Private Equity Pharmaceutical Fraud: Who Kept the Sales Program Running?

Private equity pharmaceutical fraud cases can reach an investor over sales practices that allegedly caused false claims for government payment. Inside the acquired business, the questions are concrete: who approved the marketing budget, who received a warning and who kept the program running. We work with you to connect the decisions on either side of the deal.

The Therakos Settlement Reached Both Owners

The Gores Group agreed to pay $1.5 million to resolve allegations that Therakos continued improper sales and promotion practices after Gores bought it from Johnson & Johnson in 2012. The Justice Department’s November 2020 announcement separately assigned $10 million to Medical Device Business Services, a Johnson & Johnson subsidiary, over allegations concerning the earlier ownership period.

The government’s account followed the promotion across the purchase. It alleged that Therakos marketed its UVAR XTS and CELLEX drug-device systems for unapproved pediatric uses from 2006 through 2015. The systems administered UVADEX through a process that treated a patient’s white blood cells outside the body and returned them. During the period alleged, the systems had no Food and Drug Administration approval for use in children.

The government further alleged that this promotion caused false claims to Medicaid, the Federal Employee Health Benefits Program and Tricare. Children were the target patients. Taxpayers were the intended payers.

For an employee who stayed through the acquisition, the useful comparison is the sales objective before the purchase and the instructions afterward. We examine who approved those instructions, what information reached them and how the promotion reached a paid claim.

Are Pharmaceutical Companies Liable for False Claims?

Pharmaceutical companies can be held responsible under the False Claims Act for knowingly causing false government bills, including claims submitted by a pharmacy or healthcare provider. The commercial decision and the billing can sit in different businesses. A sales instruction may originate at the manufacturer while the prescription and government claim emerge elsewhere in the drug supply chain.

For promotion beyond an approved use, we connect what the company told prescribers to the treatment and the basis for government payment. Therakos illustrates that connection through the government’s allegation about pediatric promotion and the resulting claims.

With pharmaceutical kickbacks, the question concerns what a payment bought. A payment intended to induce prescriptions or referrals for government-funded health care can connect the commercial budget to false claims. The recipient, the purpose and the resulting business matter together.

The Acquisition Buys a Commercial Position

A pharmaceutical acquisition can buy an approved product, its exclusivity and a pipeline of products still in development. The approved uses, the patients a sales team pursues and the payment available for those uses help explain the commercial plan. When we examine a marketing budget after an acquisition, we ask which use and which customers the spending was intended to develop.

Public Citizen’s 2018 report, Twenty-Seven Years of Pharmaceutical Industry Criminal and Civil Penalties: 1991 Through 2017, attributed settlements to the parent company at resolution, even when the alleged violations preceded the acquisition.

The name on a settlement total does not tell you who made the decisions. In examining conduct before and after an acquisition, we put the operating business, the product and the decision dates beside the owner. The employee who remembers a budget review or a revised sales instruction can explain something a settlement ranking cannot.

A Warning Passed From Seller to Buyer

A whistleblower’s complaint against US WorldMeds alleged that the buyer ignored a seller’s warning during a drug-rights acquisition. That handover makes a useful comparison for an insider who saw a warning reach a new owner. The complaint alleged that Ipsen raised concerns about nursing services during the acquisition of APOKYN marketing rights. The complaint described the buyer’s response:

The alleged change involved work Ipsen had reserved for doctors or their staff, including blood pressure monitoring and preparing injections. According to the complaint, US WorldMeds directed the nurses to perform that work to increase the service’s value to doctors, who could seek reimbursement for initiating treatment without administering the drug themselves.

That allegation identifies a warning, its recipient, a subsequent instruction and the billing consequence. It gives an insider a concrete way to describe what continued after a purchase. The concern traveled with the product rights. The complaint alleged that the buyer proceeded anyway.

What Evidence Is Needed to Prove Fraud?

The useful evidence connects a funding or operating decision to the prescription, service or claim it was intended to produce, and shows what the decision-makers knew. We work with insiders to establish those connections across finance, sales, compliance and billing. For an acquired business, the dates also show whose decisions shaped the program at each stage.

The Budget and the Payment Approval

A marketing budget identifies the program being funded. The approval, contract and payment record can help explain who backed it and what the recipient was expected to do. We compare those records with how the program’s success was measured.

A person in finance may know why a payment was approved. A sales employee may know what the recipient had to deliver. Bringing those accounts together can explain the purpose behind the expense.

The Warning and the Response

A complaint or internal review matters alongside what management did after receiving it. We trace what management did with the warning.

The US WorldMeds allegation shows why this sequence matters. The alleged warning concerned the very services the buyer later directed nurses to perform. In an investor-backed business, we would examine whether a comparable concern reached the sponsor and how the sponsor responded.

The Instructions Given After the Purchase

Sales plans and training materials can show what employees were expected to promote under the new owner.

For a continuing program, we would connect those instructions to the budget that supported it. An employee who attended the sales meeting or handled the approval can explain whether the direction changed and who made that decision.

The Prescription and the Government Claim

The prescription, treatment record and reimbursement communication connect the commercial effort to the bill. We would examine which entity submitted the claim, what government program paid and how the alleged payment or promotion helped cause it.

The finance employee sees the expense, the sales team sees the objective and the billing employee sees the claim. We build the case around how those decisions fit together.

How Much Money Do Pharmaceutical Whistleblowers Get for Exposing Fraud?

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. Whistleblowers started the Therakos case. For employees with knowledge of the sales program, the contribution is the inside account of how it worked and who chose to continue it.

You Know Who Approved the Spending

If you saw an investor fund a prescription marketing program or keep it running after a warning, speak with our whistleblower experts about those decisions. We build your strongest pharmaceutical whistleblower case around the financing, the instructions and the government claims, and bring in pharmaceutical fraud whistleblower lawyers who understand ownership and marketing arrangements. We stay with you from the first call through the case.