Whistleblower Comments on Hawthorn Pharmaceuticals' $2.8 Million Settlement of His Medicaid Fraud Qui Tam Case

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Mar 28, 2012, 10:47 ET

PLANO, Texas, March 28, 2012 /PRNewswire/ -- Hawthorn Pharmaceuticals Inc. and its parent company, Cypress Pharmaceutical Inc., have paid the federal government and certain states a total of $2.8 million to settle a whistleblower lawsuit filed by Phillips & Cohen LLP that alleged Hawthorn falsely marketed unapproved prescription drugs as being eligible for reimbursement by Medicaid and other government health care programs.

An even bigger result of the "qui tam" (whistleblower) lawsuit -- which was filed "under seal" in 2007 in Plano, Texas, and made public today -- was that government health care programs stopped purchasing unapproved Hawthorn prescription drugs during the government investigation of the whistleblower's claims. Those drugs included cough and cold drugs, hydrocodone products and timed-release products using unapproved "tannate" formulations of drug ingredients.

The whistleblower, Robert Heiden, is a former district sales manager for Hawthorn in Florida. He is represented by Phillips & Cohen LLP.

ROBERT HEIDEN, THE WHISTLEBLOWER: "The impact of this case goes beyond the money recovered. Unapproved and unsafe drugs sold by Hawthorn and other companies have been pulled off Medicaid and Medicare reimbursement lists, protecting consumers and saving taxpayers hundreds of millions of dollars."

"My case and the government's response mean that children, from infants to adolescents, now are protected from the dangers of certain drugs whose safety and effectiveness haven't been determined. With the removal of the drugs from government reimbursement lists, doctors are shielded from prescribing drugs they had been misled to believe were FDA-approved, and parents will no longer be giving their children drugs they didn't realize hadn't been approved by the FDA."

ATTORNEY COLETTE G. MATZZIE, PHILLIPS & COHEN LLP, WASHINGTON, DC: "A whistleblower lawsuit is a very effective enforcement tool for stopping sales of unapproved drugs. There are so many unapproved drugs that the FDA doesn't have the resources to stop sales of all of them. If the government cuts off Medicaid reimbursement for the unapproved drugs -- as it did with Hawthorn -- then the companies likely would no longer sell them as most of the market for the drugs would disappear."

ATTORNEY STEPHEN S. HASEGAWA, PHILLIPS & COHEN, SAN FRANCISCO: "It's appalling that a company would sell drugs for use by children, adolescents and others when those drugs hadn't been tested for safety or effectiveness. Doctors trusted that these drugs had been approved, not knowing Hawthorn knew how to work the system."

About the whistleblower case against Hawthorn

The settlement agreement -- which includes Hawthorn's chief executive officer, Max Draughn, a defendant in the case -- covers charges that Hawthorn caused false claims for three drugs used for skin problems -- Hylira, Zaclir, and Zacare Kit -- to be submitted to Medicaid and other government health programs from 2003 to 2009. The whistleblower lawsuit also raised safety concerns about certain cold and cough medications and many other unapproved prescription drugs Hawthorn was marketing.

The FDA issued a safety alert last year about certain unapproved prescription cough, cold and allergy products due to concerns about safety risks with use of those medications and asked drug companies to stop shipping those products for sale in the U.S.

Under the False Claims Act, whistleblowers are entitled to 15 percent to 25 percent of the amount recovered if the government joins their qui tam lawsuits and recovers funds. Heiden will receive 21 percent of the settlement amount for the information he provided and the work he and his attorneys did on the case.

Heiden praised Phillips & Cohen and the team of federal and state attorneys and investigators who worked on the case, in particular Assistant U.S. Attorney Kevin McClendon, Eastern District of Texas; Ann Williams, investigator with the U.S. Attorney's Office in the Eastern District of Texas; Brian McCabe, trial attorney with the Department of Justice's Civil Division; and Texas Assistant Attorneys General Paula Juba and Susan Miller.

Phillips & Cohen is the nation's most successful law firm representing whistleblowers. Its cases have recovered over $7 billion, and its whistleblower clients have received rewards totaling more than $730 million. See www.phillipsandcohen.com.

SOURCE Phillips & Cohen LLP