By Jonathan Stempel
NEW YORK (Reuters) – Valeant Pharmaceuticals International Inc will pay $54 million to settle civil charges that its Salix unit paid illegal kickbacks to induce doctors to prescribe seven of its products, causing the submission of thousands of fraudulent reimbursement claims to the U.S. government.
The accord announced on Thursday by the U.S. Department of Justice covers alleged improper activity at the former Salix Pharmaceuticals Inc from 2009 to 2013, predating its April 2015 acquisition by Valeant for more than $11 billion.
Salix admitted and accepted responsibility for routinely paying doctors hundreds or thousands of dollars, or offering perks including lavish meals at restaurants such as Le Bernardin and Nobu, to attend some of its roughly 10,000 “speaker programs,” including many with little or no educational value.
One doctor from Rochester, New York allegedly received more than $200,000 for attending numerous events, including some where he was told not to do slide presentations and that dinner was the only gathering planned.
“Receipts from Salix’s speaker programs – which were approved by managers – evidence the existence of speaker programs that were quite clearly happy hours,” the government added.
The Justice Department said the kickback scheme worked, as many attendees began prescribing Salix products more often.
It said this led to thousands of false payment claims being submitted to Medicare and Medicaid, and two healthcare programs serving active and retired military personnel.
“Salix found a way to pay doctors money and treated them to fancy meals to push their drugs,” U.S. Attorney Preet Bharara in Manhattan said in a statement.
The drugs and devices covered by the lawsuit are Apriso, Deflux, MoviPrep, OsmoPrep, Relistor, Solesta and Xifaxan.
Valeant spokeswoman Laurie Little said the company is pleased to settle, and that the alleged misconduct “involved personnel who are no longer with the company.”
The payment marks an additional financial strain on Laval, Quebec-based Valeant, whose stock price has fallen more than 90 percent since August amid scrutiny over its business and accounting practices and high debt load.
Salix’s settlement resolves claims originally brought under the federal False Claims Act in two lawsuits by the physician Steven Peikin and four former Salix employees.
Such lawsuits let whistleblowers bring cases on behalf of the U.S. government, and share in any recoveries. The government typically joins cases it considers stronger.
According to settlement papers, Salix will pay $46.53 million to the United States and $7.47 million to resolve civil fraud claims by various U.S. states.
(Reporting by Jonathan Stempel in New York; editing by Tom Brown and Richard Chang)