Veloxis Pharmaceuticals, based in Morrisville, North Carolina, has agreed to pay $46 million to resolve allegations of kickbacks and other improper business practices related to its anti-rejection drug, Envarsus XR. The settlement, announced by the U.S. Department of Justice and the U.S. Attorney’s Office for the Eastern District of Pennsylvania, concludes a qui tam action brought under the False Claims Act.
According to court documents and statements from the Department of Justice, Veloxis allegedly engaged in a scheme to pay kickbacks to patients and transplant centers. These kickbacks, disguised as charitable donations to third-party foundations, were reportedly used to cover co-payments for Envarsus XR prescriptions. Federal prosecutors asserted that these actions were illegal under the Anti-Kickback Statute, which prohibits offering, paying, soliciting, or receiving anything of value to induce referrals for items or services payable by federal healthcare programs.
In addition to the civil settlement, Veloxis Pharmaceuticals entered into a deferred prosecution agreement with the U.S. Attorney’s Office for the District of Massachusetts, agreeing to pay a criminal fine of $2.2 million. The company also entered into a Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General, which mandates a five-year period of independent monitoring to ensure compliance with federal healthcare program requirements.
The qui tam lawsuit was originally filed by a former Veloxis employee. Under the False Claims Act, private citizens, known as whistleblowers, can sue on behalf of the government for false claims and share in any recovery. In this case, the whistleblower will receive approximately $8.5 million from the federal share of the civil settlement.
The settlement amount reflects the federal share of the alleged improper payments. Investigations were conducted by the U.S. Department of Justice, the U.S. Attorney’s Office for the Eastern District of Pennsylvania, and the Department of Health and Human Services Office of Inspector General.
Executive Note — EGS Analysis This settlement highlights significant liability footprint exposure for organizations when internal compliance mechanisms fail or are circumvented. The scale of this federal action underscores the importance of robust internal controls and proactive risk mitigation strategies, especially for entities operating under stringent regulatory frameworks. Ensuring adherence to ethical guidelines and legal statutes is paramount not only for operational continuity but also to protect against substantial financial penalties and reputational damage.
Educational Sidebar: Understanding Qui Tam Actions and Whistleblower Protection
A qui tam action is a type of lawsuit brought under the False Claims Act (31 U.S.C. § 3729 et seq.) that allows private citizens, known as “relators” or whistleblowers, to sue on behalf of the government for false claims made against federal programs. The term “qui tam” is Latin for “who as well for the king as for himself sues.”
How it Works:
- Filing the Complaint: A whistleblower, often a current or former employee, files a lawsuit under seal (meaning it’s kept secret from the public and the defendant) in federal court. The complaint alleges that an individual or company has defrauded the government.
- Government Investigation: The Department of Justice (DOJ) then investigates the allegations, often requesting additional information and evidence from the whistleblower. During this period, the case remains under seal, sometimes for several years.
- Intervention Decision: After investigation, the DOJ decides whether to intervene in the case and take primary responsibility for prosecuting it. If the government intervenes, it often leads to a settlement or litigation. If it declines to intervene, the whistleblower can choose to pursue the case independently.
- Whistleblower Share: If the government recovers funds, the whistleblower is entitled to a percentage of the recovery – typically 15-25% if the government intervenes, and 25-30% if they pursue the case themselves.
Significance: Qui tam provisions are critical tools for uncovering fraud against the government, particularly in areas like healthcare, defense contracting, and other sectors involving federal funding. They incentivize individuals with insider knowledge to come forward, playing a vital role in government accountability and safeguarding taxpayer money. For businesses, the existence of these provisions necessitates strong internal compliance programs to prevent actions that could lead to such lawsuits.
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