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Schwarz pays $22m in false claims case

Schwarz Pharma has paid $22m to resolve False Claims Act allegations regarding reimbursement for drugs under federal healthcare programmes

Schwarz Pharma has paid $22m to resolve False Claims Act allegations regarding reimbursement for drugs under the US federal healthcare programmes, Medicare and Medicaid.

Schwarz, which is now a subsidiary of Belgian company UCB, is alleged to have submitted false quarterly reports to the government regarding the angina skin patch Deponit and the antispasmodic therapy Hyoscyamine Sulfate Extended Release (ER).

The active ingredients in both Deponit and Hyoscyamine Sulfate ER have been used in products on the market for several years. However, in 1997 and 1999 respectively, the US Food and Drug Administration (FDA) ruled that the drugs were not eligible for reimbursement by government programmes such as Medicaid.

In a release published by the US Department of Justice, it is alleged that Schwarz misrepresented the status of both drugs concerned and failed to advised the relevant regulatory body - the Centers for Medicare and Medicaid Services (CMS) that the drugs did not qualify for coverage under the federal healthcare programmes.

Neither Deponit nor Hyoscyamine Sulfate ER has received regulatory safety and effectiveness approval from the FDA, and neither product is currently on the market.

"Pharmaceutical companies must provide accurate and complete information to the government about the drugs they manufacture," said Tony West, assistant attorney general for the civil division of the Department of Justice. "There will be consequences for companies who provide false information to obtain taxpayer dollars for their drugs."

The settlement relates to allegations against Schwarz in two separate multi-defendant whistleblower actions brought under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private parties with knowledge of fraud to sue on behalf of the US and share in any recovery.

The $22m settlement will be divided between the federal state, who will receive $12,243,836; Medicaid, with $9,756,164 and the two whistleblowers who share $1,836,575.

"This False Claims Act agreement shows that the Department of Justice will not allow manufacturers to evade the drug approval process and expect the government to pay for less than effective drugs," said Carmen Ortiz, US attorney for the District of Massachusetts.

29th April 2010

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