Keith HarrisonJason M. Crawford

Life sciences companies continue to be the focus of whistleblower actions, not just on the federal level, but on the state level as well. Bristol-Myers Squibb (“BMS”) recently agreed to pay the State of California $30 million to resolve allegations stemming from a whistleblower lawsuit alleging that it paid illegal kickbacks to physicians.  The settlement (available here) resolves nine years of whistleblower litigation.

The lawsuit was filed by three former BMS sales representatives with first-hand knowledge of the illegal practices, including former NBA point guard Lucius Allen. The lawsuit was brought under the qui tam provisions of the California Insurance Frauds Prevention Act (“IFPA”) and claimed that BMS violated the IFPA by using kickbacks to defraud insurance companies. The allegations in the complaint are extremely old—dating back to 1997—which explains why the drugs involved include long-off-patent medications such as the statin drug Pravachol.

Four years after the qui tam suit was filed, the California Department of Insurance intervened, and the State’s amended complaint (available here) alleged that BMS regularly paid kickbacks to physicians who prescribed large amounts of the company’s pharmaceuticals, including Abilify, Plavix and others. The alleged kickbacks reportedly included:

  • Box suites at sporting events where physicians were provided tickets, food, drinks and parking.
  • Enrollment in a Lakers basketball camp for doctors and their children.
  • Pre-paid golf outings.
  • Tickets for physicians and their families to see Broadway plays in California cities.
  • Monetary incentives given to doctors responsible for prescription-drug decisions for formularies.
  • Lavish dinners, resort hotel trips, and concert tickets, given to doctors who were large-volume prescribers, to induce more prescriptions in the future.

The defendant also allegedly sought to encourage approved and unapproved uses of the drugs. In the settlement, the pharmaceutical manufacturer denied any wrongdoing. Under the IFPA, the whistleblowers will likely receive somewhere between 30 and 40 percent of the recovery in addition to attorney’s fees, costs and expenses.

The surge of whistleblower claims against life sciences companies may be subsiding, most likely as a result of companies beefing up their compliance programs. From 1991 through 2015, drug makers paid $35.7 billion to settle federal and state civil and criminal charges of fraudulent practices, according to a recent report by Public Citizen, the consumer advocacy group. That report noted, however, that pharmaceutical companies paid approximately $2.8 billion to settle various federal and state charges in 2014 and 2015, compared with $9.9 billion during 2012 and 2013. The most recent payments also amounted to the lowest two-year total since 2004 and 2005, according to Public Citizen.

Nonetheless, some companies continue to run afoul of the feds. Last month, two former sales employees at Insys Therapeutics were indicted for allegedly paying doctors to participate in sham educational programs designed to boost prescriptions of Subsys, an addictive opioid painkiller. Their alleged scheme took place from October 2013 through June 2015.