Pa. Acting Attorney General Secures Nearly $1.3 Million as Part of National Settlement

January 15, 2004

Pennsylvania Acting Attorney General Jerry Pappert announced that his Medicaid Fraud Control Section has secured $1,279,762 for the Pennsylvania Medicaid Program as part of a $414 million nationwide settlement with medical products manufacturer Abbott Laboratories of Abbott Park, Illinois.

Pappert said his office was scheduled to remit a check to the state Department of Public Welfare (DPW) for $937,759 representing the state’s share of the Pennsylvania settlement. The remaining $342,003 has been remitted to the federal government and represents its share of the Pennsylvania Medicaid Program damages.

Pappert said the settlement resolved allegations that Abbott defrauded state Medicaid and federal Medicare programs through the marketing of its enteral feeding pumps, which are used to feed patients through their abdomens.

Under the settlement, Abbott agreed to pay the federal government $364.8 million and the state governments $49.6 million to resolve the lawsuit. In addition, an Abbott subsidiary, C.G. Nutritionals, reportedly pleaded guilty to a federal criminal charge and was fined $200 million.

“This settlement sends a clear message to pharmaceutical and medical supply companies that they cannot manipulate the Medicaid and Medicare programs and get away with it,” Pappert said. “I plan to aggressively enforce our Medicaid fraud laws against any entity, large or small, that violates the integrity of the program and defrauds the taxpayers of Pennsylvania.”

Federal and state authorities in December 2002 began looking at Abbott’s marketing of the feeding pumps. As part of the investigation, the FBI created a fictitious durable medical equipment (DME) supplier to purchase enteral feeding pumps. Investigators reportedly determined that Abbott’s Ross Products Division’s marketing practices included:

— Providing free enteral feeding pumps to nursing homes and DME suppliers in exchange for those buyers agreeing to purchase a specific number of pumps sets, which are necessary for the pumps to function.

— Claiming that nursing homes and DME suppliers could bill Medicare and Medicaid for the pumps, even though the pumps had been supplied for free.

— Providing monetary encouragement to DME suppliers and nursing homes to buy products from Ross Products Division.

In addition to the penalties, the settlement requires Abbott to enter a Corporate Integrity Agreement designed to end any illegal marketing practices and requires Abbott to undergo audits for the next five years.

Pappert noted that Abbott’s enteral feeding pumps comprised approximately 40 percent of the market between January 1992 and October 2003, the period investigated in the probe. Pappert said the DPW settlement check represents the full restitution of $468,879.69 spent by the state on the pumps, as well as an equal amount in penalties.

Pappert thanked the DPW for its cooperation. He noted that Chief Deputy Attorney General E. Christopher Abruzzo handled this matter for the Commonwealth.

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