Schwarz Pharma and UCB: The Unapproved-Drug Reporting Case

Schwarz Pharma, then a UCB subsidiary, agreed to pay $22 million in the Deponit and hyoscyamine settlement over allegations that it misrepresented the drugs’ regulatory status and caused false claims for government reimbursement. The alleged gap was between what the Food and Drug Administration had decided about the products and what Schwarz told the Centers for Medicare and Medicaid Services. If you worked on product status, government reporting or reimbursement, that gap is the part of this case you may recognize.

The Justice Department announced this pharmaceutical fraud settlement on April 29, 2010. It alleged that Schwarz failed to advise the Centers for Medicare and Medicaid Services that the products did not qualify for federal health care coverage and submitted false quarterly reports about them. The government said the company’s misinformation caused claims for drugs that federal programs should not have covered.

Deponit and Hyoscyamine Had Familiar Ingredients, Without Full Approval

Deponit and Hyoscyamine Sulfate ER contained active ingredients that had appeared in products on the market for many years. But FDA determinations in 1997 and 1999 made these particular drugs ineligible for reimbursement by government healthcare programs such as Medicaid.

Deponit was a nitroglycerin skin patch used to prevent angina. Hyoscyamine Sulfate ER was an antispasmodic used for stomach, intestinal and urinary tract disorders involving cramps, colic or other painful muscle contractions.

According to the Justice Department, neither product ever received full regulatory approval for safety and effectiveness. By the time of the settlement announcement, neither remained on the market.

The U.S. Attorney’s Office for the District of Massachusetts put the public-payment problem plainly:

False Quarterly Reports Connected Product Status to Government Claims

The government alleged that Schwarz both misrepresented the drugs’ regulatory status and failed to tell the Centers for Medicare and Medicaid Services that they were ineligible for coverage. It contended that Schwarz knowingly caused false claims to be submitted for the products.

Manufacturer reporting sits inside the machinery of public drug coverage. Under the Medicaid Drug Rebate Program, manufacturers report average manufacturer price and Best Price quarterly, alongside other reporting obligations that include drug product information. The company supplying the medicine also supplies information the program uses to administer its drug spending.

That dependence helps explain why manufacturer-reported information matters so much. In pricing cases, reported figures determine rebate obligations. Here, the government’s allegation concerned whether the drugs qualified for reimbursement at all. In the government’s account, the product-status decision reached beyond the regulatory department and into the claims submitted for payment.

A manufacturer can cause a false claim through information other businesses rely on. Pharmacies and physicians submit reimbursement claims, while the manufacturer’s reporting can shape the treatment of the product behind those claims. The government placed Schwarz’s alleged misconduct at that earlier point, where the manufacturer supplied information about the drugs. The report and the prescription were parts of the same chain.

Two Whistleblower Cases Reached the Same Reporting Problem

The settlement resolved allegations against Schwarz in two separate whistleblower cases. The whistleblowers brought the cases under the False Claims Act’s qui tam provisions, which allow private parties to pursue fraud claims on the government’s behalf and share in a recovery.

The same reporting problem appeared in the KV Pharmaceutical and Ethex case. The government alleged a failure to notify CMS that nitroglycerin ER and hyoscyamine ER were unapproved and ineligible for reimbursement. KV Pharmaceutical, Ethex’s parent, reached its own settlement, announced in December 2011.

Both cases turn on what the manufacturer told the Centers for Medicare and Medicaid Services about the products. In the government’s account, the missing information was consequential: it concerned whether public money should pay for the medicine at all.

Whistleblower cases supplied much of the industry’s federal settlement record in that period. Public Citizen’s 2010 study, Rapidly Increasing Criminal and Civil Monetary Penalties Against the Pharmaceutical Industry: 1991 to 2010, found that qui tam cases accounted for 67% of federal pharmaceutical settlement payouts from 2001 through 2010.

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. In Schwarz’s case, the two whistleblowers were collectively allocated approximately $1.84 million from the federal share, with additional amounts from the state share.

The settlement allocated $12,243,836 to the federal government and $9,756,164 to state Medicaid programs.

The government’s allegation puts taxpayers on the hook for drugs that never cleared the approval process. The money at stake belonged to both federal and state health care programs.

The Product File and the Report Should Tell the Same Story

The insider’s view of this case is the connection between product status, information sent to CMS and reimbursement. A person responsible for regulatory affairs may know the approval history. Someone responsible for government reporting may know how the company described the product. A reimbursement specialist may understand how that description reached claims for payment.

We work with pharmaceutical whistleblowers to connect those views: the product-status records, communications with the Centers for Medicare and Medicaid Services, the quarterly reports and the payment information. The dates matter because they put what the company knew beside what it told the government. The decision matters because it explains how an ineligible product could still be presented for reimbursement.

The useful comparison is specific to each product. What did its approval record say, what information reached the government, and what claims followed? An insider who understands the reporting decision may be able to explain both what the report said and why it said it. That is the knowledge we build the case around.

You Know What the Company Told CMS

Speak with our pharmaceutical whistleblower experts about the gap between a product’s approval status and its reimbursement reports. We develop the case with you and bring in pharmaceutical fraud whistleblower lawyers who understand manufacturer reporting and government drug payments. You bring the knowledge of what happened inside the business, and we stay beside you to build your strongest pharmaceutical whistleblower case.