Kickback Probe Ends in Large Settlement from CareFusion

San Diego, Calif.-based CareFusion Corp. will pay $40.1 million to settle federal charges the firm paid kickbacks to boost sales of a pre-surgical skin treatment called ChloraPrep, and marketed the product for off-label uses (i.e., for applications not approved by the U.S. Food and Drug Administration [FDA]).

The U.S. Department of Justice (DOJ) said the fine resolves allegations that CareFusion violated the federal False Claims Act by paying $11.6 million to a doctor to promote its ChloraPrep product to healthcare providers. The doctor, Charles Denham, received the kickbacks while co-chairing the safe practices committee of the nonprofit National Quality Forum, which makes recommendations on healthcare practices, according to the DOJ.

“Corrupting the standard-setting process through kickbacks can affect the healthcare treatment choices that doctors and hospitals may make for patients,”

Stuart Delery, assistant attorney general for the Justice Department’s civil division, said in a formal statement. The lawsuit also claimed that CareFusion promoted ChloraPrep from September 2009 through August 2011 for unapproved uses. The FDA has only approved ChloraPrep to prepare patients’ skin for surgery or injections.

CareFusion officials say the company set aside funds for the settlement in the first quarter of 2013. CareFusion previously disclosed on April 25 that it had reached an agreement, in principle, to pay the government to resolve the allegations.

“We are pleased to resolve this matter and are confident we have strong practices, processes and controls in place,” said Kieran T. Gallahue, chairman and CEO of CareFusion. “We have made significant investments during the past several years to improve our quality and compliance systems, including our sales and marketing practices, and will continue to do so as part of our commitment to adhering to the highest standards and aligning with best global practices.”

The agreement to pay the fine also resolves a whistleblower lawsuit first brought in September 2010 by Cynthia Kirk, a former vice president of regulatory affairs at a CareFusion infection prevention unit. She will receive $3.26 million through the settlement, which along with the lawsuit was unsealed recently by the federal court in Kansas City, Kansas.

But it’s not all dismal news from CareFusion. The company closed January with a 510(k) clearance from the FDA for its AVAflex vertebral balloon system. The new system is the latest innovation in CareFusion’s AVAmax advanced vertebral augmentation portfolio. The focus of these products is to provide a minimally invasive solution to treat vertebral compression fractures, while also promoting safety for the patient, physician and staff. The system combines the features of a curved vertebral augmentation needle and a vertebral balloon to enable targeted balloon placement across the midline of the vertebral body, followed by targeted cement placement for optimal fill through a single pedicle.