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CA Department of Insurance

Multi-million dollar settlement reached in major pharmaceutical pay-for-play health insurance fraud case

News: 2015 Press Release

For Release: December 18, 2015
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Multi-million dollar settlement reached in major pharmaceutical pay-for-play health insurance fraud case
Warner Chilcott agrees to pay $23.2 million for defrauding California insurers

SACRAMENTO, Calif. - Insurance Commissioner Dave Jones today announced that a $23.2 million settlement has been reached by the Department of Insurance and whistleblowers with pharmaceutical company Warner Chilcott to resolve a lawsuit alleging drug marketing fraud in violation of state law. The $23.2 million settlement resolves allegations contained in a whistleblower lawsuit filed by three former Warner Chilcott employees. The whistleblower lawsuit was filed in 2012 in a California Superior Court by the Simmer Law Group on behalf of the whistleblowers and alleged Warner Chilcott executives violated the California Insurance Code False Claims Act, which prohibits anyone from defrauding private insurance companies by using kickbacks or other inducements to procure or steer clients or patients.

The former Warner Chilcott employees alleged the company knowingly used illegal inducements to influence physician decisions, including paying kickbacks and falsifying prior authorization forms to increase the number of prescriptions written for several Warner Chilcott medications.

"Whistleblowers alleged that Warner Chilcott put profit margins ahead of patient needs by using illegal kickbacks to influence physicians' treatment decisions," said Commissioner Dave Jones. "The alleged kickback payments and other inducements amounted to a pay-for-play scheme in order to gain an illegal competitive advantage and defraud insurers out of tens of millions of dollars."

Whistleblowers alleged Warner Chilcott management funneled kickbacks and inducements to physicians under the guise of physician education, often hosting events with little or no education content at high-end hotels and spas-all in an effort to encourage physicians to increase the number of prescriptions written for Warner Chilcott medications.

Average losses per case from healthcare fraud are greater than average losses per case associated with all other forms of insurance fraud-with losses running into the hundreds of millions of dollars annually in California alone. Businesses and consumers carry the burden of those losses when insurers pass them along through higher health insurance premiums.

"Insurance fraud is not a victimless crime. Patients are put at risk when medical decisions are made based on kickbacks and other inducements," said Jones. "In response to the costs of healthcare fraud, we have focused more of the Department of Insurance's law enforcement resources on investigation of civil and criminal cases against those who commit fraud."

The insurance commissioner represents the people of California in civil cases alleging insurance fraud against private insurers under California Insurance Code False Claims Act. Attorneys with the department's Fraud Liaison Bureau worked closely with lawyers for the whistleblowers to ensure the final settlement was a sound and appropriate resolution to the case.

As part of the final settlement agreement Commissioner Jones insisted that Warner Chilcott agree to discontinue and refrain from promoting its pharmaceutical products identified in the complaint and sold in California. Of the $23.2 million state settlement, California will receive $11.8 million, which is to be used for enhanced insurance fraud investigation and prevention efforts.

In addition to the allegations of violating California law, a separate lawsuit was filed in federal court in Massachusetts alleging Warner Chilcott violated the Federal False Claims Act. The U.S. Department of Justice announced a settlement of the federal allegations on October 29, in which Warner Chilcott pleaded guilty to healthcare fraud and agreed to pay $125 million to resolve both federal civil and criminal liability for alleged activities that violated the federal anti-kickback and HIPAA statutes, and for false claims submitted to Medicare and Medicaid.


Media Notes:

The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $310 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $469 million in claims and premiums. Please visit the Department of Insurance website at Non-media inquiries should be directed to the Consumer Hotline at 800.927.4357. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.

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