Kusserow on Compliance: Whistleblowers receive $98M in $784.6M FCA settlement

Pharmaceutical companies Wyeth and Pfizer Inc., agreed to pay $784.6 million to resolve allegations that Wyeth knowingly reported to the government false and fraudulent prices on two of its proton pump inhibitor (PPI) drugs, Protonix Oral® and Protonix IV®. The case was brought under the qui tam provisions of the federal False Claims Act (FCA) (31 U.S.C. § 3729 et seq.) by two relators, a former hospital sales representative for AstraZeneca Pharmaceuticals and a practicing physician. They will receive $98,058,190.00 as their share from the settlement. This amount ranks among the largest award for whistleblowers ever.

Pfizer acquired New Jersey-based Wyeth in 2009, approximately three years after Wyeth had ended the conduct that gave rise to the settlement. The Department of Justice (DOJ) alleged that Wyeth failed to report deep discounts on Protonix Oral and Protonix IV that it made available to thousands of hospitals nationwide through a bundled sales arrangement in which a hospital could earn deep discounts on both drugs, if it placed them on formulary and made them “available” within the hospital. Through this bundled arrangement, Wyeth sought to induce hospitals to buy and use Protonix Oral, which hospitals otherwise would have had little incentive to use, because other pre-existing oral PPI drugs were priced competitively and were considered to be as safe and effective. Wyeth wanted to control the hospital market because patients discharged from the hospital on Protonix Oral were likely to stay on the drug for long periods of time, rather than switch to competing PPIs, during which time payers, including Medicaid, would pay nearly full price for the drug.

All this resulted in their wrongfully avoiding paying hundreds of millions of dollars in rebates to Medicaid. Under the terms of the settlement, Wyeth will pay $413,248,820 to the federal government and $371,351,180 to state Medicaid programs.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

Connect with Richard Kusserow on Google+ or LinkedIn.

Subscribe to the Kusserow on Compliance Newsletter

Copyright © 2016 Strategic Management Services, LLC. Published with permission.