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Litigation

Warner Chilcott Pleads Guilty, Pays $125M In Criminal, Civil Fines For Fraud

BOSTON — (Mealey’s) Pharmaceutical company Warner Chilcott on Oct. 23 pleaded guilty to health care fraud, and its former president was arrested for conspiracy to pay kickbacks to physicians, the U.S. Attorney for the District of Massachusetts announced Oct. 29 (United States of America v. Warner Chilcott Sales (U.S.) L.L.C., No. 15-cr-10324, United States of America ex rel. Lisa A. Alexander, et al. v. Warner Chilcott, plc, et al., No. 11-cv-10545, D. Mass.). 

According to court documents, Warner Chilcott agreed to plead guilty on Oct. 23 in the U.S. District Court for the District of Massachusetts to one count of health care fraud and criminal forfeiture.  The criminal information, filed Oct. 29, alleges that between 2009 and 2013, company employees, acting at the direction of the management team, paid remuneration to physicians to induce them to prescribe the company’s drugs. 

(Warner Chilcott criminal information available.  Document #28-151112-002F.  Warner Chilcott criminal plea available.  Document #28-151112-003P.

The government says the inducements were in the form of payments and meals associated with “medical education events” that were held at expensive restaurants and that frequently contained minimal or no educational aspects.  Instead, it says, the meals were an attempt to gain a competitive advantage over other drug companies. 

False Drug Authorizations 

In addition, the government alleges that from 2011 to 2013, Warner Chilcott employees submitted false, inaccurate or misleading prior authorizations to federal health care programs to pay for company drugs that would otherwise not be covered.  In some cases, the government says, Warner Chilcott sales representatives misrepresented themselves to insurance companies as physicians. 

The government says the company’s management team instructed employees to make unsubstantiated claims that the osteoporosis drug Actonel was superior to similar drugs, even though that was not supported by clinical evidence. 

Under the plea, Warner Chilcott will pay a criminal fine of $22,940,000. 

False Claims Settlement 

Concurrently, Warner Chilcott agreed to pay $102,060,000 to settle allegations that it caused false claims to be submitted to federal health care programs. 

(Warner Chilcott false claims settlement available.  Document #28-151112-004P.

The U.S. Attorney said the federal share of the civil settlement is about $91.5 million and the state Medicare share is about $10.6 million.  Relators Lisa A. Alexander and James P. Goan will receive about $22.9 million as their statutory share of the federal recovery. 

Also on Oct. 29, former Warner Chilcott President W. Carl Reichel, 57, of Chester, N.J., was arrested for conspiracy to pay kickbacks.  

Ex-President’s Sales Strategy 

The Oct. 28 indictment says that between 2009 and 2012, Reichel designed a sales and marketing strategy to provide physicians with free dinners and bogus speaker fees in return for prescribing the company’s drugs.  The government says Reichel provided the company sales force with virtually unlimited expense accounts for dining with doctors and other health care practitioners for medical education programs. 

The government says little, if any medical education took place at the dinners. 

Physicians who prescribed high volumes of Warner Chilcott drugs received speaker fees, the government says, even though the recipients often never spoke to anyone.  It says that physicians were not paid at subsequent events until their prescriptions increased. 

The government says that if found guilty, Reichel faces a maximum sentence of five years in prison and a maximum fine of $250,000. 

In 2011, Warner Chilcott announced that Reichel was leaving the company “to pursue other interests” at the same time the company announced a sales realignment.  

Sales Reps Charged 

In addition to the company plea and Reichel’s arrest, former Warner Chilcott district sales manager Timothy Garcia, 35, of Los Gatos, Calif., on Oct. 16 pleaded guilty in the District of Massachusetts to one count of conspiracy to commit health care fraud (United States of America v. Timothy Garcia, No. 15-cr-10310, D. Mass.).  The government says that because many insurance companies would not pay for the osteoporosis drug Atelvia, Garcia instructed his sales representatives to fill out prior authorizations for the drug if doctors would not do so. 

(Garcia criminal information available.  Document #28-151112-006F.

The government says that Garcia’s scheme resulted in $100,000 Atelvia sales based on prior authorizations manipulated by the sales representatives. 

Garcia faces a maximum sentence of 10 years in prison and a maximum fine of $250,000 or twice the gain from his offense.  Judge Patti B. Saris set sentencing for April 14. 

HIPAA Violations 

Also on Oct. 16, former district manager Landon Eckles, 30, of Huntersville, N.C., was charged with one count of wrongful disclosure of protected health information in violation of the Health Insurance Portability and Accountability Act (HIPAA).  The government alleges that Eckles instructed his sales representatives to fill out prior authorizations for Atelvia if physicians refused to do so. 

(Eckles criminal information available.  Document #28-151112-007F.

In addition, the government says that Eckles encouraged his sales representatives to “flag” patient medical charts with Atelvia brochures to remind physicians to prescribe the drug.

 If convicted, Eckles faces a maximum sentence of 10 years in prison and a maximum penalty of $250,000 plus forfeiture.  A plea hearing is set for Nov. 12. 

Earlier Arrests, Plea 

In related prosecutions, the federal government on Oct. 21 arrested Margaret “Rita” Luthra, M.D., of Longmeadow, Mass., on one count of accepting kickbacks from Warner Chilcott in exchange for prescribing the osteoporosis drugs Actonel and Atelvia.  

In July, former district sales manager Jeff Podolsky, 49, of East Meadow, N.Y., pleaded guilty to one count of conspiracy to commit health care fraud.  The government alleged that he directed his sales representatives to fill out prior authorizations for Actonel and Atelvia. 

The government also said that on July 7, former district manager Jeff Podolsky, 49, of East Meadow, N.Y., pleaded guilty to one count of conspiracy to commit health care fraud.  The government says Podolsky told his sales representatives to fill out prior authorizations for Actonel and Atelvia using false justification about why the patients needed those specific drugs. 

In 2000, Irish drugmaker Galen bought Warner Chilcott.  Actavis PLC bought Galen in 2013, and Allergan Inc. bought Actavis in 2015.  On Oct. 29, Allergan and Pfizer Inc. announced they were discussing a merger. 

In an Oct. 29 press statement, Allergan said it previously disclosed the government investigation and previously reserved $125 million to resolve it.  It said it has cooperated with the investigation. 

Counsel 

The United States is represented in the criminal case by U.S. Attorney Carmen M. Ortiz and Assistant U.S. Attorneys David S. Schumacher, Miranda Hooker, Sonya Rao and Susan M. Poswistilo of the U.S. Attorney’s Office in Boston and Jill P. Furman of the U.S. Justice Department in Washington, D.C. 

In the False Claims Act case, the government is represented by Colin M. Huntley of the Justice Department in Washington and Rao and Poswistilo of the U.S. Attorney’s Office in Boston.  Warner Chilcott is represented by Geoffrey E. Hobart and Matthew J. O’Connor of Covington & Burling in Washington. 

Alexander and Goan are represented by W. Scott Simmer and Thomas J. Poulin of the Simmer Law Group in Washington, Stephen A. Weiss of Seeger Weiss in New York and Steven F. Molo of MoloLamken in Washington. 

Individual Counsel 

In the Reichel, Garcia and Eckles cases, the government is represented by Schumacher and Hooker of the U.S. Attorney’s Office in Boston. 

Garcia is represented by Thomas J Butters of Butters Brazilian in Boston.  Eckles is represented by Michael J. Tuteur of Foley & Lardner in Boston, Pamela L Johnston of Foley & Lardner in Los Angeles and Noah G. Brown of Alexion Pharmaceuticals Inc. in Cheshire, Conn.

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