[co-author: Stephanie Kozol]*
The U.S. Department of Justice (DOJ) and 18 state attorneys general (AG) announced a settlement with Boston-based QOL Medical, LLC (QOL) and its CEO, Frederick Cooper, to resolve allegations that the company provided unlawful kickbacks to health care providers. Under the terms of the settlement, QOL and Cooper agreed to pay $47 million to resolve allegations that QOL manipulated health care providers into prescribing a drug called Sucraid — an FDA-approved therapy for a rare genetic disorder, Congenital Sucrase-Isomaltase Deficiency (CSID). Regulators alleged that QOL and Cooper violated the Anti-Kickback Statute and federal and state False Claims Acts.
According to the U.S. Attorney’s Office of the District of Massachusetts, QOL supplied health care providers with free breath tests and asked providers to administer the test to patients with common gastrointestinal symptoms. QOL allegedly represented that these tests could “rule in or rule out” CSID — when in fact, the tests could not diagnose CSID but rather only reveal low sucrase activity, which can be caused by several factors in addition to the rare genetic disorder, resulting in many false positives.
The DOJ and states alleged that approximately 30% of the test came back positive, and QOL then marketed directly to the health care providers of patients who had tested positive, frequently using claims of efficacy to generate sales of Sucraid, even though a majority of patients had no need for the medication. Health care providers subsequently submitted claims to Medicaid and other government health care programs for reimbursement. As a result, the DOJ and states alleged that QOL caused false claims to be submitted to the government, despite not submitting those claims itself.
As a result of the settlement, QOL and Cooper will pay $47 million, with $8 million specifically allocated to the whistleblowers who brought the false Medicaid claims to light. The participating states will receive and split the sum of approximately $3.4 million.
Why It Matters
This settlement reflects regulators’ aggressive policing of the health care industry using the False Claims Act as a substantial weapon. The allegations are noteworthy because the regulators’ theory of liability under the False Claims Act is mainly that QOL caused others to submit false claims through aggressive and targeted sales tactics and allegedly deceptive practices. Health care companies need to exercise care because what may be intended as creative marketing techniques may in practice be viewed as unlawful conduct by watchful regulators — especially if aided by a whistleblower in a qui tam lawsuit.
*Senior Government Relations Manager
