Kathleen G. Kane - Pennsylvania Office of Attorney General - Protecting Pennsylvanians

Healthpoint, Ltd. to pay nearly $2 million to Pennsylvania for false Medicaid Claims for unapproved prescription drug

(Monday, March 4, 2013, Harrisburg, PA) - Pennsylvania Attorney General Kathleen G. Kane announced that the Commonwealth has reached a nearly $2 million settlement with Healthpoint Ltd., a Smith & Nephew business (LSE: SN, NYSE: SNN), and DFB Pharmaceuticals to resolve allegations that Healthpoint caused false claims to be submitted to Medicaid for an unapproved drug, Xenaderm, which was ineligible for reimbursement by the program. Pennsylvania?s multimillion-dollar settlement is part of the U.S. Department of Justice's agreement with Healthpoint Ltd. and DFB Pharmaceuticals to pay up to $48 million to resolve allegations that the company caused false claims to be submitted to both Medicare and Medicaid programs. The state's settlement will return nearly $2 million to the PA Department of Public Welfare.

"For a pharmaceutical company to knowingly misrepresent a drug, take taxpayers dollars and then, overcharge state programs is unconscionable," said Kane. "My administration will take action against any company that disregards the law and puts our citizens at risk."

According to complaints, Healthpoint did not accurately represent the regulatory status of Xenaderm when it submitted quarterly reports to the U.S. government and knowingly caused false claims to be submitted for Xenaderm to Pennsylvania's Medicaid program.  If the drug - Xenaderm - was not approved by the FDA, the plaintiffs alleged that every bill submitted to the Commonwealth's Medicaid program was a false claim caused by Healthpoint.

Under the Federal Food Drug and Cosmetic Act, manufacturers must obtain Food and Drug Administration (FDA) approval before introducing any new drug into the market. The U.S. Department of Justice intervened in, and later filed, a civil False Claims Act case against Healthpoint, alleging that it launched Xenaderm - a prescription skin ointment for the treatment of nursing home patients' bed sores - without any FDA approval.  

The complaint alleged that Healthpoint's business strategy was to market new prescription drug products modeled after drug products that were on the market before October 1962, in order to avoid the time, effort, and expense of obtaining FDA approval.   The complaint also alleged that at no time prior to its introduction of Xenaderm into the market did Healthpoint complete any double-blind placebo-controlled clinical studies that established the safety and effectiveness of Xenaderm.  In fact, one of Healthpoint's own clinical researchers expressly conceded in an internal e-mail that the safety and efficacy data for Xenaderm was "cruelly insufficient" to meet FDA standards.   Notwithstanding the lack of FDA approval, the U.S. government alleges, Healthpoint actively promoted Xenaderm as a prescription drug that, unlike non-prescription skin ointments such as Vaseline, was "Medicare reimbursed" and this, cost nursing homes nothing to administer to patients.

The Pennsylvania Office of Attorney General negotiated the Commonwealth's claims in the U.S. Department of Justice lawsuit.  The National Association of Medicaid Fraud Control Units also participated with the U.S. Department of Justice in the settlement negotiations with Healthpoint, along with Offices of the Attorneys General including Florida, North Carolina, Ohio, Massachusetts and Virginia.

The settlement resolves allegations against Healthpoint in a multi-defendant whistleblower action captioned United States ex rel. Constance Conrad v. Healthpoint, Ltd., et al., No. 02-11738-RWZ (D. Mass.).   The lawsuit was brought under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private parties with knowledge of fraud to sue on behalf of the United States and share in any recovery.  

[The claims settled by this agreement are allegations only; there has been no determination of liability.]