A whistleblower lawsuit against McKesson Corp. and affiliated companies was unsealed today, alleging that the drug distributor gave illegal kickbacks in the form of free business services to community oncologists to entice them to buy their patients’ cancer drugs from McKesson.
Phillips & Cohen LLP filed the qui tam lawsuit on behalf of the whistleblower, Adam Hart, in February 2015 in New York City’s Southern District. The lawsuit has been under seal, so not publicly known, until yesterday when the court unsealed it.
“McKesson’s specialty-drug distribution business depends on purchases by oncology practices,” said Stephen Hasegawa, a whistleblower attorney with Phillips & Cohen who is the lead counsel on the whistleblower case. “In exchange for purchasing oncology drugs from McKesson for outpatient treatment, physician practices were given free access to valuable business-management tools that helped the doctors increase their profits.”
“It was a win-win for McKesson and the doctors, but not for their patients or taxpayers who might have saved money with cheaper drugs that were just as effective,” Hasegawa said.
Kickbacks alleged for oncologists
“Kickbacks in the healthcare industry have gone beyond obvious ones, such as bags of cash and trips to Hawaii, to more subtle – but still illegal – kickbacks,” Hasegawa said.
For cancer drugs administered on an outpatient basis by a doctor, government healthcare programs pay 80 percent of the Medicare-approved price. The remaining 20 percent is paid by the patient or is covered by insurance the patients purchase for that purpose.
Oncology practices that provide services in an office setting, as opposed to a hospital, can buy patients’ drugs from a wholesaler and then bill patients’ insurers for those drugs, a process referred to as “buy-and-bill.”
McKesson buys drugs from a manufacturer and sells them to community oncology practices. To induce oncologists to buy cancer drugs from McKesson, the company offered them free access to business tools, such as the “Margin Analyzer” and the “Regimen Profiler,” which doctors use to optimize their profits from the drugs they administer to Medicare patients and others.
For example, the “Margin Analyzer” showed doctors they could make $43 per dose by prescribing a very expensive drug obtained from McKesson rather than just $6 per dose for a similar, but cheaper, drug. The cost to Medicare for the more expensive drug, Fusilev, was $1,233 at the time the lawsuit was filed; the cheaper drug, Leucovorin, cost Medicare only $66 per dose.
McKesson’s oncology business generates billions of dollars in annual revenues.
Hart was a business development executive for McKesson who was responsible for generating new business with oncology practices in the Southeast for McKesson.
Although the government did not intervene in the qui tam lawsuit, Hart and his attorneys will continue to litigate it. Kellogg Hansen and Constantine Cannon are co-counsel on the case with Phillips & Cohen.
“We have a very strong case against McKesson and are looking forward to recovering funds on the taxpayers’ behalf,” Hasegawa said.
How the False Claims Act works
The False Claims Act empowers whistleblowers to pursue qui tam lawsuits against entities that defraud the government, enabling the whistleblowers to recover funds on the government’s behalf. The law provides whistleblowers protections against job retaliation and rewards based on the amount recovered as a result of the qui tam case.