Shire and Advanced BioHealing: The Clinic Payments Behind Dermagraft Sales

In the Shire Advanced BioHealing Dermagraft settlement, Shire agreed to pay $350 million to resolve civil allegations that kickbacks induced clinics and physicians to use or overuse its skin substitute. The allegations reached into work a sales or clinic employee would recognize: dinner attendance reports, speaker payments, equipment supplied with orders, and patient information passed to the sales team. The government alleged that the sales practices led to hundreds of millions of dollars of false claims against taxpayer-funded health care programs, including Medicare, Medicaid and the Department of Veterans Affairs.

The Department of Justice announced the settlement on January 11, 2017. The $350 million settled federal and state False Claims Act allegations. Beyond the kickbacks, it also resolved allegations that Shire and Advanced BioHealing marketed Dermagraft for uses the FDA had not approved, made false statements to inflate its price, and caused improper coding, verification or certification of Dermagraft claims and related services. Shire cooperated in the investigation. It had been operating since late 2014, after the Dermagraft conduct, under a corporate integrity agreement with the Department of Health and Human Services from the settlement of separate False Claims Act allegations.

What Dermagraft Was and Who Sold It

Dermagraft is a bioengineered human skin substitute approved by the FDA to treat diabetic foot ulcers. The Justice Department describes it as a medical device. Advanced BioHealing sold it, Shire acquired that business in 2011, and Shire sold the Dermagraft assets in early 2014.

The product needed to remain frozen before use, according to the complaint. That storage requirement matters to the alleged sales practices: a freezer could help a clinic handle the very product the representative wanted it to order.

Shire also had a separate drug-promotion settlement in 2014, involving alleged representations about medicines including Adderall XR and Vyvanse. Those drug-promotion allegations concerned different products and suits. Dermagraft’s story runs through wound-care clinics, sales representatives and the benefits allegedly used to influence purchasing and treatment.

Dinner Guests Added to the Expense Report

The complaint alleged that representatives inflated dinner attendance to make excessive spending appear to fit a per-person limit. The complaint against Shire Regenerative Medicine gave this example:

The bill stayed the same. The guest list changed. In the complaint’s example, the spending control worked on paper because the paper contained people who had never been at the table.

The complaint separately alleged that some representatives created fake catering invoices to obtain reimbursement for expenses presented as sales breakfasts and lunches. For an employee who approved those expenses, the useful knowledge is who attended, what the event actually was, and who supplied the invoice.

Speaker Fees Without a Speech

The complaint alleged that physicians received speaker payments even when they never spoke. It also alleged that each physician received $1,500 for training, with expenses covered. A payment labeled training could therefore reach a physician before any speaking took place.

That is the question inside speaker program kickbacks: what work did the payment buy? Here, the complaint separates the invitation, the training payment and the actual speech.

The same complaint alleged that trips to Advanced BioHealing’s facility in La Jolla, California, offered as advisory-board training, served as pretexts for golf at Torrey Pines, meals and time in San Diego. The allegation gives advisory-board payments a concrete setting. The itinerary and the work performed matter alongside the program’s name.

A similar relationship between sales and supposed advice appeared in Galena Biopharma’s Abstral case. In its September 2017 civil settlement announcement, the government alleged that physicians were paid to attend an advisory board partly planned and attended by Galena sales staff. Across these allegations, the people arranging the event and the business they wanted from its guests help explain the payment.

A Freezer in Exchange for a Large Order

Advanced BioHealing allegedly supplied freezers to customers in exchange for purchases of large quantities of Dermagraft. The complaint connected the benefit directly to the product’s storage requirement. The customer got equipment it could use to hold the product, and the manufacturer got the order.

The allegation also reached a Veterans Affairs facility. According to the complaint, the logistics department at the Fayetteville, North Carolina VA questioned receiving a freezer in about May 2011. An Advanced BioHealing sales vice president then emailed the whistleblower directing its immediate removal. The whistleblower understood the urgency as an effort to keep the issue from becoming known to other VA providers.

That account adds a management decision to the equipment transaction. The freezer, the order and the removal email describe different parts of the same alleged arrangement.

The Unit Bonus and the Patient Schedule

The complaint alleged that Advanced BioHealing representatives received a $100 bonus for each Dermagraft unit they sold, including units sold for off-label use. The incentive followed the unit. The complaint also described how the sales operation reached into physician-office records:

The alleged workflow made the patient schedule a source of sales prospects. An office employee who handled those requests could know how patients entered the sales process, while a representative could know how the resulting units affected compensation.

A broader review, Risks of Corruption in the Healthcare and Pharmaceutical Sector and the Impact of a Pandemic, published in Proceedings in 2021, describes a risk at the point of care: healthcare professionals working with manufacturer representatives can steer product selection and order more medicine than necessary. The Dermagraft complaint supplies a specific alleged workflow to examine: patient identification, sales contact and a payment for every unit.

Six Qui Tam Cases Behind the Settlement

Six qui tam cases in federal court in Florida brought the allegations resolved by the corporate settlement.

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

The Former Chief Executive’s Separate Civil Settlement

The former Advanced BioHealing chairman and chief executive agreed to a separate $2.5 million civil settlement, announced on June 6, 2019. The government alleged that he knowingly allowed sales representatives to use inducements to increase Dermagraft use or overuse. A former Advanced BioHealing sales representative brought the qui tam case behind that resolution.

The announcement described alleged dinners, travel, equipment, unwarranted speaking payments, bogus case studies, cash, credits and rebates. It tied those alleged practices to false claims submitted to federally funded health care programs.

For an insider, knowing who approved the practice or responded when it was questioned can matter as much as knowing who handed over the benefit.

What the Sales and Clinic Records Reveal

The Dermagraft allegations connect records that employees encounter in different jobs. Meal reports describe attendance. Speaker records describe paid work. Equipment orders describe what the clinic received. Patient schedules and sales compensation describe whom the sales effort reached and what it rewarded.

The point is the connection between those records. A finance employee may know the payment’s description, a clinic employee may know what happened, and a sales manager may know why that customer was selected.

You Know What the Clinic Was Offered

If you saw a speaker paid without speaking, equipment exchanged for orders or patient lists fed into a sales campaign, speak with our whistleblower experts about what the clinic was offered. We build the case with you and bring in medical-device whistleblower lawyers who understand clinic inducements and government billing. You bring the view from inside the business, and we stay beside you to build your strongest whistleblower case.