Veloxis Pays $46M to Settle Kickback Allegations -- Just the Latest Whistleblower-Originated Kickback Settlement Under the False Claims Act
By the Constantine LLP Whistleblower Team
On August 10, the Department of Justice (DOJ) announced that North Carolina-based drug maker Veloxis Pharmaceuticals agreed to pay roughly $46 million to settle criminal and civil allegations it violated the False Claims Act and Anti-Kickback Statute by paying kickbacks to induce prescriptions and purchases of its kidney transplant drug Envarsus.[1] As U.S. Attorney (District of Massachusetts) Leah Foley described it: “Attempting to improperly influence medical decision-making for financial gain is dangerous, yet it is exactly what Veloxis was doing. Instead of prioritizing patient safety, they were prioritizing profits.”
What Was the Nature of Veloxis’ Kickback Violations?
The Anti‑Kickback Statute prohibits any kind of financial inducement to induce referrals for goods or services covered by Medicare/Medicaid or any of the other federal healthcare programs. The statute is extremely broad in what form of kickbacks are covered and includes cash, meals, entertainment, travel, gifts, and virtually anything else of financial value. It is designed to protect medical decision making from improper financial influence.
As to the criminal charges against Veloxis, the Government claimed that from October 2016 to June 2023 the company engaged in a scheme to pay kickbacks to transplant healthcare professionals to induce them to prescribe Envarsus for kidney transplant recipients. The kickbacks comprised lavish meals, expensive resort stays, pricey personal gifts, and payments under sham consulting agreements for consulting work never provided. For many of these payoffs, Veloxis employees created fake expense reports to make the payments appear legitimate. Veloxis ultimately admitted the purpose of the payments was to induce prescriptions.
In addition to resolving the criminal charges, the settlement also resolved the Government’s charges that Veloxis violated the False Claims Act by submitting claims to Medicare, Medicaid, and TRICARE for Envarsus prescriptions written by healthcare professionals or filled by pharmacies to which Veloxis paid kickbacks. Again, Veloxis ultimately admitted to providing improper remuneration to induce referrals and concealing them through fabricated expense reports.
Veloxis also admitted that during this timeframe, it made per-patient/per-month payments to specialty pharmacies to induce them to purchase Envarsus instead of competitor drugs, including a less expensive generic version. Veloxis disguised these kickbacks through sham contracts for “enhanced services” such as data collection or adherence services never actually provided.
Under the settlement, Veloxis will pay a criminal penalty of roughly $10 million and civil False Claims Act damages of roughly $34.5 million. Veloxis will also pay $1.55 million to the Centers for Medicare & Medicaid Services (CMS) to resolve allegations that Veloxis failed to report certain payments to physicians under the Open Payments Program (“Sunshine Act”). According to DOJ, it is the largest Sunshine Act recovery since the law was passed in 2010.
Are Kickbacks Still a DOJ Enforcement Priority?
As it routinely does with all its kickback settlements, the Government took the opportunity to stress its strong commitment to strictly enforcing The Anti-Kickback Statute. As DOJ Civil Chief Brett Shumate forcefully put it: “Today’s resolution should serve as a warning to any healthcare company that tries to improperly influence the decisions of healthcare providers.” He further explained how “kickbacks can erode medical decision making, result in unnecessary prescriptions of branded drugs, and waste federal healthcare funds.”
A chorus of other Government officials weighed in with a similar message. U.S. Attorney Foley stressed that “treatment decisions need to be based on what’s best for the patient, not what’s best for the drug manufacturer’s bottom line,” and that “drug manufacturers should know that the federal government will use all available enforcement mechanisms to stop the payment of illegal health care kickbacks.”
Special FBI Agent Ted Docks and HHS Acting Deputy Inspector General for Investigations Miranda Bennett were equally forceful in their remarks. Mr. Docks said “the FBI and our partners are committed to fighting health care offenses, one case at a time, and seeing perpetrators held accountable.” Ms. Bennett added that “today’s resolution makes clear that this conduct will not be tolerated,” and that HHS “will continue working with our law enforcement partners to protect patients, uphold the integrity of federal health care programs, and hold companies accountable when they violate the law.”
This strong language is consistent with the Government’s continued treatment of healthcare kickbacks as a top DOJ enforcement priority. According to Constantine LLP partner Gordon Schnell, “the Government has made it very clear it has a zero tolerance for healthcare kickbacks and will use all enforcement tools at its disposal to go after those that engage in this conduct.” Schnell says, “this means going after both the companies and individuals involved and both the providers and recipients of the kickbacks.”
Schnell adds, “it also means going after violators both criminally and civilly.” He explains that “the Government has increasingly grown to realize that the best way to deter illegal conduct is to go after the specific individuals involved with the threat of criminal exposure and jail time.” Schnell notes that “we are seeing this recognition routinely play out in DOJ’s enforcement playbook, especially in the area of healthcare kickbacks, with an increasing willingness of DOJ to bring criminal charges against those who violate the kickback rules.”
How Can Whistleblowers Help Report Illegal Kickbacks?
What we also are seeing is the increasing role of whistleblowers in helping the Government police this area of healthcare fraud. The False Claims Act provides a valuable pathway for whistleblowers to provide this support through the qui tam provisions of the statute. These provisions authorize private parties to bring lawsuits on behalf of the Government against those that commit fraud against the Government.
Successful whistleblowers under the statute can receive up to 30% of the Government’s recovery. Over the past thirty years, whistleblowers have received close to $10 billion in awards under the statute and helped the Government secure tens of billions more in recoveries. Whistleblowers have originated the majority of False Claims Act cases over the past forty years, especially in the area of healthcare kickbacks.
Unsurprisingly, a whistleblower originated the Veloxis matter. The Government did not identify who the whistleblower was and the whistleblower award they will receive but it will be some percentage (up to 25%) of the $34.5 million Veloxis paid to settle the civil False Claims Act charges.
Schnell explains the reason whistleblowers have been responsible for originating most kickback cases is simple: “they are the ones on the inside with firsthand exposure to the illicit payments and the company’s efforts to conceal them.” He says that “without someone with this kind of front row seat, it can be extremely difficult to uncover these types of payoffs and their true purpose to induce referrals.”
Schnell points to the Veloxis matter as a case in point, especially with respect to the sham agreements and fake expense reports that likely appeared perfectly legitimate on their face. He further points to the kickback cases in which he has been involved, with virtually all of them involving complex financial arrangements through which the kickbacks were provided and which likely would have remained hidden from the Government but for the efforts of his whistleblower-clients exposing them through the False Claims Act cases they brought.
Constantine LLP Has Substantial Experience Representing False Claims Act Whistleblowers Reporting Kickback Violations
Constantine LLP has substantial experience representing kickback whistleblowers under the False Claims Act. Most recently, we represented the whistleblower who helped DOJ secure a $34 million settlement against dialysis giant DaVita for allegedly paying physicians for referring patients to DaVita’s dialysis centers. He received an award of roughly 18.5% of the Government’s recovery.
If you would like to learn more about this matter, Constantine LLP’s long list of False Claims Act successes, or what it means to be a whistleblower more broadly, please do not hesitate to contact us. We will connect you with an experienced member of the Constantine LLP whistleblower team for a free and confidential consultation.
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[1] See https://www.justice.gov/usao-ma/pr/veloxis-pharmaceuticals-agrees-pay-46-million-resolve-criminal-and-civil-liability.
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