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2019 Affirmative Civil Enforcement Achievements, Recoveries of Over $260 Million

From Department of Justice, U.S. Attorney’s Office, Eastern District of Pennsylvania

2019 Affirmative Civil Enforcement Achievements, Recoveries of Over $260 Million

PHILADELPHIA, PA – United States Attorney William M. McSwain announced affirmative civil enforcement (ACE) achievements in 2019 by the Civil Division of the United States Attorney’s Office for the Eastern District of Pennsylvania, and its ongoing efforts in the first half of 2020 to stop fraud, waste, and abuse against the government. The number of affirmative civil enforcement settlements rose to an all-time high in 2019, solidifying the Office’s Civil Division as one of the busiest and most productive in the nation.

The Office’s Civil Division recovered over $260 million in settlements and judgments from civil cases involving fraud against the government in 2019 and the first half of 2020.  These matters originated from qui tam, or whistleblower, filings under the False Claims Act (FCA), referrals from agency partnerships, and proactive efforts including data analytics. In 2019, the Civil Division also opened a record-setting number of ACE investigations into alleged fraud against the government, Controlled Substances Act violations, and civil rights violations. Much of the Office’s affirmative success came from a renewed focus on generating and supporting investigations using data analytics, which helps to identify fraud trends.

“This past year’s results reflect creative and groundbreaking resolutions across a variety of programs that appropriately address violations by health care providers, government contractors, and federal grant recipients, while encouraging those same entities and their employees to come forward and self-disclose when they are aware of non-compliance with federal laws,” said U.S. Attorney McSwain. “In our District, we have one of the most sophisticated whistleblower bars in the country. We thank those whistleblowers and their counsel who have brought allegations of fraud to our attention. The willingness of whistleblowers, or relators, to come forward and shed light on claims of fraud resulted in the return of millions of dollars to the federal government programs that were defrauded.”

U.S. Attorney McSwain continued, “We also thank our federal enforcement partners for their dedication in the matters summarized below, including: the United States Department of Health and Human Services, Office of the Inspector General; the Defense Investigative Service, Office of the Inspector General; the Department of Veterans Affairs; the Drug Enforcement Administration; the United States Office of Personnel Management, Office of the Inspector General; and the United States Postal Inspection Service. My Office would not have achieved the level of success it did without the benefit of their dedication and expertise.”

“Our Civil Division’s affirmative achievements show that we will fight fraud and hold companies and individuals accountable, no matter the methods, schemes, or amounts at play,” U.S. Attorney McSwain said. “I look forward to ongoing ACE success and continued enforcement in the areas of health care fraud, grant fraud, Controlled Substances Act enforcement, and civil rights enforcement.”

Below are some of the case highlights from 2019 and thus far in 2020.

2019 ACE Achievements Spanned Multiple Enforcement Areas

FCA Healthcare Fraud Settlements

Pentec Health. Pentec Health, a provider of compounded infusion drugs and nutritional supplements for use by patients with end-stage renal disease, paid $17 million to resolve allegations that, from 2007 to 2018, it billed Medicare and other federal healthcare programs for excessive amounts of product wasted during the compounding of its nutritional supplement Proplete for dialysis patients, and routinely waived patient copayments and deductible obligations in order to induce prescriptions and use of Proplete. Along with this settlement, Pentec executed a Corporate Integrity Agreement with the Department of Health and Human Services, Office of Inspector General.

Mallinckrodt/Questcor Pharmaceuticals.  Mallinckrodt ARD LLC (formerly known as Mallinckrodt ARD, Inc. and previously Questcor Pharmaceuticals, Inc.) paid $15.4 million to resolve claims that Questcor paid illegal kickbacks to doctors from 2009 through 2013 in the form of lavish dinners and entertainment, to induce prescriptions of the company’s drug, H.P. Acthar Gel, for the treatment of complications from multiple sclerosis. The company allegedly paid kickbacks to induce referrals from health care providers in violation of the Anti-Kickback Statute and to induce the submission of false claims to Medicare.

Heritage Pharmaceuticals. Generic drug manufacturer Heritage Pharmaceuticals paid $7.1 million to resolve allegations that from 2012 to 2015, it engaged in a scheme to artificially inflate generic drug prices and other anti-competitive behavior, causing a loss to Medicare, Medicaid, and the Department of Defense’s Tricare program beneficiaries, as well as the Department of Veterans Affairs. Separately, Heritage entered into a three-year deferred prosecution agreement with the Antitrust Division with regard to a criminal charge that the company conspired to suppress and eliminate competition by allocating customers, rigging bids, and fixing and maintaining prices in violation of the Sherman Act.

Controlled Substances Act Enforcement

Spiro Kassis, M.D. Dr. Kassis paid $1.4 million, committed to never obtaining a controlled substance registration, and consented to a 15-year exclusion from Medicare and Medicaid to resolve allegations that he improperly prescribed Schedule II controlled substances to patients between 2014 and 2017.

In a parallel criminal proceeding, Kassis pled guilty to 14 counts of illegal distribution of controlled substances. According to the criminal charges, Kassis, who claimed to be a specialist in psychiatry and addiction medicine, operated medical offices in East Norriton Township, PA and Scranton, PA and used his offices to operate a prescription “pill mill” where he sold medically unnecessary prescriptions for opioids such as oxycodone for approximately $200 cash each.

This opioid settlement, the first of its kind in this Office, simultaneously resolved all three aspects of liability – under the Controlled Substances Act, FCA, and forfeiture statutes – in a single civil settlement agreement.

FCA Procurement and Grant Fraud Settlements

Drexel University. Drexel agreed to pay the United States $189,062 to resolve potential FCA liability for a former professor’s use of grant funds to fund trips to “gentlemen’s clubs,” sports bars, and other improper purchases. The government’s investigation began in 2017 after Drexel voluntarily disclosed the improper charges to eight federal grants for energy and naval technology related research that it received from the Department of the Navy, the Department of Energy, and the National Science Foundation.

Ambu. Ambu, a provider of medical supplies, paid $3.3 million to resolve allegations that it submitted false claims for manufactured products in China and Malaysia for sale to United States government agencies in violation of the Trade Agreements Act (“TAA”). The TAA requires that products sold to government agencies must come only from countries with which the United States has a trade agreement.

Our Lady of Lourdes. Our Lady of Lourdes Health Foundation and two related Our Lady of Lourdes companies paid $1,143,881 to resolve claims arising from Lourdes’ administration of community service grants funded through the Corporation for National and Community Service (CNCS)’s Senior Corps program. Specifically, the fraud affected the Foster Grandparent Program, which places seniors in school and community settings to serve alongside youth with exceptional needs, and the Senior Companion Program, which places seniors in community and residential settings to assist other seniors who have difficulty with tasks of daily living. These programs provide small hourly stipends to the volunteers performing these services, who must clear criminal history checks to ensure their suitability for service. Lourdes allegedly either failed to perform these criminal history checks or failed to keep records of doing so for 46 individuals. When a monitoring visit was scheduled in 2017, Lourdes employees cut-and-pasted other background checks in an attempt to conceal this failure from CNCS officials.

Civil Rights Settlements

Thomas Jefferson University Hospital.  Thomas Jefferson University Hospitals, Inc., and Outpatient Imaging Affiliates, LLC, the owners and operators of Jefferson Outpatient Imaging and Radiology (“Jefferson Outpatient”), resolved allegations that Jefferson Outpatient violated the Americans with Disabilities Act (ADA) by denying full and equal access to services based on an individual’s disability and use of a wheelchair. Under the ADA, facilities like Jefferson Outpatient, as a place of public accommodation, must provide outpatient and radiology services to members of the general public. In response to allegations that it failed to provide access to DEXA bone density scans to individuals with disabilities at its facilities in the greater Philadelphia area, Jefferson Outpatient agreed to comply with its obligations under the ADA, provide employee training, pay compensatory damages to the complainant, adopt and incorporate a non-discrimination policy into its existing policies, and post the policy in conspicuous locations in all of its offices and on its website.

ACE Achievements Continue in 2020, Despite Coronavirus Pandemic

The coronavirus pandemic has not impeded the Office’s continued work in the civil enforcement area, as resolutions of significant FCA matters have continued into 2020:

In February 2020, Guardian Elder Care Holdings, Inc., and its related companies, paid over $15 million to settle claims that the skilled nursing home chain provided medically unnecessary rehabilitation therapy to residents in order to meet revenue goals. Guardian Elder Care operates more than fifty facilities throughout Pennsylvania – including locations in the Lehigh Valley, the Poconos, and Bucks County – as well as in Ohio and West Virginia.

In April 2020, Logan Laboratories, Inc. and two former executives, Michael T. Doyle and Christopher Utz Toepke, agreed to pay $41 million to resolve alleged FCA violations for billing federal health care programs for medically unnecessary urine drug testing.

In July 2020, Universal Health Services, Inc. and UHS of Delaware, Inc. (UHS), headquartered in King of Prussia, PA, agreed to pay $117 million to resolve alleged FCA violations for billing for medically unnecessary inpatient behavioral health services and for failing to provide adequate and appropriate services for adults and children admitted to UHS psychiatric and behavioral treatment facilities nationwide.

As the year continues to unfold, the Office’s Civil Division is prepared to fight any coronavirus-related fraud through the enforcement of the FCA. The Coronavirus Aid, Relief, and Economic Security (CARES) Act provided $2 trillion in federal funds to fight the ongoing health and economic crisis caused by the coronavirus and was the largest economic stimulus package in U.S. history. It provided $349 billion in loans for small businesses, $130 billion in relief for hospitals and medical suppliers, and $500 billion in assistance to other businesses, states, and municipalities. Unfortunately, there are unscrupulous actors who are attempting to take advantage of these financial outlays by committing fraud, especially when there is so much money at stake.

Attorney General Barr has directed the Department of Justice to prioritize fraud schemes arising out of the coronavirus pandemic. If there are federal funds involved in any coronavirus-related fraud in the Eastern District of Pennsylvania, whether through Medicare, Medicaid, defense contracting, or other government contracts, this Office will dedicate resources to holding companies and individuals appropriately accountable. The FCA remains an extremely powerful tool to combat fraud on the government.

“During this difficult time, protecting our communities from fraudsters who prey on federal programs and federal taxpayers is paramount,” said U.S. Attorney McSwain. “Previous experience has shown that there are people who will seek to illegally profit from disasters. But my Office is committed to using all of the criminal and civil tools at our disposal to protect federal programs.”