KV Pharmaceutical Whistleblower Case Settles for $17 Million

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Latest Settlement Involving Drug Companies Selling Unapproved Drugs

Yesterday, the federal government announced the $17 million settlement of Nolan & Auerbach’s client’s False Claims Act case against KV Pharmaceutical Company, the parent company of Ethex Corporation. This is the latest settlement from a decade-old qui tam action, alleging that dozens of small and mid-sized pharmaceutical companies have been allowed (and some continue to be allowed) to sidestep the FDA drug approval process and manufacture and distribute unapproved drugs, ultimately prescribed to Medicaid patients, jeopardizing the safety of millions of Americans and thwarting federal law. This multi-defendant healthcare fraud lawsuit has led to the recovery of hundreds of millions of dollars for Government Health Care Programs. Nolan & Auerbach has taken on the responsibility of prosecuting the remaining defendants identified in this qui tam action.

According to the firm’s qui tam complaint, several drug companies, including Ethex Corporation, had, time and time again, deceived the government by falsely certifying that their unapproved drugs had met with the statutory definition of a Covered Outpatient Drug. These false certifications allowed the drug companies to peddle their unapproved products to physicians of Medicaid patients and to wrongfully receive payments from Government Health Care Programs.

Under the federal Food, Drug & Cosmetic Act, 21 U.S.C. § 301 et seq., every drug must be approved by the FDA for safety and effectiveness before it can be marketed to the public. These drugs were not. Ultimately, the FDA determines whether the drug is safe and effective in its proposed use(s), whether the benefits of the drug outweigh the risks, and whether the methods used in manufacturing the drug and the controls used to maintain the drug's quality are adequate to preserve the drug's identity, strength, quality, and purity.

Federal and State False Claims Acts allow private citizens with detailed knowledge of fraud to bring an action on behalf of the governments and to assist in the recovery of the governments’ stolen dollars. These statutes allow the government to recover three times the amount it was defrauded, in addition to civil penalties of $5,500 to $11,000 per false claim. Successful whistleblowers can receive between 15 and 30 percent of the governments’ recovery.

The federal share of the settlement is $10,158,695, and the state Medicaid share of the settlement is $6,841,305. Under the settlement, Nolan & Auerbach, P.A. is pleased to announce that its client is entitled to receive a total of $1,523,804 from the federal share and additional amounts from the state share.

This case is United States ex rel. Constance Conrad v. Ethex Corp., et al., No. 02-11738-RWZ (D. Mass.).

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Marcella Auerbach

Ken Nolan
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