Officials Investigating Abbott Subsidiary for Medicare Fraud
The U.S. attorney's office for the Southern District of Illinois is investigating whether a division of Abbott Laboratories and "at least three other" medical product manufacturers, including Novartis AG, worked with providers to defraud Medicare and Medicaid, the Chicago Tribune reports. Allegedly, the manufactures "engaged in a kickback scheme to encourage hospitals, nursing homes or home-care providers to buy pumps and related supplies used to feed seriously ill people by giving the products away or selling them at a discount"; providers then allegedly billed the products to the Centers for Medicare and Medicaid Services (formerly HCFA) at a higher price. According to analysts, Abbott's Ross Products division, which makes products such as the "widely used" nutritional supplement Ensure and Similac baby formula, "dominates the so-called enteral nutrition therapy industry." The division brought in about $2 billion in sales last year. CMS data show that Medicare spent more than $650 million on "enteral pumps and related supplies" in 2000 -- reimbursements for supplies for Medicare beneficiaries can amount to more than $200 per month per patient. In addition to Switzerland-based Novartis, the other companies under investigation are Tyco International's Kendall Co. unit and Zevex International. According to HME Answer Book, an industry publication, "hundreds" of agents from the Office of Inspector General, the FBI and the U.S. Postal Service conducted surprise inspections of enteral nutritional suppliers, distributors and manufacturers on July 26.
This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.
The medical products investigation is part of a larger movement by federal investigators to crack down on improper marketing arrangements between drug and medical product companies and providers. For instance, TAP Pharmaceutical Products, an affiliate of Abbott, is currently negotiating a settlement that could exceed $800 million -- a record for a drug company -- over allegations that it colluded with providers, giving them free samples of its prostate cancer drug Lupron and urging them to bill Medicare and Medicaid. In addition, oversight of enteral supplies increased following a 1997 HHS Office of the Inspector General report showing that Medicare was "overpaying providers" for such products (Japsen, Chicago Tribune, 8/23).