Jon Campisi Jan. 13, 2014, 3:21pm

HARRISBURG, Pa. (Legal Newsline) - Pennsylvania will share in a portion of a $40.1 million multi-state settlement with CareFusion that resolves off-label marketing and Medicaid fraud allegations involving the ChloraPrep surgical preparation solution, the state Attorney General's Office announced Jan. 10.

Under the terms of the settlement, CareFusion, a California-based technology company that manufactures medical and surgical supplies and medical devices, will pay the multi-million-dollar settlement to the federal government and the unspecified number of states for allegedly promoting and marketing ChloraPrep for uses that were not approved by the Food and Drug Administration.

Authorities say CareFusion's alleged unlawful and improper conduct took place for about two years beginning back in 2009, and caused false and/or fraudulent claims to be submitted to, or caused purchases by, government-funded healthcare programs, including Pennsylvania's Medicaid programs.

According to the Pennsylvania Attorney General's Office, CareFusion's predecessor corporation had entered into agreements, as to which CareFusion assumed legal and financial responsibility, for the payments of monies to an entity known as Health Care Concepts Inc.

Those payments were allegedly made, prosecutors contend, in order to conceal kickbacks to the physician owner of Health Care Concepts, for the purpose of promoting and inducing healthcare providers to use ChloraPrep, in violation of various federal and state anti-kickback statutes.

Federal authorities worked in conjunction with a team from the National Association of Medicaid Fraud Control Units on the investigation into CareFusion's alleged unlawful conduct and helped conduct the settlement negotiations with CareFusion on behalf of the states involved in the case, according to the Attorney General's Office.

"When companies pay kickbacks to doctors, especially doctors involved in setting standards for the health care industry, they undermine the integrity of the health care system," Stuart F. Delery, assistant attorney general for the U.S. Justice Department's Civil Division, said in a statement. "Corrupting the standard-setting process through kickbacks can affect the health care treatment choices that doctors and hospitals may make for patients."

The settlement resolves allegations that, under CareFusion's predecessor, the company paid $11.6 million in kickbacks to Dr. Charles Denham while Denham served as the co-chairman of the Safe Practices Committee at the National Quality Forum, a nonprofit group that reviews, endorses and recommends standardized healthcare performance measures and practices, according to the Justice Department.

The government maintains that the purpose of the payments was to induce Denham to recommend, promote and arrange for the purchase of ChloraPrep by healthcare providers.

The settlement resolves allegations that between September 2009 and August 2011, CareFusion violated the False Claims Act by promoting ChlorPrep, which has been approved by the Food and Drug Administration for the preparation of a patient's skin prior to surgery or injection, for uses not approved by the FDA.

"Health care fraud drives up the cost of health care and jeopardizes the strength of our health care system," Barry Grissom, U.S. Attorney for the District of Kansas, said in a statement. "This case demonstrates that our fight against health care fraud is helping to protect all Americans, including the elderly, the disabled and the most vulnerable among us."

The case began with a qui tam, or whistleblower, lawsuit filed by Dr. Cynthia Kirk, a former vice president of regulatory affairs for the Infection Prevention Business Unit of CareFusion, according to the Justice Department.

CareFusion Chief Executive Officer Kieran Gallahue told Reuters that the company is pleased to reach a settlement, and that it has made "significant investments" toward improving its quality and compliance practices, which includes the divisions of sales and marketing.

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