Shire to Pay $350 Million to Settle Dermagraft Kickback Allegations-- 2nd Update

By Anne Steele 

Shire PLC will pay $350 million to settle allegations a regenerative drugmaker it bought in 2011 used kickbacks to promote its core skin substitute product.

New York Attorney General Eric Schneiderman's office on Wednesday said an agreement was reached with New York, 37 other states and the District of Columbia to settle allegations that Shire and Advanced BioHealing illegally promoted Dermagraft, a bioengineered human skin substitute made from cells derived from newborn foreskin tissue for treating diabetic foot ulcers.

Shire, a Lexington, Mass.-based pharmaceutical company, which is domiciled in Ireland, sold the assets associated with Dermagraft in early 2014.

The settlement will resolve allegations that Shire's promotion and marketing of Dermagraft resulted in false claims being submitted to government health care programs -- $14.5 million of the total fee will go to Medicaid.

The attorney general's office alleged that from 2007 to 2014, Dermagraft salespeople persuaded clinics and physicians with "lavish dinners, drinks, entertainment and travel; medical equipment and supplies; unwarranted payments for purported speaking engagements and bogus case studies; and cash, credits and rebates."

Shire and Advanced BioHealing also settled allegations they marketed Dermagraft for uses not approved by the U.S. Food and Drug Administration, "made false statements to inflate the price of Dermagraft, and caused improper coding, verification, or certification of Dermagraft claims and related services."

Shire said the investigation had been going on for several years and it hasn't admitted any wrongdoing.

"We are pleased to have reached a resolution on this matter, and believe that the terms of the resolution reflect Shire's extraordinary cooperation with the Justice Department throughout its lengthy investigation," a company spokeswoman said.

In addition, three high-level executives responsible for organizing the kickback scheme, as well as "a number of" health-care providers who took the kickbacks, have been criminally convicted in the Middle District of Florida, according to the Justice Department.

A Shire spokeswoman said the civil settlement doesn't impose any criminal liability on the company and that those executives left Shire in 2012.

Write to Anne Steele at [e-mail]

(END) Dow Jones Newswires

January 11, 2017 16:45 ET (21:45 GMT)

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