U.S. Files Complaint Against Texas-Based Healthpoint Ltd. Under the False Claims Act

Government Alleges That Pharmaceutical Company Submitted False Statements to Obtain Coverage of Unapproved and Medicaid/medicare Ineligible Drug Xenaderm

WASHINGTON – The United States has filed a complaint against Healthpoint Ltd., alleging civil False Claims Act violations arising from the company’s sale of an unapproved prescription drug that was ineligible for payment under Medicaid and Medicare, the Justice Department announced today.   In the complaint, filed in the District of Massachusetts, the government alleges that the Ft. Worth, Texas-based subsidiary of DFB Pharmaceuticals Inc., submitted false statements concerning the regulatory status of Xenaderm to the United States, thereby causing false or fraudulent prescription claims for the unapproved drug to be submitted to Medicaid and Medicare.  

Xenaderm, a skin ointment primarily used to treat bed and pressure sores, otherwise known as “decubitus ulcers,” was launched by Healthpoint in 2002 without any approval by the Food and Drug Administration (FDA). Xenaderm contains trypsin as an active ingredient, which is intended to function in the unapproved drug as a debriding agent, i.e., for the removal of dead tissue around a wound. In the 1970s, however, the FDA determined on at least two separate occasions that trypsin was ineffective as a debriding agent and rescinded the market approval for products containing trypsin as a debriding agent. As a result of these determinations, Xenaderm, which came onto the market much later, was ineligible for reimbursement under Medicaid and Medicare.  

The government’s complaint alleges that Healthpoint knew Xenaderm was unapproved, and knew of or recklessly disregarded the FDA notices concerning trypsin’s lack of effectiveness as a debriding agent. According to the complaint, Healthpoint nonetheless falsely represented to the United States that the drug was eligible for Medicaid and Medicare reimbursement. As a result of Healthpoint’s false statements, the United States alleges that Healthpoint caused Medicaid and Medicare to pay tens of millions of dollars for an unapproved drug that was ineligible for reimbursement.

“The complaint filed today underscores our commitment to pursuing manufacturers that provide false information to obtain taxpayer dollars for unapproved and ineffective drugs,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice.                                      

“This action reflects our continued efforts to ensure that drug manufacturers do not evade the drug approval process or cause the government to pay for less than effective drugs,” said Carmen Ortiz, U.S. Attorney for the District of Massachusetts.

Prior to filing its complaint, the United States filed a notice of intervention in an action against Healthpoint that was commenced under the qui tam or whistleblower provisions of the False Claims Act.   U.S. ex rel. Constance Conrad v. Healthpoint, 02-CV-11738-NG (D.Mass.). The False Claims Act allows for private persons to file whistleblower suits to provide the government information about wrongdoing. Under the statute, if it is established that a person has submitted or caused others to submit false or fraudulent claims to the United States, the government can recover treble damages and $5,500 to $11,000 for each false or fraudulent claim filed. If the government is successful in resolving or litigating its claims, a proper whistleblower can receive a share of between 15 percent to 25 percent of the amount recovered.

“The problem with unapproved drugs is that FDA does not know what is in them, whether they are effective or safe, or how they are made.” said FDA Commissioner Margaret M. Hamburg, MD.  "FDA routinely works together with companies to ensure that safe, effective products are available for Americans.   As this case demonstrates, when companies place consumers at risk by selling drugs without required FDA approval, they should not profit from that." 

This investigation was conducted by the Justice Department’s Civil Division, the U.S. Attorney's Office for the District of Massachusetts, the Office of Inspector General of the Department of Health and Human Services and the FDA.