Teva Pharmaceuticals has reached a $54 million settlement in a lawsuit filed by two whistleblowers concerning alleged violations of the False Claims Act and the Anti-Kickback Statute. Teva’s compliance argument did not hold water, the judge found.

The False Claims Act (FCA) prohibits companies from overcharging or otherwise defrauding the U.S. federal government. Individuals who discover fraud can file a complaint on the government’s behalf—known as qui tam claims—and collect up to 30 percent of the proceeds of a successful lawsuit. The Anti-Kickback Statute (AKS) criminalizes, among other things, “knowingly or willingly” offering or paying a person “remuneration,” in the form of kickbacks, bribes, or rebates, to “induce” that person to “recommend” the purchase of a drug covered by a federal healthcare program.

Charles Arnstein and Hossam Senousy, former sales representatives of Teva Neuroscience, filed the whistleblower lawsuit in May 2013. In a February 2014 regulatory filing, Teva disclosed it had received a subpoena in January 2014 from the U.S. Attorney for the Southern District of New York, seeking documents and information related to the sales, marketing, and promotion of its multiple sclerosis drug Copaxone and Parkinson’s disease treatment-drug Azilect. In November 2014, U.S. authorities notified the court of their decision not to intervene in the lawsuit.

In March 2015, the court issued an order unsealing the complaint and permitting Arnstein and Senousy to prosecute claims on behalf of the United States and various states. Teva’s attempt to dismiss the whistleblowers’ case was unsuccessful.

According to the allegations in the case United States ex rel. Arnstein and Senousy v. Teva Pharmaceuticals USA, Teva paid physicians bogus speaking fees for their participation in numerous “sham” speaker programs, which were really used to pay kickbacks to the targeted practitioners in exchange for prescribing certain Teva drugs. Physician participants of these sham speaker programs would write prescriptions for two of Teva’s drugs—Copaxone and Azilect—that were then filled at pharmacies across the country.

After filling and dispensing the prescriptions, the pharmacies then submitted claims for reimbursement to various government-funded healthcare programs. Since Teva’s actions allegedly caused the submission of false claims to the government via the dispensing pharmacies, those actions were alleged to constitute violations of the FCA and AKS.

Compliance failures

On Feb. 27, 2019, the Honorable Colleen McMahon, chief judge for the U.S. District Court for the Southern District of New York, issued a 70-page opinion denying Teva’s motion for summary judgment. In her opinion, McMahon rejected numerous arguments asserted by Teva and ruled the case would proceed to trial.

In denying summary judgment, McMahon, among other things, rejected Teva’s argument that its written compliance policies could be used to shield it from liability. “The question is whether these policies are worth the paper they are written on,” the opinion stated.

The opinion highlights the misconduct of the promotional speaker program at issue. McMahon found the whistleblowers “introduced substantial evidence that Teva did, in fact, track speakers’ prescription writing,” and that “[s]ales representatives linked prescriber habits with their retention as paid speakers for Teva.” She further noted that “Teva has no real answer to this evidence” and the evidence included “dozens of examples of sales representatives using speaker prescriptions to see whether the programs were producing tangible results and to suggest working more closely with high volume prescribing speakers.”

In denying summary judgment, McMahon also cited substantial evidence showing the same programs were repeatedly presented to the same attendees, including the following:

  • 1,500 examples of healthcare providers’ attending three or more events related to the same drug within six months;
  • Paid speakers who attended speaker programs on the same topic for which they also serve as a speaker; and
  • Healthcare providers “rotating” by attending sequential Teva programs as the speaker at one and audience member at the other.

McMahon likewise rejected Teva’s argument the whistleblowers’ evidence of sham speaker programs was insufficient. Here, she noted that “relators submit that Teva routinely carried out speaker program events in a sham manner, as evidenced by the location at which many programs were held, the amount of alcohol served, and the fact that the audience was frequently made up of either Teva representatives, speakers themselves, repeat attendees, or physicians’ family members.”

In a press release, counsel for the whistleblowers said they “engaged in substantial discovery, including the review of millions of pages of documents, scores of depositions of Teva employees and former employees, and expert discovery, including the production by the relators of expert reports by several world-renowned experts that they retained to support their claims.”