The Department of Justice announced that Caremark, a pharmacy benefit management (PMB) company, will pay $6 million to settle allegations that it violated the False Claims Act; and the former Caremark employee who blew the whistle on the violations will receive $1.2 million from the settlement. Caremark allegedly knowingly failed to reimburse Medicaid for the cost of drugs for beneficiaries who were covered by both Medicaid and a private health plan. These patients are referred to as “dual eligible” and their private insurer or PMB must assume the cost of the prescription drugs rather than submit claims to Medicaid.
If Medicaid pays for the drugs when a private insurer or PMB should have assumed the cost, the private insurer or PMB must reimburse Medicaid. Caremark caused Medicaid to pay the drug costs when Caremark should have paid.
On January 19, 2012 Janssen Pharmaceuticals Inc., a subsidiary of Johnson & Johnson, announced that it had agreed to pay $158 million to settle a Medicaid fraud lawsuit in Texas which alleged that the company improperly marketed its antipsychotic drug Risperdal causing the state to overpay for the drug.
The lawsuit alleges that the company committed fraud by making false or misleading statements about the cost, effectiveness, and safety of the drug and exerted improper influence over physicians and state officials to recommend the drug, including allegations of providing kickbacks. Additionally, the lawsuit claimed that the company told physicians that the drug was safe to prescribe to children even though the Food and Drug Administration (FDA) had not approved such use.
Janssen announced that it agreed to pay the $158 million settlement in order to resolve all claims against it in Texas. The company noted, however, that it does not admit any liability or wrongdoing by entering into the settlement agreement. The settlement will put an end to the trial that began on January 10, 2012.
Some analysts have contended that the $158 million settlement is a victory for Johnson & Johnson because the company has made billions from the sales of Risperdal and the settlement will allow the company to avoid repaying the $579 million that the Texas Medicaid program spent on the drug in addition to the $500 million in penalties initially sought by Texas Attorney General Greg Abbot.
The suit was originally filed in 2004 when whistleblower Allen Jones, a former employee of the Office of Inspector General of Pennsylvania, claimed that he had uncovered the drug manufacturer’s alleged violations while he investigated claims in Pennsylvania. Texas joined the lawsuit two years later in 2006.
Mr. Jones will receive a portion of the settlement amount for his role as a whistleblower. The details of the settlement, including the amount of the award to be received by the whistleblower, have not yet been released.
The Employment Law Group© law firm focuses in the areas of employment law and whistleblower protection law, has helped many clients file suit against employers that fraudulently billed the U.S. government, and has established favorable precedents under the retaliation provision of the False Claims Act.