Consumer Fraud

CDC contractor pays $18 million to settle whistleblower allegations

osha whistle CDC contractor pays $18 million to settle whistleblower allegationsA California pharmaceutical distributor has agreed to pay the U.S. $18 million to resolve a whistleblower’s allegations that it improperly set temperature monitors in shipping vaccines while it was under contract with the Centers for Disease Control and Prevention (CDC) to provide vaccine distribution services.

The U.S. Justice Department said that San Francisco-based McKesson Corporation failed to comply with the shipping and handling requirements of its vaccine distribution contract with the CDC, which had contracted the company to receive vaccines purchased by the government from manufacturers and then distribute them health care providers.

The CDC contract required McKesson to ensure that the vaccines were maintained at proper temperatures during shipping, by including electronic temperature monitors set to detect when the air temperature in the box fell to two degrees Celsius or below, or climbed to eight degrees Celsius and above.

According to the Justice Department, McKesson failed to set the monitors to the appropriate range. As a result, the company knowingly submitted false claims to the CDC for shipping and handling services that did not satisfy its contractual obligations. The complaint alleged that the McKesson’s failure to set the temperature monitors continued for about eight months in 2007.

“Companies must comply with the requirements they agree to when they contract with the government to provide products that protect the public,” said Assistant U.S. Attorney General Stuart F. Delery. “If a contractor does not adhere to the terms it negotiated, its conduct not only hurts taxpayers but also could jeopardize the integrity of products, like vaccines, that Americans count on to be safe.”

The allegations against McKesson were originally raised in a lawsuit filed against McKesson by Terrell Fox, a former finance director at McKesson Specialty Distribution LLC, under the False Claims Act’s qui tam, or whistleblower, provisions. The False Claims Act allows private citizens with knowledge of false claims to bring civil actions on behalf of the government and to share in any recovery.  Fox’s share of the settlement has not been determined, but under the Act’s terms could be as much as 30 percent of the total recovery.

Accordng to the Justice Department, the False Claims Act is one of the most important tools the government has in its effort to recover taxpayer funds fraudulently taken from federal agencies and programs. Since January 2009, the U.S. has recovered more than $20.2 billion through whistleblower cases filed under the False Claims Act. More than $14 billion of that amount was recovered in cases involving fraud against Medicare, Medicaid, and other federal health care programs.


U.S. Department of Justice