Recent Settlement by Drug Company Illustrates the Potential Magnitude of Payouts Under the False Claims Act
The Canary™: Qui Tam Whistleblower Blog
Being on the wrong song of a False Claims Act suit can be devastating for a company. The Act imposes liability on persons or entities that defraud the government. A successful claim under the Act can lead to astronomically large payouts, as the government is entitled to collect treble damages. One of the largest drug wholesalers in the U.S., AmerisourceBergen Corp., just experienced this firsthand, as it recently agreed to a $625 million deal to settle a False Claims Act lawsuit brought by the U.S. Attorney’s office in Brooklyn. This settlement comes in addition to $260 million dollars in fines and forfeitures that the company agreed to pay to settle a separate criminal suit resulting from the same conduct.
AmerisourceBergen faces massive financial penalties for trouble caused by an Alabama subsidiary.
The trouble for AmerisourceBergen arose from one of its Alabama subsidiaries, Medical Initiatives, Inc. To start, AmerisourceBergen never registered Medical Initiatives’ Alabama facility with the U.S. Food and Drug Administration, as required by federal law. From 2005 to 2014, Medical Initiatives was found to have illegally repackaged and sold injectable cancer treatment drugs, dispensed drugs without a valid prescription, and filled some syringes with excessive and unsafe dosages. Perhaps worst of all, an outside laboratory found on several occasions that some of the pre-filled syringes that Medical Initiatives shipped from that facility were contaminated with bacteria. Despite having this knowledge, Medical Initiatives failed to notify regulators or issue a recall. Medical Initiatives has since ceased operations, but the financial and reputational damage to AmerisourceBergen has already been done. Fortunately for AmerisourceBergen, it has the financial capacity to absorb such a hit, with the company making over $153 billion in revenue this past year alone.
The False Claims Act entitles the government to treble damages, a percentage of which whistleblowers are entitled to collect.
The AmerisourceBergen case serves as a reminder that companies should carefully review their policies and procedures to ensure compliance with the False Claims Act. AmerisourceBergen is fortunate to have deep coffers, though a judgment of treble damages or a settlement like the one here would be enough to put many companies in a state of financial ruin. Also, while here it was the government that brought a claim against AmerisourceBergen, the Act provides incredible incentives for whistleblowers, called “relators” under the Act, to bring a claim against entities defrauding the government. A relator filing a claim under the False Claims Act on behalf of the government is entitled to receive a portion–generally 15 to 25 percent–of any recovered damages. When payouts are in the range of that agreed to by AmerisourceBergen, the rewards for the relator can be life-changing.
If you’re aware of a fraud against the government, or you’d like more information about the False Claims Act, please Contact Us.