Shire Pharmaceuticals PLC has reached a tentative $350 million settlement with the U.S. Department of Justice (DOJ) to settle False Claims Act (FCA) violations and Medicaid-related claims over the sales and marketing practices by the Massachusetts-based biotech company. This settlement arises from the ongoing investigation into the sales and marketing practices of the skin substitute product Dermagraft. Shire picked up the product when it acquired Advanced Biohealing Inc., now known as Shire Regenerative Medicine Inc., as part of a $750 million deal in 2011.
Even though Shire divested the Dermagraft product in January 2014, it retained the liability that could come from the DOJ’s investigation. Shire has agreed to a civil settlement in the amount of $350 million plus interest, subject to negotiating a final settlement agreement and obtaining final approvals. The filing with the court stated:
The tentative settlement proposal would settle the federal government’s claims under the federal False Claims Act and the Dermagraft Medicaid-related claims for states that opt into the settlement. Some states with Dermagraft Medicaid-related claims might elect to opt out of any final settlement, and those states’ claims would remain unresolved.
The DOJ initiated both civil and criminal investigations in June 2011, with U.S. attorneys in Florida and Washington, D.C., participating in the process. Shire mentioned the investigation two-and-a-half years later when it sold off Dermagraft at a loss of $650 million, saying that it would retain the liabilities of the investigation. The proposed settlement, if finalized, will be the second that Shire has reached with the government over FCA violations in as many years. In September 2014, Shire reached another settlement for $56.5 million over the marketing and promotion of drugs used to treat attention deficit hyperactivity disorder and ulcerative colitis.
The Dermagraft settlement was the fourth FCA settlement the DOJ reached in one week last month. Other cases include two shippers settling allegations of overbilling, a South Carolina hospital paying $17 million to resolve a whistleblower suit over FCA allegations, and the University of Pittsburgh Medical Center agreeing to pay $2.5 million to also settle a whistleblower suit with FCA claims.
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