A qui tam lawsuit has ended in a settlement agreement that puts pharmaceutical manufacturer Qualitest Pharmaceuticals Inc. on the hook for $39 million in penalties.

The whistleblower lawsuit originated from allegations that Qualitest, a subsidiary of Endo Health Solutions, had illegally marketed fluoride supplement tablets that contained less than half their advertised amount of fluoride. Federal health programs had funded the distribution of these tablets to children in communities with no fluoridation in their water supply.

The whistleblower and plaintiff, Dr. Stephan P., claimed that he discovered the discrepancy through his own testing. Those test results allegedly showed that fluoride tablets made by Qualitest contained only about 45 percent of the amount of fluoride indicated on their labeling. Qualitest’s labeling allegedly described the tablets as containing the amount of fluoride recommended by the American Dental Association.

With that evidence, Stephan filed a qui tam lawsuit under the federal False Claims Act. Federal authorities intervened and began an investigation. The investigation expanded into a cooperative effort by several federal agencies in cooperation with the state Medicaid fraud control agencies of New York and Oregon.

Federal authorities now say that Medicaid and the Federal Employees Health Benefits Program paid millions of dollars for the distribution of these under-fortified tablets.

Qualitest’s admissions show that its manufacturing process was not designed to produce tablets that contained the amount of fluoride indicated on their labels. The company admitted to using half the indicated amount. They also admitted that children who took Qualitest fluoride tablets would receive less than half the amount of fluoride recommended by the American Dental Association and the American Academy of Pediatrics.

Under the terms of the settlement, Qualitest will pay over $22 million to the federal government. More than $16 million will be distributed among the 47 state governments who also claim a stake in this qui tam lawsuit.

For playing the role of whistleblower, Stephan will receive about $4.71 million.

Whistleblower Provisions of the False Claims Act

The qui tam lawsuit provisions of the federal False Claims Act allow private parties like Stephan to initiate a whistleblower lawsuit if they find evidence of fraud committed against the United States government. Qui tam lawsuits are frequently used to prosecute fraud involving Medicaid or Medicare.

Once filed, the claim is kept under seal while the government then gets the opportunity to intervene and continue prosecution of the claim. The seal may be renewed repeatedly, depending on how long the investigation takes.

The government may be able to recover up to three times the amount of damages incurred, plus civil penalties that can range from $5,500 to $11,000 per violation. The False Claims Act allows the whistleblower to share in any recovery, usually between 15 and 25 percent.

If the government decides not to intervene, the whistleblower still has the option of pursuing the case on their own. Their odds of success tend to be lower than if the government had intervened. But if they are eventually successful, the payoff tends to be bigger – around 25 to 30 percent of the recovery.