of probable liability in connection with the civil litigation." On February 18, 2016, Tenet bumped up their official offer, to $238 million, to settle the matters.

Tenet's SEC filing included a statement on the settlement proposal, stating, "we expect that the DOJ will make a counterproposal, and there can be no assurance that the ongoing uncertainties and potentially wide range of outcomes associated with any potential resolution, we cannot estimate the ultimate amount of potential loss or range of reasonable possible loss we may face."

Criminal Investigation

The criminal investigation stems out of a subpoena from the Department of Health and Human Services in Atlanta, received by Tenet in 2012, requesting Tenet documents. The investigation has continuously centered on the relationship with Hispanic Medical Management, who Tenet contracted with for translation, marketing, management, and Medicaid eligibility determination services. The four Georgia hospitals involved in the investigation are: Atlanta Medical Center; South Fulton Medical Center, which consolidated with Atlanta Medical Center in 2013; North Fulton Regional Medical Center; and Spalding Regional Medical Center.

In 2014, federal investigators filed criminal charges against two people involved in the kickback scheme, a former owner of HMM and a former employee of a Tenet hospital. On April 10, 2015, the DOJ informed Tenet that the criminal investigation expanded to include four of its hospitals.

What Next?

The DOJ will have the opportunity to respond to Tenet's settlement offer, and either accept it, or reject it, as they did with the $20 million offer in December 2013.

According to Sheryl Skolnick, the Director of Research and a healthcare analyst at Mizuho Securities USA, criminal investigations and charges in big Medicare and Medicaid fraud cases are becoming more comment. Historically, she said, criminal prosecution was more common in the smaller Medicare and Medicaid fraud cases. One of the reasons the DOJ may have been focusing on smaller cases first is because it is difficult to bring criminal charges, since the standard of proof is higher than it is in civil cases.

"You have to prove intent, which at a corporate level means you have to have some level of senior management involved and some sort of pattern that you can essentially say this was not just a fluke of a one-off situation but rather this was part of a strategy or policy or intent of the organization to bill in this way," Skolnik stated.

This rise in criminal investigations of companies and potential fraud cases of all sizes, means companies must be increasingly vigilant as to what is going on at all levels, but especially senior management level.

We will be sure to monitor the progress of settlement negotiations between Tenet and the DOJ, and are interested whether Tenet and the DOJ will be able to come to one single settlement agreement, or if it will go through two separate trials, one concluding the criminal investigation, and the other concluding the civil allegations.


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