Two orthopedic clinics in Tennessee entered into settlements with federal and state enforcement authorities, totaling approximately $2 million, relating to the purchase of drugs from international sources. The settlements allege that Appalachian Orthopaedic Associates, P.C. (AOA) and Tennessee Orthopaedic Clinics, P.C. (TOC) purchased the viscosupplement medications Syncvisc and/or Orthovisc from abroad and billed federal health care programs for the drugs. These viscosupplement drugs, which are used to treat knee pain, are reimbursed by Medicare, Medicaid, and other federal health care programs based on their average sales price in the United States. The international market price for the drugs is lower. The enforcement authorities contend that by purchasing and reimporting the unregulated drugs at lower prices on international markets, and then submitting claims to the federal health care programs for the drugs based on the higher U.S. average sales price, the clinics were submitting false claims and garnering an unlawful profit. On a general level, enforcement authorities expressed concerned that when the drugs are purchased internationally, there are no assurances about how the drugs have been stored and if they have been tampered with—risks that are potentially shifted onto the patient for whom the medications are prescribed.
The investigation and settlements emerged from a qui tam suit filed by a physician representative for a pharmaceutical manufacturer of one of the viscosupplements. TOC will pay over $1.3 million to settle the matter; AOA will pay approximately $600,000 in connection with its settlement. Reports have indicated that the relator will receive approximately $325,000 for his participation in the matter. Each of the two settlements was entered into between federal and state authorities and the relevant clinic, and covered the False Claims Act, the Civil Monetary Penalties Law, the Program Fraud and Civil Remedies Act, and certain common law claims, among other types of liability. TOC's settlement covers the period of time between January 2008 and August 2012; AOA's settlement covers April 2007 to April 2012.