DOJ Civil Cyber-fraud Initiative Obtains First Settlement 

DOJ Civil Cyber-fraud Initiative Obtains First Settlement 

The Department of Justice announced on Tuesday, March 8th, that Comprehensive Health Services LLC (“CHS”) will pay $930,000 to settle False Claims Act allegations involving cyber fraud. The settlement represents the first such settlement since the launch of the Civil Cyber-Fraud Initiative, which aims to hold accountable entities or individuals that put US information or systems at risk by knowingly providing deficient cybersecurity products or services, knowingly misrepresenting their cybersecurity practices or protocols, or knowingly violating obligations to monitor and report cybersecurity incidents and breaches.

CHS, a provider of global medical services, allegedly contracted with the State Department and Air Force to provide medical support services in Iraq and Afghanistan. According to the government, CHS submitted claims to the State Department for the cost of procuring an electronic medical record system intended to store confidential patient medical records, but between 2012 and 2019, it allegedly failed to consistently use the secure system.

The government also alleged that during the same time period, CHS falsely represented to both the State Department and Air Force that certain controlled substances supplied under the contracts were approved by the Food and Drug Administration or the European Medicines Agency. CHS did not have a license to export controlled substances and allegedly used a South African physician to prescribe the controlled substances and a South African shipping company to receive the unapproved controlled substances and ship them to CHS in Iraq, the government alleges. CHS, in turn, allegedly supplied the unapproved controlled substances to patients treated under the State Department and Air Force contracts.

DOJ’s press release is here.

Mallinckrodt Settles False Claims Act Lawsuits for $260 Million

Pharmaceutical manufacturer Mallinckrodt ARD LLC (f/k/a Questcor Pharmaceuticals, Inc.) will pay $260 million to settle False Claims Act allegations that it underpaid Medicaid drug rebates and used a foundation as a conduit to pay illegal kickbacks. 

According to the government, between 2013 and 2020, Mallinckrodt and Questcor calculated quarterly rebates to state Medicaid programs for its drug H.P. Acthar Gel (“Acthar”) as if it was a “new drug” first marketed in 2013, when it was approved since 1952. As a result, the companies allegedly ignored all pre-2013 price increases on Acthar, significantly lowering the Medicaid rebates.

The government also alleged that Mallinckrodt knowingly used a foundation to set up three funds to pay illegal co-pay subsidies for Acthar so it could market the drug as “free” to doctors and patients while increasing its price. The payments, which allegedly violated the Anti-Kickback Statute, were intended to address doctor and patient concerns about the high cost of the drug.

In addition to the monetary settlement, Mallinckrodt also agreed to enter into a five-year corporate integrity agreement requiring it to establish a risk assessment program, implement executive recoupment provisions, and obtain compliance related certifications from company executives and board members.

DOJ’s press release is here.

Department of Energy Contractor Agrees To Pay $10 Million To Resolve False Claims Act Lawsuit

On Monday, March 7th, DOJ announced that MOX Services LLC (“MOX”) will pay $10 million to resolve False Claims Act allegations that it knowingly submitted false claims to the Department of Energy (“DOE”) for non-existent materials and improper kickbacks. MOX served as DOE’s prime contractor for the construction of the Mixed Oxide Fuel Fabrication Facility in Aiken, South Carolina. Under the contract, MOX was required to confirm receipt and acceptance of materials from subcontractors prior to submitting claims for those materials to DOE. 

One subcontractor, Wise Services Inc., allegedly submitted hundreds of false invoices to MOX for millions of dollars’ worth of materials that did not exist, and MOX, in turn, submitted the false invoices to DOE. MOX employees also allegedly received kickbacks from Wise employees in furtherance of the scheme.

DOJ’s press release is here.