Former Advanced BioHealing CEO To Pay $2.5 Million To Settle False Claims Act Allegations

Tampa, Florida – United States Attorney Maria Chapa Lopez announces today that Kevin Rakin, the former Chairman and CEO of Advanced BioHealing (ABH), has agreed to pay the government $2.5 million to settle False Claims Act allegations that he knowingly allowed ABH sales representatives to use kickbacks and other unlawful methods to induce clinics and physicians to use or overuse its product, “Dermagraft.” Dermagraft is a bioengineered human skin substitute approved by the FDA for the treatment of diabetic foot ulcers. The Anti-Kickback Statute prohibits, among other things, the payment of remuneration to induce the use of medical devices covered by Medicare, Medicaid and other federally funded health care programs.

“Kickbacks that incentivize the sale of medical devices undermine the integrity of our health care system,” said U.S. Attorney Maria Chapa Lopez. “We will take action against individuals who break the law to inflate the value of their companies at the expense of our federal healthcare programs.”

“We will continue to hold accountable individuals who knowingly allow sales practices that result in false claims, as the government contended in this case,” said Shimon R. Richmond, Special Agent in Charge, Office of Inspector General for the U.S. Department of Health and Human Services. “The millions of people depending on government healthcare programs and the taxpayers who fund those programs should expect nothing less.”   

The settlement resolves allegations that Rakin allowed Dermagraft salespersons to unlawfully induce clinics and physicians with lavish dinners, entertainment, and travel; medical equipment and supplies; unwarranted payments for purported speaking engagements and bogus case studies; and cash, credits, and rebates, to induce the use of Dermagraft. Claims filed in violation of the Anti-Kickback Statute are considered false or fraudulent under the False Claims Act. In addition, the Anti-Bribery statute and the Federal Acquisition Regulations prohibit bribes to government officials or employees, including Department of Veterans Affairs (VA) physicians, to obtain a contract or favorable treatment under a supply contract. The United States alleged that as a result of his conduct, Rakin caused millions of dollars in false claims to be submitted to federally funded health care programs for Dermagraft.

The allegations resolved by the settlement were brought in a lawsuit filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private parties to sue on behalf of the government for false claims and to receive a share of any recovery. The qui tam case against Rakin was filed by Heather Webb, a former ABH sales representative, and is captioned: United States ex rel. Webb v. Advanced BioHealing, Inc., Case No. 8:14-cv-1055-T-30EAJ. Ms. Webb will receive at least $550,000 of the settlement.

In 2011, Shire plc (Shire) acquired ABH and named Rakin president of its newly-formed subsidiary, Shire Regenerative Medicine. In January 2017, Shire paid the United States $350 million to settle similar federal and state False Claims Act allegations related to the promotion of Dermagraft.

This matter was investigated by the U.S. Department of Health and Human Services, the FBI, the VA–Office of Inspector General, and the Department of Defense Criminal Investigative Service. It was prosecuted by Assistant United States Attorney Sean Keefe.

The claims resolved by this settlement are allegations only, and there has been no determination of liability.