Modernizing Medicine to Pay $45 Million to Settle False Claims Act Allegations

Modernizing Medicine to Pay $45 Million to Settle False Claims Act Allegations

Modernizing Medicine Inc. (ModMed), a Florida-based electronic health record (EHR) technology vendor, has agreed to pay $45 million to resolve alleged False Claims Act (FCA) and Anti-Kickback Statute (AKS) violations. The settlement follows the government’s intervention in a qui tam lawsuit filed in the District of Vermont by a former ModMedVice President of Product Management. The government alleged that ModMed violated the FCA and AKS by accepting and providing remuneration in exchange for referrals and by causing its users to report inaccurate information in connection with claims for payment from federal programs.

Specifically, the government alleged that ModMed solicited and received kickbacks from Miraca Life Sciences Inc. (Miraca) so that ModMed’s customers would use Miraca’s pathology lab services. ModMed also allegedly conspired with Miraca to improperly donate ModMed’s EHR to health care providers to both increase Miraca’s lab orders and grow ModMed’s customer base. Finally, the government alleged that ModMed paid kickbacks to health care providers and other industry members in exchange for referrals to ModMed. As a result of these schemes, the government alleged that ModMed caused health care providers to submit false claims for reimbursement to federal health care programs. The government further alleged that ModMed knew that its EHR did not always enable physicians to electronically document medical records using the correct verbiage, thereby causing submission of false claims for incentive payments under the US Department of Health and Human Services’ EHR Incentive Program.

The case is captioned United States ex rel. Long v. Modernizing Med., Inc., No. 2:17-cv-179 (D. Vt.). As a result of the settlement, the whistleblower will receive approximately $9 million.

Read the press release here.

New Yorker Convicted In COVID-19 Loan Fraud Scheme

Following a week-long trial, a federal jury found a New York-based defendant guilty of all six counts of an indictment for his role in a scheme to fraudulently obtain more than $10 million in government-backed loans designed to provide relief to small businesses during the COVID-19 pandemic. The evidence presented at trial established that, while on pretrial release in connection with a separate criminal fraud case, the defendant used stolen identities and sham tax records to obtain more than $1 million in loans pursuant to the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) Program.

The defendant and his co-conspirator had allegedly attempted to obtain more than $10 million in government funds by submitting 14 loan applications through the PPP and EIDL programs. Using stolen identities and fraudulent tax returns, the co-conspirators represented that they had full control of a number of companies that they did not actually operate, and represented that these companies employed more than 200 people and paid monthly salaries of more than $3.2 million. Rather than using the government-backed loans for legitimate business purposes, moreover, the defendant and his co-conspirator used the funds to make cryptocurrency investments, stock purchases, and cash withdrawals. They also used the funds for personal expenses, including luxury apartment leases and a Mercedes.

The fraud and conspiracy charges of which the defendant was convicted carry a maximum of between 20 to 40 years in prison, and the sentence will take into account the aggravating factor that the defendant was on pretrial release when the crimes were committed. Sentencing is currently scheduled for January 31, 2023. The defendant’s co-defendant previously pled guilty to major fraud against the United States and was sentenced to 9 years in prison.

Read the press release here.

Neurologist and Pharma Sales Rep Plead Guilty In Nuedexta Drug Kickback Scheme

On October 31, 2022, mere days before a federal jury trial was set to begin, a neurologist and pharmaceutical company sales representative pled guilty to a charge of conspiracy to solicit, receive, offer, and pay health care kickbacks. The charge arose from an alleged scheme to bribe doctors to prescribe Avanir Pharmaceuticals Inc.’s neurological medication Nuedexta. According to prosecutors, Nuedexta’s sole approved use was to treat pseudobulbar affect, a neurological condition that causes involuntary and frequent fits of crying and laughing.

The defendants admitted that they conspired to ensure that doctors, including the defendant neurologist, received kickbacks in exchange for writing more prescriptions for Nuedexta, even when patients did not have pseudobulbar affect. Avanir allegedly paid the neurologist $331,550 between 2011 and 2016 in exchange for approximately 10,088 Nuedexta prescriptions, which prosecutors alleged were “the highest in the country.” The second defendant also admitted to working with a subordinate to incentivize doctors to prescribe more Nuedexta.

As part of his plea deal, the defendant neurologist agreed to serve 2.5 years in prison, surrender his medical license, and pay a fine of up to $200,000, and pay at least $1.18 million in restitution. The defendant sales representative also agreed to serve between 15 and 21 months in prison, and to pay $488,000 in restitution, joint and several with other defendants, including two other Avanir sales representatives that previously pled guilty. The defendants are scheduled to be sentenced in February by US District Judge Sara Lioi.

Separate from the individual defendants, in 2019 Avanir admitted that it paid a doctor to increase his prescriptions of Nuedexta to beneficiaries of federal health care programs. At that time, the company agreed to pay close to $13 million in penalties and forfeitures to resolve a criminal investigation, and another $96 million to resolve alleged False Claims Act violations.

The case is US v. Raheja et al., case number 1:19-cr-00559, in the US District Court for the District of Northern Ohio.