Consumer Fraud

Tennessee clinics settle whistleblower’s allegations of fraud for $1.85 million

osha whistle Tennessee clinics settle whistleblower’s allegations of fraud for $1.85 millionTwo Tennessee orthopedic clinics will pay a combined $1.85 million to settle a whistleblower’s allegations that the clinics engaged in a scheme to defraud Medicare by buying potentially unsafe injections of knee pain medication from foreign sources at deeply discounted prices, re-importing them for use in U.S. patients, and billing state and federal health care programs for the drugs at higher U.S. rates.

The U.S. Justice Department said that Tennessee Orthopaedic Clinics P.C., headquartered in Knoxville, Tenn., will pay $1.3 million to settle the lawsuit, and Appalachian Orthopaedic Clinics P.C., headquartered in Kingsport, Tenn., will pay $550,000.

The lawsuit alleged that the clinics knowingly purchased Synvisc, Orthovisc and other vicosupplements used to treat pain in orthopedic patients from foreign countries in order to profit from Medicare, Medicaid, and other taxpayer-funded health care reimbursements.

The reimported drugs allegedly included labeling in both English and foreign languages for additional uses not approved in the United States. Because the products were reimported to the U.S., there was no manufacturer assurance that they had not been tampered with or stored properly.

Stuart Delery, Assistant Attorney General for the Justice Department’s Civil Division, said that the U.S. “will not tolerate the conduct of companies that impermissibly shift risks onto patients in order to increase their own profits.

“The department is committed to maintaining the integrity of the health care system, ensuring that patients receive drugs and devices that are safe and effective and taking action against companies that take chances with the health of consumers so as to improve their own bottom lines,” Mr. Delery said in a statement.

The allegations resolved by the settlement were first raised in a lawsuit filed against the clinics under the qui tam, or whistleblower, provisions of the False Claims Act by Douglas Estey, a physician’s assistant who was occasionally paid to speak to medical providers about the use of Synvisc. The False Claims Act has become one of the federal government’s most powerful weapons in combatting fraud against U.S. programs and agencies as it allows private citizens to sue on behalf of the U.S. and share in any recovery.

For his role in exposing fraud and helping the U.S. recover vital Medicare funds, Mr. Estey will receive $323,750.


U.S. Department of Justice