Eon Labs to Pay $3.5M for Medicaid False Claims

Eon Labs Inc. will pay the federal government $3.5 million to settle False Claims Act allegations raised in a whistleblower suit relating to drug maker's Nitroglycerin Sustained Release capsules, the Justice Department announced today.

The FDA ruled in 1999 that Nitroglycerin SR had unproven effectiveness and issued a notice to withdraw approval of the drug, which made it no longer legally eligible for Medicaid reimbursements, DOJ said in a media release.

DOJ alleges that from April 1999 through September 2008, Eon submitted false quarterly reports to the government that misrepresented Nitroglycerin SR's status and failed to report that Nitroglycerin SR no longer qualified for Medicaid reimbursements. As a result, DOJ contends, Eon knowingly submitted fraudulent Medicaid claims.

Eon Labs is a subsidiary of Sandoz Inc., which is a subsidiary of Novartis AG.

"This is the first False Claims Act agreement with a drug company that sought to charge the government for less than effective drugs, and it shows that the Department of Justice will pursue those who market such drugs and expect the government to pay for them," said Carmen Ortiz, US Attorney for the District of Massachusetts, in a media release.

The settlement resolves allegations against Eon in the multi-defendant whistleblower suit United States ex rel. Conrad v. Eon Labs, Inc., et al. Under this settlement, the whistleblower will receive approximately $525,000, DOJ said.

"We expect manufacturers to be truthful about the regulatory status of their drugs, and we will pursue those companies that submit false information to obtain payment for unapproved drugs that are less than effective or on the market illegally," said Tony West, assistant attorney general for the Civil Division, in a media release.

DOJ said it has used the False Claims Act One to recover approximately $2.2 billion in cases involving fraud against federal healthcare programs since January 2009.

When asked to comment on the case, Eon responded with a one-sentence statement: "Eon Labs has reached a settlement with the federal government bringing final closure to the lawsuit regarding Nitroglycerin SR capsules."