Sacramento, California - California Attorney General Xavier Becerra today announced a $10 million settlement against Medical Device Business Services, Inc. (MDBS), a subsidiary of Johnson & Johnson, and a $1.5 million settlement against global private equity firm The Gores Group (Gores). The settlements resolve allegations that each company engaged in improper marketing tactics and submitted false claims to state Medicaid programs, including California’s Medi-Cal program. It is alleged that both companies improperly marketed prescription medical device systems developed by Therakos Inc. (Therakos), a company which MDBS and Gores each owned at separate times.
Starting in 2006, MDBS allegedly marketed Therakos’ UVAR XTS and CELLEX systems to doctors for use in pediatric patients despite the systems not being approved by the U.S. Food and Drug Administration (FDA) for pediatric use. Gores allegedly continued the improper marketing tactics when it acquired Therakos in 2013. California’s share of the companies’ settlements with all 50 states is $73,062.16 from MDBS and $60,742.13 from Gores.
“Doctors make decisions every day about the best treatment options for their patients. They rely on the companies that produce the medications which doctors prescribe to be honest about the approved use of these products. It is unlawful for a company to market its products for populations that the products are not FDA-approved to treat,” said Attorney General Becerra. “MDBS’ and Gores’ improper marketing scheme involving Therakos’ products are an example of companies putting profits before the health and safety of patients.”
Therakos developed UVADEX, a drug used with the company’s extracorporeal photopheresis (or ECP) systems UVAR XTS and CELLEX to treat skin problems associated with cutaneous T-cell lymphoma (CTCL), a type of Non-Hodgkin’s lymphoma. CTCL is an immune system cancer in which cancerous T-cells move to the skin, causing the skin to develop lesions. According to the FDA, Therakos’ ECP systems remove a portion of a patient’s blood and through centrifugation, separate the red blood cells from the white cell layer. UVADEX is injected into and mixed with the white cell layer and then the drug-cell mixture is irradiated with ultraviolet light. The treated cells are then returned to the patient.
In 2012, two Therakos employees alleged Therakos used significant marketing tactics to persuade doctors to prescribe the UVAR XTS and CELLEX systems as an off-label, or unapproved, treatment of graft-versus host-disease (GvHD) in both adults and children. The FDA never approved the use of the systems on pediatric patients. The U.S. Department of Justice led the investigation of MDBS and Gores. It alleged that both MDBS and Gores marketed their ECP systems in a way that was not approved by the FDA, and as a result, false claims were submitted to Medicaid, the Federal Employee Health Benefits Program, and Tricare.
Today’s settlements were negotiated by the California Department of Justice’s Division of Medi-Cal Fraud and Elder Abuse (DMFEA), working with a team of other states and the federal government. Through the DMFEA, the Attorney General’s office works to protect Californians by investigating and prosecuting those who perpetuate fraud on the Medi-Cal program. DMFEA also investigates and prosecutes those responsible for abuse, neglect, and fraud committed against elderly and dependent adults in the state. DMFEA regularly works with whistleblowers, the California Department of Health Care Services, and law enforcement agencies to investigate and prosecute.
A copy of the settlement agreement involving MDBS is available here and a copy of the settlement agreement involving Gores is available here.
The DMFEA receives 75 percent of its funding from the U.S. Department of Health and Human Services under a grant award totaling $33,829,000 for Federal fiscal year 2019-2020. The remaining 25 percent, totaling $11,379,000 for fiscal year 2019-20, is funded by the State of California. The Federal fiscal year is defined as October 1, 2019, through September 30, 2020.
