Victory Pharma to pay $11.4 million in kickback probe

Victory Pharma Inc., a specialty pharmaceutical company headquartered in San Diego, agreed Thursday to pay $11.4 million to resolve federal civil and criminal liability arising from its marketing of the pharmaceutical products Naprelan, Xodol, Fexmid and Dolgic, the Justice Department said.

Under the agreement, Victory Pharma entered into a deferred prosecution agreement and paid a criminal forfeiture of $1.4 million to resolve federal Anti-Kickback Statute accusations, and paid $9,938,310 to resolve False Claims Act allegations.

The company is accused of engaging in a scheme to promote its drugs by paying kickbacks to doctors to induce them to write prescriptions for Victory’s products, including prescriptions for patients covered by Medicare and other federal health insurance programs.

The kickbacks included tickets to professional and collegiate sporting events; tickets to concerts and plays; spa outings; golf and ski outings; dinners at expensive restaurants; and numerous other out-of-office events.

Boston attorney Joseph M. Makalusky, a partner at Ellis & Rapacki LLP who represented whistleblower Chad Miller in the case, said Victory’s kickbacks included giving a doctor money to help make a house payment; paying for a doctor’s staff’s outing to a strip club, including “lap dances” for the female staff; and offering a doctor and his staff an all-expense paid trip to Las Vegas.

The settlement resolved a False Claims Act lawsuit filed in California by Mr. Miller, a former sales representative for Victory. The False Claims Act allows whistleblowers to obtain a portion of the proceeds obtained by the federal government. As part of Thursday’s resolution, Mr. Miller will receive $1.7 million.

“By bribing physicians with cash, concert tickets, tickets to sporting events, dinners and other inducements, Victory Pharma compromised what is supposed to be the physician’s independent and sound medical judgment when they prescribe drugs to their patients,” said Mr. Makalusky. “The practice of providing these kickbacks, which puts a patient’s health secondary to profits, is a clear violation of the False Claims Act. I am proud that my client had the courage to step forward and put an end to this fraud, and I hope that this case and others like it [embolden] would-be whistleblowers to do the same.”

Principal Deputy Assistant Attorney General Stuart F. Delery, in the Justice Department’s Civil Division, said kickback schemes “undermine the integrity of medical decisions, subvert the health marketplace and waste taxpayer dollars.”

“We will continue to hold accountable those who refuse to play by the rules and provide illegal incentives to influence the decision making of health care providers,” Mr. Delery said.

The settlement is the result of a coordinated effort by the Justice Department’s Civil Division; the U.S. Attorney’s Office for the Southern District of California; the FBI; and the Offices of Inspectors General for Health and Human Services, Justice and Labor; the U.S. Postal Service; the Veterans Administration; and the Office of Personnel Management.

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