Teva and IVAX: A Consulting Fee for a Change in Prescriptions

Teva Pharmaceuticals USA and IVAX LLC agreed to pay more than $27.6 million to resolve allegations of clozapine prescribing kickbacks involving Medicare and Medicaid patients in nursing homes and hospitals. The government alleged that a Chicago psychiatrist switched patients to the manufacturers’ drug in exchange for a consulting agreement and other benefits. A manufacturer employee who knew the spending, or a nursing home insider who saw the prescriptions change, could recognize different sides of that bargain.

What Was the Teva and IVAX Fraud Case?

The government alleged that the companies violated the False Claims Act by paying the psychiatrist in return for prescriptions to thousands of patients at dozens of Chicago-area nursing homes and hospitals.

The Justice Department announced the manufacturer settlement on March 11, 2014. Teva Pharmaceuticals USA and IVAX belonged to the same corporate group. The settlement required nearly $15.5 million payable to the United States and more than $12.1 million to Illinois.

The alleged manufacturer payments behind nursing home prescribing put the commercial decision outside the facility. A contract between a drug company and a physician could influence treatment across many homes. The manufacturer was paying for access to the prescriber’s patient population, according to the government’s account, and the resulting drug claims went to government health programs.

The Consulting Agreement and the Generic Switch

The government traced the alleged bargain to at least August 2003. The psychiatrist allegedly proposed switching his patients to generic clozapine if IVAX paid him $50,000 under a one-year consulting agreement and provided other benefits. The promised change in prescribing was part of the bargain described in the Justice Department’s account.

The contract called the payment consulting. The alleged return was patients switched to the company’s drug. An employee familiar with the agreement’s purpose could explain something that the label on the expense would never show.

According to the government, the psychiatrist quickly became the country’s largest prescriber of generic clozapine. IVAX, and later Teva, allegedly continued the payments and benefits through at least November 2009. They included annual renewals of the consulting agreement, travel, meals, entertainment and sporting-event tickets. IVAX also allegedly provided an all-expenses-paid Miami trip for the psychiatrist, his wife and employees.

For someone who handled these accounts, the alleged arrangement could appear across contract files and expense approvals. The annual renewals and travel benefits extended the relationship beyond the initial fee.

Why Clozapine Mattered

Clozapine is an antipsychotic used for treatment-resistant schizophrenia. In its settlement announcement, the Justice Department described it as a rarely used drug generally considered a last resort, particularly for elderly patients. It identified serious potential effects, including a potentially deadly reduction in white blood cells, seizures, inflammation of the heart muscle and increased mortality in elderly patients.

The resident was taking a drug with serious risks while the prescriber allegedly received benefits tied to choosing it. A last-resort drug had become the target of a paid prescribing bargain. Elderly residents bore the health risks, and taxpayers paid for the prescriptions.

How the Prescriptions Became Government Claims

The alleged clozapine scheme generated thousands of false claims to Medicare Part D and Illinois Medicaid. The Justice Department identified those prescription claims as the result of the manufacturer’s alleged bargain with the psychiatrist.

The CMS billing rules generally put drugs inside the facility’s payment during a covered Part A stay through skilled nursing consolidated billing. Here, the alleged false claims went to the prescription programs. The drug ordered, the manufacturer’s benefits and the Part D or Medicaid bill connect the prescribing bargain to taxpayer-funded health care.

It also explains why the manufacturer matters even when its employee never works inside a nursing home. The alleged inducement began with the company paying the prescriber. Its consequences appeared in the treatment and claims of patients spread across facilities.

What Evidence Is Needed to Prove Fraud?

For a prescribing-kickback case, the evidence connects the manufacturer’s payments and benefits to the physician’s drug choices and the resulting government-paid claims. Our whistleblower experts examine that connection with the insider who knows what the arrangement was meant to achieve.

Contracts and expense approvals sit on the manufacturer’s side, while clinical and pharmacy records show the resident’s condition and prescribing history. Our experts connect those different views of a suspected healthcare fraud scheme with the claims for payment.

The California Research Bureau’s 1997 report, Fraud and Abuse in the Health Care Market of California, describes paid steering as a relationship in which one party channels business to another for a fee. In the clozapine allegations, the consulting contract and the prescription sat on opposite sides of that relationship. An accounts employee might understand the payment’s purpose. A clinician might recognize the change in drug choice. We build the evidence connecting the financial arrangement to the care and the claim around what each can explain.

The Physician’s Separate Civil Settlement

The psychiatrist agreed to a separate $3.79 million civil settlement, announced in February 2015. That resolution concerned allegations involving clozapine prescriptions and medication-management claims. The Justice Department reported nearly $600,000 in kickbacks and benefits behind the prescribing arrangement.

When Manufacturer Money Changes the Drug Choice

Omnicare agreed to a smaller $4.19 million settlement in a manufacturer-payment case involving Aranesp. The Justice Department’s February 2014 announcement described alleged rebates, grants, speaker and consulting payments, data fees, meals and travel tied to switching Medicaid beneficiaries to Amgen’s drug.

In that case, the whistleblower’s complaint described what repeated switching looked like from the nursing homes:

The alleged influence in that case ran through the pharmacy. In the Teva and IVAX matter it ran through the prescribing physician. Both accounts put manufacturer spending beside a change in the drug a resident received. Someone inside the commercial relationship may know why the switch was sought, while staff caring for the resident see its effect.

IVAX also reached an earlier pharmacy settlement. In November 2009, IVAX Pharmaceuticals agreed to pay $14 million over alleged payments for drug-purchasing commitments. That earlier pharmacy agreement concerned a different commercial relationship from the benefits paid to the clozapine prescriber.

What Is the Reward for a Medicare Fraud Whistleblower?

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. Speak to one of our whistleblower experts about the prescribing arrangement and how a whistleblower reward fits your case.

You Know What the Consulting Fee Bought

If you handled manufacturer payments or saw nursing home prescriptions change with a paid relationship, speak to one of our whistleblower experts about what connected them. We bring in pharmaceutical fraud whistleblower lawyers who know prescribing kickbacks and stay at your side to build your strongest pharmaceutical kickback whistleblower case.