Whistleblower Negotiating Reward in $48 Million FCA Case

A whistleblower lawsuit brought against Healthpoint Ltd. and DFB Pharmaceuticals was settled for $48 million.  The suit was brought under the qui tam provision of the False Claims Act, which allows individuals to sue on behalf of the government and share in any recovery.

Whistleblowers can be current or former employees, sales representatives, physicians, trainers, consultants, patients, customers, competitors, or anyone else with knowledge of Medicare or Medicaid fraud.

Under the False Claims Act, a whistleblower who brings a qui tam suit is entitled to a reward of between 15% and 25% of the amount the government actually collects.  The government and the whistleblower in this case are negotiating the amount of her reward.

In this case, the settlement resolves allegations that Healthpoint caused false claims to be submitted to Medicare and Medicaid for an unapproved drug, Xenaderm, a prescription skin ointment for the treatment of nursing home patients’ bed sores.  Prescription drugs that have not been approved by the Food and Drug Administration (FDA) are not eligible for reimbursement from Medicare or Medicaid.

The government alleges that Healthpoint actively promoted Xenaderm as a prescription drug that, unlike non-prescription skin ointments such as Vaseline, was “Medicaid reimbursed” and therefore cost nursing homes nothing to administer to Medicaid patients.  In fact, Xenaderm was not eligible for reimbursement and Healthpoint did not include Xenaderm on its quarterly list of reimbursable drugs that it submitted to the government.

The government also alleges that Healthpoint did not complete any double-blind placebo-controlled clinical studies to establish the safety and effectiveness of Xenaderm.  It points to an internal email written by a Healthpoint clinical researcher who admitted that the safety and efficacy data for Xenaderm was “cruelly insufficient” to meet FDA standards.

The lawsuit was originally filed under seal (in secret) by the whistleblower, and the whistleblower’s evidence was provided only to the government.  After reviewing the secret complaint and conducting an investigation, the government joined the lawsuit.

The government and the whistleblower, have not yet agreed on the size of her award.  Under the False Claims Act, she is entitled to a reward of 15% top 25% of the total amount recovered, or between $7.2 million and $12 million if the government collects the full amount of the settlement and determines that her lawsuit covered the claims that were settled.

Two issues may be under negotiation.  First, it is unclear whether the lawsuit filed by the whistleblower was as broad as the lawsuit the government ultimately pursued.  If the whistleblower’s lawsuit had a more narrow scope, then her reward may be limited to the portion of the settlement attributable to her claims.

Second, Healthpoint and DFB have agreed to pay $28 million now, plus another $20 million if there is a change in ownership of Healthpoint or DFB over the next three years.  If there is no change in ownership and the settlement is limited to $28 million, then the whistleblower would be entitled only to a percentage of the amount actually paid.

If you are aware of false claims being submitted to Medicare or Medicaid, then you should consult with an experienced False Claims Act attorney immediately.  You may be entitled to a substantial reward and the legal protections afforded whistleblowers under state and federal laws.

To arrange a free and confidential consultation, call John Howley, Esq. at (917) 652-6504 or click here to contact us via email.

John Howley, Esq.

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