Drug Rep in $3B Procrit Case: "80% of My Sales Were Medicare Fraud"; Carried $400K in "Cash"

Last Updated Aug 17, 2009 4:58 PM EDT

The whistleblower pharmaceutical sales reps in the Procrit case reinstated in a Massachussetts federal court claim that their careers at Johnson & Johnson's Ortho Biotech unit were based mostly on lies. Mark Duxbury and Dean McClennan, both former sales reps at J&J, claim that the bulk of their business selling Procrit to hospitals and clinics was conducting Medicare fraud.

Duxbury claims he sold $13 million of Procrit between 1992 through 1998, and that approximately 80 percent of those sales were "false or fraudulent claims for Medicare reimbursement."

McClennan sold more than $65 million of Procrit, and about 50 percent of his sales were fraudulent Medicare claims, he alleges.

The case -- which J&J denies -- was revived by a Massachussetts federal appeals court last week. It contains the usual complaints: marketing the spread between the price reimbursed by Medicare and the lower price the company sold it at, and off-label marketing.

But it also names names. Dozens of them: Doctors, hospitals, and clinics. In each case it describes how the doctor or institution took advantage of J&J's schemes to lower the price it sold Procrit to doctors at, while asking the government to reimburse at the higher "average wholesale price."

The whistleblowers' lawyer says Medicare was defrauded of $3 billion.

Broadly, the complaint states (download here), J&J is accused of:

... giving providers unreported unlawful front end and back end payments in the form of "off-invoice" discounts, rebates, account credits, and other cash or cash equivalent payments such as phony "grants", "advisory board honoraria", and "donations" directly tied to the providers' purchase of Procrit.
J&J did this by making presentations to hospitals demonstrating the savings they could make by overbilling Medicare, the suit claims. Here's one example:
Seattle District Manager Robert Nelson instructed Relator Duxbury to analyze profits gained by the spread at St. Peter's [in Olympia, Wash.,] and St. Joseph's [in Tacoma, Wash.,] hospitals and present them in writing as a "financial analysis" of the benefits of purchasing Procrit.
J&J had a software program, called MVP, designed to generate rebates and discounts that would make Procrit sales profitable for such institutions.

The pair also carried $400,000 in Procrit discount cards that they could hand out to customers. The cards were referred to within the company as "cash" because, to doctors, that's exactly what they were worth:

There were thousands of "Patient Trial Cards" provided to sales representatives, each of which was worth well over one thousand dollars ($1,000) in free Procrit. For example, Relator McClellan had over 400 Patient Trial Cards in his possession at one time. Medicare was billed for free Procrit and the free Procrit was not accounted or in calculating AWPs.
And, of course, there were the bogus grants:
One example of this type of "kickback" given to Providers to purchase Procrit is Relator Duxbury possesses documentation of a ten thousand dollar ($10,000) and twenty thousand dollar ($20,000) unrestricted grants that Defendant gave St. Joseph's Hospital in Tacoma, Washington in 1992 and 1993 conditioned upon the purchase of Procrit.
J&J argues (download here) the case should be dismissed because the allegations were previously disclosed and the pair are merely jumping on the bandwagon.