Healthpoint to Pay up to $48 Million to Settle False Claims Charge

Healthpoint Ltd. and DFB Pharmaceuticals will pay up to $48 million to resolve allegations that Healthpoint caused false claims to be submitted to Medicare and Medicaid for an unapproved drug, Xenaderm, which was ineligible for reimbursement by those programs.

Healthpoint and DFB will pay $28 million, plus another $20 million if there is a change in ownership of Healthpoint or DFB over the next three years.

The Justice Department and the whistleblower – Constance Conrad – have not reached agreement on a share of the proceeds of this settlement.

Conrad worked for many years at the Center for Medicare and Medicaid Services, retired and then brought the lawsuit.

Conrad was represented by John Roddy a partner at Bailey & Glasser in Boston.

The defendants were represented by Ethan Posner of Covington & Burling in Washington, D.C. and Michael Loucks of Skadden in Boston.

Under the Federal Food Drug and Cosmetic Act, manufacturers must obtain Food and Drug Administration (FDA) approval before introducing any new drug into the market.

In January 2011, the United States intervened in, and later filed, a civil False Claims Act case against Healthpoint, alleging that it launched Xenaderm, a prescription skin ointment for the treatment of nursing home patients’ bed sores, without any FDA approval.

The complaint alleged that Healthpoint’s business strategy was to market new prescription drug products modeled after drug products that were on the market before October 1962, in order to avoid the time, effort, and expense of obtaining FDA approval.

The complaint alleged that at no time prior to its introduction of Xenaderm into the market did Healthpoint complete any double-blind placebo-controlled clinical studies that established the safety and effectiveness of Xenaderm.

In fact, one of Healthpoint’s own clinical researchers expressly conceded in an internal e-mail that the safety and efficacy data for Xenaderm was “cruelly insufficient” to meet FDA standards.

Notwithstanding the lack of FDA approval, Healthpoint actively promoted Xenaderm as a prescription drug that, unlike non-prescription skin ointments such as Vaseline, was “Medicaid reimbursed” and thus cost nursing homes nothing to administer to Medicaid patients.

While products containing Xenaderm’s principal active ingredient, trypsin, were on the market prior to 1962, the FDA had determined in the 1970s that trypsin was less-than-effective for its intended use.

The government contends that those determinations rendered Xenaderm ineligible for Medicaid and Medicare reimbursement.

Nonetheless, the government alleges, Healthpoint misrepresented the regulatory status of Xenaderm when it submitted quarterly reports to the government.

As a result, the government contends, Healthpoint knowingly caused false claims to be submitted for Xenaderm.

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