Justice Dept. joins suit on drug pricing fraud

Physicians are rarely brought into such cases, but doctors should be wary of drug representatives touting high reimbursement gains, a lawyer warns.

By Amy Lynn Sorrel — Posted March 19, 2007

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The government is targeting only a pharmaceutical manufacturer in a recent lawsuit alleging that the company reported inflated prices for federally reimbursed drugs. But physicians who bill for the medications they purchase from drugmakers should take precautions to make sure they remain immune from liability in these types of cases, an expert warns.

The Justice Dept. in late January joined a whistle-blower lawsuit that accuses generic drug manufacturer Boehringer Ingelheim Pharmaceuticals Inc. and its affiliates of reporting to Medicare and Medicaid drug prices sometimes 1,000% more than the actual price its customers paid. The charges involve nine different medications, such as the cancer therapy azathioprine and hydromorphone, a pain treatment.

According to the complaint, Boehringer allegedly marketed the difference between the two prices to encourage customers to buy its medications and to boost profits.

The government and private insurers use the reported price, referred to as the "average wholesale price," as a benchmark to set federal reimbursement rates for doctors and others who buy the medications. Because of that, the government contends that, between 1996 and 2004, Boehringer knowingly caused its customers to submit more than $500 million in fraudulent claims to federal health care programs, in violation of the federal False Claims Act and anti-kickback statute.

The investigation began after Ven-A-Care of the Florida Keys Inc., a pharmacy, filed a whistle-blower lawsuit in the U.S. District Court for the District of Massachusetts against Boehringer.

The government declined to comment for this story. U.S. Assistant Attorney General for the Civil Division Peter D. Keisler said in a statement, "Fraudulent pricing practices in the pharmaceutical industry have provided illicit profits for pharmaceutical manufacturers and providers at the expense of the taxpayer."

He said the government's involvement in this lawsuit "is another example of our ongoing effort to combat these practices and hold its perpetrators accountable."

Boehringer spokeswoman Marybeth McGuire did not provide a comment by deadline.

Although physicians are rarely the subject of inquiry in these cases, it is possible for doctors to get caught in the middle, said Washington, D.C.-based health care fraud expert Robert S. Salcido, a partner at Akin Gump Strauss Hauer & Feld LLP.

"The Dept. of Justice could easily come up with one of two theories: That the physician conspired with the drug company to submit false claims; or simply that the hospital or doctor knowingly presented false claims to the government because they knew that the claims were based on what the government refers to as a sham average wholesale price," said Salcido, a former Justice Dept. lawyer.

If doctors are approached by pharmaceutical sales reps touting increased reimbursements, that should raise a red flag, he said. To steer clear of legal trouble, Salcido recommends that doctors think twice about doing business with that company.

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