Shire Pharma pays record $350 million on its subsidiary Advanced BioHealing case over kickbacks on Dermagraft

Shire Pharmaceuticals LLC and other subsidiaries of Shire plc (Shire) must pay the government $350 million to settle federal and state False Claims Act allegations that Shire and the company it acquired in 2011, Advanced BioHealing (ABH), employed kickbacks and other unlawful methods to induce clinics and physicians to use or overuse its product “Dermagraft,” a bioengineered human skin substitute approved by the FDA for the treatment of diabetic foot ulcers. Shire plc is a multinational pharmaceutical firm headquartered in Ireland, with its United States operational headquarters in Lexington, Massachusetts. Shire sold the assets associated with Dermagraft in early 2014.

“This settlement represents the largest False Claims Act recovery by the United States in a kickback case involving a medical device,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “Kickbacks by suppliers of healthcare goods and services cast a pall over the integrity of our health care system.Œ Patients deserve the unfettered, independent judgment of their health care professionals.”

The settlement resolves allegations that Dermagraft salespersons unlawfully induced clinics and physicians with lavish dinners, drinks, entertainment and travel; medical equipment and supplies; unwarranted payments for purported speaking engagements and bogus case studies; and cash, credits and rebates, to induce the use of Dermagraft. The Anti-Kickback Statute prohibits, among other things, the payment of remuneration to induce the use of medical devices covered by Medicare, Medicaid and other federally-funded health care programs, including the Department of Veterans Affairs (VA). Claims filed in violation of the Anti-Kickback Statute are considered false or fraudulent under the False Claims Act. In addition, the Anti-Bribery statute and the Federal Acquisition Regulations prohibit bribes to government officials or employees, including VA physicians, to obtain a contract or favorable treatment under a supply contract. The United States alleged that as a result of its violation of these provisions, Shire submitted or caused to be submitted to federally-funded health care programs hundreds of millions of dollars of false claims for Dermagraft.

In addition to the kickback allegations, the settlement also resolved allegations that Shire and its predecessor (ABH) unlawfully marketed Dermagraft for uses not approved by the FDA, made false statements to inflate the price of Dermagraft, and caused improper coding, verification, or certification of Dermagraft claims and related services.

The allegations resolved by the settlement were brought in six lawsuits filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private parties to sue on behalf of the government for false claims and to receive a share of any recovery.ΠThe whistleblower shares to be awarded in this case have not yet been determined.

The six qui tam cases, all of which were either filed or transferred to the U.S. District Court for the Middle District of Florida, are captioned: United States ex rel. Vinca v. Advanced BioHealing, Inc., Case No. 8:11-cv-176-T-30MAP; United States ex rel. Harvey v. Advanced BioHealing, Inc., Case No. 8:16-cv-303-T-30TBM; United States ex rel. Medolla v. Advanced BioHealing, Inc., Case No. 8:12-cv-575-T-30TBM; United States, et al., ex rel. Petty v. Shire Regenerative Medicine, Inc., Case No. 8:14-cv-969-T-30TBM; United States ex rel. Webb v. Advanced BioHealing, Inc., Case No. 8:14-cv-1055-T-30EAJ; and United States ex rel. Montecalvo v. Shire Regenerative Medicine, Inc., Case No. 8:16-cv-268-T-30TBM.

Jeffrey Newman represents whistleblowers but not in this case.