Headlines that Matter for Companies and Executives in Regulated Industries
Seventh Circuit Affirms Dismissal of FCA Retaliation Suit Against AbbVie for Alleged Off-Label Promotion
The Seventh Circuit affirmed the dismissal of a False Claims Act (FCA) retaliation suit against AbbVie Inc. (formerly Allergan) brought by former sales representative Jeffrey Lewis. In the complaint, Lewis alleged he was denied a promotion and given onerous assignments after complaining that AbbVie aggressively promoted the antipsychotic drug Vraylar for off-label uses — major depressive disorder and substance-abuse treatment — in violation of US Food and Drug Administration (FDA) rules against off-label promotion.
The district court had agreed with Abbvie that the plaintiff’s theory of recovery was “implausible” given the providers’ intervening decisions to submit the claims for reimbursement. These decisions, the district court held, effectively constituted superseding causes that broke the chain of causation between Abbvie’s alleged off-label promotion and the reimbursement.
On appeal, the Seventh Circuit rejected that rationale, but ultimately affirmed. As to causation, the court observed that FCA suits against drug manufacturers for deceptive off-label marketing campaigns were “not novel,” and it was “eminently foreseeable” that a false prescription would result in a false claim. Still, the panel affirmed because Lewis failed to put Abbvie on sufficient notice of a potential FCA violation. More specifically, the panel explained, Lewis’ internal emails spoke only of “regulatory non-compliance” and “corporate policy” without indicating a concern about government fraud. Thus, AbbVie could not have known he was engaging in protected activity aimed at preventing FCA violations.
The case is Lewis v. AbbVie Inc., No. 24-3121 (7th Cir. Sept. 3, 2025).
Kimberly-Clark to Pay Up to $40.4 Million Over Adulterated Surgical Gowns
Kimberly-Clark Corporation entered a deferred prosecution agreement to resolve one felony count of introducing adulterated medical devices into interstate commerce with intent to defraud and mislead.
Kimberly-Clark, a consumer goods and personal care company, made design changes to its AAMI Level 4 MicroCool™ gowns, triggering the need for a new FDA pre-market notification to show that the gowns were safe and effective. Kimberly-Clark admitted, however, that an employee directed the preparation of fabricated test samples in efforts to avoid the notification requirement. Consequently, between 2013 and 2014, Kimberly-Clark sold approximately $49 million worth of non-conforming gowns in the United States and abroad while touting the “highest level” of pathogen protection.
Under the deferred prosecution agreement, Kimberly-Clark must pay a $24.5 million criminal penalty, $3.9 million in forfeiture, and up to $12 million in victim compensation. Kimberly-Clark must also enhance compliance reporting. Prosecutors noted an absence of evidence that patients were physically harmed, yet still emphasized the “betrayal of trust” inherent in falsifying safety data.
Read the US Department of Justice’s (DOJ) press release here.
DOJ Moves to Compel Kroger’s Patient Data in Opioid FCA Probe
The DOJ Civil Division petitioned the Southern District of Ohio for summary enforcement of a 2022 Civil Investigative Demand after Kroger refused to unredact patient information linked to its pharmacy dispensing practices.
Investigators are probing whether Kroger pharmacies submitted false claims to Medicare and other federal programs for opioids and controlled substances that were not reasonable, necessary, or otherwise eligible for coverage. Kroger has produced documents with patient names and identifiers redacted, citing corporate policy and potential liability for breach. The DOJ argues that, as a “health oversight agency,” it is expressly entitled to the patient health information and that Kroger’s stance “is not grounded in any legal authority.” The government is seeking an order compelling Kroger to produce all non-privileged responsive documents, fully unredacted.
The case is United States v. The Kroger Co., No. 1:25-mc-00017 (S.D. Ohio).
California Laboratory Owner Admits Tax, Health Care, and Pandemic Loan Fraud
Armen Muradyan, the hidden owner of Genex Laboratories Inc., pleaded guilty in the Central District of California to conspiracy to commit health care fraud, wire fraud, and tax evasion in a scheme that spanned nearly a decade.
Muradyan owned and operated Genex, a Burbank, California-based blood testing laboratory. But from 2015 to 2023, Muradyan paid a nominee “owner” to front Genex, channeling more than $23 million in Medicare reimbursements through accounts controlled by the strawman. Muradyan then provided the nominee with false financial summaries, which were used by the nominee’s tax preparer in preparing the nominee’s personal tax returns. At the same time, Muradyan omitted Genex’s income from his own tax returns, resulting in Muradyan allegedly shorting the Internal Revenue Service more than $8.5 million and California approximately $2.7 million. Additionally, in 2020, Muradyan secured nearly $100,000 in Economic Injury Disaster Loans for a fictitious company he claimed had revenue of $1 million in 2019.
Muradyan now faces up to 20 years for wire fraud, 10 years for health care fraud conspiracy, and five years for tax evasion. His sentencing is currently scheduled for December 11.
Read the DOJ’s press release here.
Second Circuit Vacates 12-Year Sentence in $600 Million Medical Billing Fraud But Upholds Conviction
While affirming Mathew James’ 2022 conviction for orchestrating a $600 million insurance fraud through third-party biller Leale Inc., a Second Circuit panel ordered James to be resentenced after identifying multiple procedural errors.
District Judge Joanna Seybert increased James’ sentence from 10 to 12 years after learning he might earn First Step Act credits and Residential Drug Abuse Program reductions — a rationale the appellate court deemed impermissible. The panel also faulted the district court for imposing an “organizer or leader” enhancement without making specific factual findings in open court. Furthermore, the Second Circuit vacated the district court’s $63 million forfeiture and $337 million restitution orders with instructions to recalculate such amounts using correct loss and gain metrics. James’ remaining challenges based on jury exposure to inadmissible transcripts were ultimately rejected as harmless.
The case is United States v. James, No. 24-849 (2d Cir.).
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