Forest Laboratories and its subsidiary, Forest Pharmaceuticals, have agreed to pay $38 million to resolve allegations that they violated the False Claims Act by paying kickbacks to induce physicians to prescribe its drugs.

As a result of the settlement, the federal government will receive $35.5 million and state Medicaid programs will receive $2.5 million. The Medicaid program is funded jointly by the state and federal governments.

“Kickback schemes undermine the integrity of medical decisions and increase the costs of health care for everyone,” Principal Deputy Assistant Attorney General Benjamin Mizer, head of the Justice Department’s Civil Division, said in a statement. “Such schemes are particularly of concern when they are designed to influence drug prescriptions, and the Department of Justice will vigorously pursue companies that subvert the law at the public’s expense.”

The settlement resolves allegations that Forest violated the Anti-Kickback Statute, which prohibits the payment of remuneration to induce referrals of items or services covered by federal health care programs, by providing payments and meals to certain physicians in connection with speaker programs about Bystolic, Savella, or Namenda between 2008 and 2011. 

The United States contends that the payments and meals were intended as improper inducements, because Forest provided these benefits even when the programs were cancelled (and Forest provided no evidence of a bona fide reason for the cancellation), when no licensed health care professionals attended the programs, when the same attendees had attended multiple programs over a short period of time, or when the meals associated with the programs exceeded Forest’s internal cost limitations.

The case, United States ex rel. Kroening v. Forest Pharmaceuticals, arose from a lawsuit filed by former Forest employee Kurt Kroening, in federal court in Milwaukee, Wisconsin. The lawsuit was filed under the whistleblower provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery. Kroening will receive approximately $7.8 million under the settlement.

The settlement is the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office for the Eastern District of Wisconsin, with assistance from the HHS Office of the Inspector General, the HHS Office of Counsel to the Inspector General, the Office of the General Counsel for the Defense Health Agency, the National Association of Medicaid Fraud Control Units, and the FBI.