Healthpoint Ltd. Agrees to Settle False Claims Act Lawsuit Involving Unapproved Prescription Drug

Drug makers engage in Medicaid and Medicare fraud when they market unapproved drugs that have not been subjected to the FDA’s regulatory process. Such conduct places consumers at risk. Whistleblowers work with the government to end health care fraud and protect American consumers.

Healthpoint Ltd. and DFB Pharmaceuticals, defendants in a recent False Claims Act suit, have agreed to pay as much as $48 million to settle charges that Healthpoint caused the submission of false claims to Medicaid and Medicare for Xenaderm, an unapproved drug that was ineligible for reimbursement. Under the settlement, Healthpoint and DFB will pay $28 million now, as well as another $20 million if the ownership of Healthpoint or DFB changes during the next three years.

Before drug makers introduce a new drug into the market, they are required under the Federal Food Drug and Cosmetic Act to obtain approval from the Food and Drug Administration (FDA). The Justice Department alleged that Healthpoint began marketing and sales of Xenaderm — a prescription skin ointment used to treat bed sores for nursing home patients — without the necessary FDA approval.

Healthpoint’s alleged business plan was to sell new prescription drug products that were patterned after drugs sold before October 1962, so the company could escape the need for FDA approval. Healthpoint did no double-blind, placebo-controlled clinical studies to show the effectiveness and safety of Xenaderm prior to releasing the drug, the complaint alleged. And even though Xenaderm had not been FDA approved, Healthpoint actively marketed Xenaderm as a prescription drug that was “Medicaid reimbursed.”  According to the complaint, Healthpoint told nursing homes that they could save money by using Xenaderm instead of non-prescription skin ointments like Vaseline, since the cost of Xenaderm would be paid for by Medicaid.

In reality, the complaint alleged, Xenaderm’s principal active ingredient, trypsin, had been shown to be less-than-effective in the 1970s. The government alleged that Xenaderm was ineligible for Medicare and Medicaid reimbursement because the drug was ineffective. But Healthpoint misrepresented that Xenaderm use could be reimbursed, thus knowingly causing the submission of false claims to Medicaid and Medicare, the government contended.

The original whistleblower action was filed in federal court in Massachusetts. Under the qui tam provisions of the False Claims Act, the whistleblower, Constance Conrad, is eligible to receive a portion of the government’s settlement with Healthpoint.

Waters & Kraus represents whistleblowers in health care fraud lawsuits

Whistleblowers help the government to put an end to fraudulent health care schemes. It’s vital that you know and understand your legal rights under the False Claims Act. Waters & Kraus’ qui tam attorneys can help. Send us an email or call our whistleblower lawyers at 800.226.9880 to learn more about our firm and what we can do to assist.

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