WASHINGTON, DC – A whistleblower lawsuit, brought by Phillips & Cohen, has exposed an illegal scheme where doctors have purchased illegally imported cancer drugs as a way to cut their costs and boost their income. In doing so, the doctors risked the effectiveness of their cancer patients’ treatment and defrauded the Medicare program.

In the first settlement of its kind, an oncologist in Flushing, N.Y., Dr. Kee Y. Shum, has agreed to pay $275,000 to the federal government to settle allegations against him that are part of the “qui tam” (whistleblower) lawsuit, the whistleblower’s lawyers and the U.S. Attorney’s Office for the Eastern District of New York announced today.

“By participating in this scheme, doctors risked the health and safety of their patients with cancer by buying drugs that may have been counterfeit or contaminated,” said Colette G. Matzzie, a Washington, DC, attorney with Phillips & Cohen LLP, which represents the whistleblower. “They were taking chances with patients’ lives just to make more money from Medicare.”

Doctors could purchase the illegally imported drugs for less than what they would have paid for oncology drugs purchased legally and profited off the “spread” between the two prices when they sought reimbursement from Medicare. Medicare reimburses doctors at a fixed rate for drugs used to treat patients if the drugs can’t be self-administered and are reasonable and necessary for treatment and diagnosis.

The doctors couldn’t verify the country of origin of the drugs and there were no controls on the drugs to ensure they were effective and to ensure they weren’t counterfeit or contaminated.

The sale of drugs that are imported without the approval of the Food and Drug Administration (FDA) is prohibited in the U.S. Medicare will not reimburse doctors for administering illegally imported drugs to patients. Importers of drugs that don’t have FDA approval have been known to sell fake and potentially unsafe drugs to consumers in the U.S. The FDA has repeatedly warned the public that there are potential health concerns with illegally imported drugs.

Dr. Suby Rao, a hematologist/oncologist in suburban Chicago, brought the qui tam lawsuit in 2004 in federal district court in New York City (Eastern District). He decided to become a whistleblower after being solicited to buy imported oncology drugs and investigating the extent of the practice.

“I was concerned about physicians treating cancer patients with drugs whose effectiveness and safety were unknown,” Dr. Rao said. “It’s a shame that some doctors decided to boost their income by taking chances with their patients’ treatment.”

The federal investigation is a combined effort of the U.S. Attorney’s Office, the Department of Justice, the Office of Inspector General from the Department of Health and Human Services and the FDA. Dr. Rao and his counsel, Phillips & Cohen, worked with federal investigators to uncover the illegal drug importations and were assisted by New York City attorney Jonathan Willens.

“Assistant U.S. attorneys Paul Kaufman and Deborah Zwaney have done a tremendous job investigating and pursuing these illegal drug importations that could harm cancer patients,” attorney Matzzie said. “We hope that the settlement with Dr. Shum is the first of many enforcement actions taken against doctors who illegally import oncology drugs.”

Phillips & Cohen specializes in representing whistleblowers in qui tam lawsuits brought under the False Claims Act. A private individual may sue companies or individuals that are defrauding the government and recover damages on the government’s behalf. The whistleblower is entitled to a reward of 15 percent to 30 percent of the money recovered. For more information about Phillips & Cohen’s record, see P&C’s Successful Whistleblower Cases.

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