Don't let it get away!
Keep track of the stocks that matter to you.
Help yourself with the Fool's FREE and easy new watchlist service today.
The Department of Justice (DOJ) announced on Thursday that two privately-held health-care companies will be fined up to nearly $50 million for falsely promoting an unapproved drug as being reimbursable through health care. Healthpoint Ltd. and DFB Pharmaceuticals are to pay up to $48 million, due to fallacious marketing of the prescription bed sore ointment known as Xenaderm.
The initial fine of $28 million will increase by $20 million should there be a change in ownership in either company in the next three years.
The companies claimed that the treatment was reimbursed by Medicaid, although it was not, causing false Medicare and Medicaid claims to pour in. Additionally, the DOJ claims that Xenaderm was not even adequately tested for efficacy and safety, nor did Healthpoint report with fidelity Xenaderm's regulatory status in quarterly reports.
This settlement is the most recent application of the qui tam, or "whistleblower," provision of the False Claims Act, which allows individuals who bring forth evidence of fraud to share in financial settlements with the U.S. government. Since the beginning of 2009, the DOJ has recovered nearly $14 billion through the False Claims Act. Over $10 billion of that amount involves federal health-care fraud.
Healthpoint is an affiliate of DFB Pharmaceuticals. The DOJ notes that, although the fines stand, these are allegations only, and "there has been no determination of liability."