Healthpoint and DFB: A Skin Ointment Pitched as Free to Nursing Homes

In the Healthpoint DFB Xenaderm settlement, Healthpoint Ltd. and DFB Pharmaceuticals agreed in 2012 to pay up to $48 million to resolve allegations that Healthpoint caused Medicare and Medicaid claims for an unapproved prescription drug. The alleged sales pitch made public reimbursement the attraction: nursing homes could use Xenaderm without bearing the cost themselves. Inside the company, the government said, a clinical researcher had described the evidence for the product as insufficient to meet Food and Drug Administration standards.

A whistleblower brought the qui tam case, and the United States joined it. Among pharmaceutical fraud cases, Xenaderm shows how a manufacturer’s statements about its product can connect a sales decision inside a nursing home to a bill paid by the government.

Why Xenaderm’s Approval Status Mattered

Xenaderm was a prescription skin ointment for treating nursing-home patients’ bed sores. The government alleged that Healthpoint introduced it without Food and Drug Administration approval and that it was ineligible for Medicare and Medicaid reimbursement.

The product’s principal active ingredient was trypsin. According to the government’s account, products containing trypsin had been marketed before 1962, but the Food and Drug Administration had determined in the 1970s that trypsin was less than effective for its intended use. The government contended that those determinations made Xenaderm ineligible for reimbursement.

Here, the government connected the ingredient’s effectiveness history to whether public programs should pay for the finished ointment.

The Reimbursement Pitch to Nursing Homes

Healthpoint allegedly promoted Xenaderm as “Medicaid reimbursed,” telling nursing homes that it cost them nothing to administer to Medicaid patients. The Justice Department’s account contrasted that pitch with nonprescription skin ointments such as Vaseline, whose cost the nursing home would bear.

The alleged pitch moved the expense off the nursing home’s budget and onto Medicaid. The buyer could choose the prescription ointment on the understanding that someone else would pay for it. Taxpayers were that someone else.

The connection between drug promotion and government payment is particularly clear here. Healthpoint allegedly made reimbursement part of the reason to choose Xenaderm. The government’s position was that the very coverage being sold to the nursing home was coverage the product did not qualify for.

The Clinical Evidence Behind the Sales Message

The government alleged that Healthpoint’s business strategy was to model new prescription products on drugs marketed before October 1962 to avoid the time, effort and expense of obtaining Food and Drug Administration approval.

The complaint, as described in the Justice Department’s announcement, alleged that Healthpoint had completed no double-blind placebo-controlled clinical studies establishing Xenaderm’s safety and effectiveness before introducing it. The same announcement quoted a Healthpoint clinical researcher’s internal email describing the safety and efficacy data as “cruelly insufficient” to meet FDA standards.

The government’s account puts the internal assessment beside the sales pitch: a researcher questioning the evidence while the company promoted reimbursement. That alleged gap gives the email its force.

For an employee familiar with the clinical evidence behind a drug’s promotion, that is a recognizable gap. The questions are what studies were done and what the company believed its data could support.

Quarterly Reports Connected the Product to the Claims

The government alleged that Healthpoint misrepresented Xenaderm’s regulatory status in quarterly reports submitted to the government. It contended that those representations caused false claims for the ointment.

That adds a reporting decision to the sales story. A promise to a nursing home explains the incentive to choose the product. The regulatory-status reports explain what Healthpoint allegedly told the government about the same product.

A drug company can cause false bills to reach Medicaid even when a pharmacy submits them. Here, the government alleged that Healthpoint’s reports caused false claims for Xenaderm. An employee who knows how those reports were prepared may therefore understand a decision that the person handling the eventual claim never saw.

The Payment Depended in Part on an Ownership Change

The agreement called for Healthpoint and DFB to pay $28 million, with another $20 million payable if ownership of either company changed over the next three years.

Unapproved Drugs and False Reimbursement Reports

The Justice Department described the Healthpoint settlement as part of a series of recoveries totaling over $100 million from manufacturers of unapproved drugs. Other defendants in the same broader whistleblower action faced allegations that government reimbursement continued because manufacturers misrepresented or failed to report their products’ status.

In the Schwarz Pharma settlement, the government alleged that the company failed to advise the Centers for Medicare and Medicaid Services that two unapproved products were ineligible for reimbursement and submitted false quarterly reports. That is the closest parallel to Healthpoint’s alleged reporting mechanism: the manufacturer’s account of the product’s status reached the agency responsible for payment.

KV Pharmaceutical, the parent of Ethex, faced allegations that Ethex failed to notify the agency that nitroglycerin ER and hyoscyamine ER were unapproved and ineligible for reimbursement. Here, too, the allegation concerned information about the product that the manufacturer should have given the payer.

These cases make the recurring question concrete: what did the manufacturer know about the product’s eligibility, and what did it tell the government? In Xenaderm’s case, that reporting question sits beside an unusually direct sales pitch about who would bear the cost.

What Evidence Is Needed to Prove Fraud?

For a case like Xenaderm, the records that connect what the company knew to what it told nursing homes and the government matter. We work through those records with you to build the case. The government’s account of the internal email and quarterly reports shows why that connection matters.

A pharmaceutical whistleblower may know the scientific assessment, the sales message or the reporting decision from their own work. We examine how that knowledge connects to the public payment and build the case with them.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know What the Company Told the Payer

If you know a drug was sold on a reimbursement promise that its clinical or regulatory history could not support, bring that account to our whistleblower experts. We work with you to turn the difference between the internal assessment and the public claim into a pharmaceutical whistleblower case, bringing in pharmaceutical whistleblower lawyers who understand drug approval and government reimbursement. Tell us what the company told the payer, and we will stay beside you from the first call through the pursuit of your case.