Last week the U.S. Department of Justice (DOJ) announced its largest settlement with a drug distributor – AmerisourceBergen (ABC) – in the combined amount of $885 million.

ABC, through its Pre-Filled Syringe Program, allegedly caused numerous false claims to be submitted to the federal healthcare programs (1) for unapproved new drugs; (2) for drugs that were defective, contaminated or otherwise compromised, whose quality and/or purity fell below that which they were purported or represented to possess; (3) by causing double billing for the same vial of drug product as a result of exploiting overfill; and (4) for Procrit® purchased as a result of the ABC’s kickback to physicians for Procrit® Pre-Filled Syringe purchases.

Misbranded Drugs

ABC, through its subsidiary Medical Initiatives (MI), broke the sterility of the original sterile vials of the manufactured products, pooled the contents, and repackaged the product into plastic syringes. Some of the Pre-Filled Syringes contained visible particles of unknown origin, which MI sought to filter out before shipment. However, MI did not conduct any tests to confirm that the filtering process removed the foreign particles. The ABC Defendants represented to physician customers that MI’s repackaging procedures followed aseptic technique and complied with all applicable laws when, in fact, that was not uniformly the case. On the few occasions when samples of Pre-Filled Syringes were tested for sterility, some of those samples tested positive for bacteria. The ABC never recalled any Pre-Filled Syringes.

Double Billing

ABC used overfill and salvaged vials for resale, which caused double-billing for the same vial of drug product. The ABC’s repackaging operation at MI allowed some vials to remain unopened. ABC resold the unopened vials to other healthcare providers. These unopened vials were billed to payors, including the federal healthcare programs. The second purchaser was either another physician ordering vials to be made into Pre-Filled Syringes or a hospital or pharmacy that purchased the unopened vials with the representation from ABC that the unopened vials were purchased directly by ABC from the manufacturer and sold directly to the second purchaser. ABC failed to disclose to the second purchasers that the unopened vials were extra vials accumulated by MI as a result of the Pre-Filled Syringe Program and billed to payors, including federal healthcare programs.

Kickbacks

ABC paid kickbacks to physicians to induce them to purchase Procrit® in Pre-Filled Syringes rather than the original vials by providing a rebate to physician-customers who purchased the drug in syringe form. The rebate was disguised on the invoice as a general pharmacy credit and not associated with Procrit®. Customers who bought Procrit® in a vial rather than Pre-Filled Syringes did not receive the additional rebate. The ABC Defendants did not properly disclose the rebate to customers in writing at the time of the initial sale of Procrit®.

The prosecution points out that ABC never registered MI as a repackager or manufacturer with the FDA. But instead portrayed it as a state-regulated pharmacy (however MI’s operation did not fit within 503A definition of a traditional pharmacy). In addition, the Pre-Filled Syringes did not have approved New Drug Applications or Biologics License Applications in effect.

To assure future compliance, ABC entered into the Corporate Integrity Agreement with the federal government.

Interestingly, there was almost identical suit against McKesson Corporation, which was accused of repackaging cancer drugs in conditions that were not sterile.