Former Shire Subsidiary Executive Reaches $2.5M Settlement

What's New/Significant

Kevin Rakin, former president of a Shire PLC subsidiary, has reached a settlement with the Department of Justice, resolving False Claims Act allegations that Rakin allowed the use of kickbacks and other illegal  methods to incentivize clinicians and physicians to use the medical product Dermagraft. Rankin’s $2.5 million settlement is in addition to an FCA settlement of $350 million by Shire and some of its subsidiaries related to Dermagraft.

Allegations

Dermagraft, a bioengineered skin substitute approved by the Food and Drug Administration in the treatment of diabetic foot ulcers, was developed by Advanced BioHealing. Shire acquired ABH in 2011 and subsequently sold it in 2013. 

The whistleblower, Heather Webb, was a former sales representative of ABH. Webb alleged that Rakin, who was CEO of ABH and became president of the renamed Shire Regenerative Medicine after the Shire acquisition, allowed sales representatives to use kickbacks, including lavish dinners and trips, payments for nonexistent speaking engagements, rebates, cash and medical equipment, to encourage clinics and doctors to use and overuse the product Dermagraft, in violation of the Anti-Kickback Statute, which prohibits compensation to promote the use of medical devices covered by programs including Medicare and Medicaid. 

In addition to the kickback allegations, the whistleblower suits (six in all that were eventually consolidated in the U.S. District Court for the Middle District of Florida) alleged that Shire and its predecessor, ABH, unlawfully marketed Dermagraft for unapproved uses, made false statements to inflate the price of the product, and caused improper coding, verification or certification of Dermagraft claims. 

Apart from civil litigation, the U.S. Attorney’s office for the Middle District of Florida has obtained criminal convictions for three high-level executives, as well as a number of health care providers, in relation to the kickback scheme. 

Shire, which since 2014 has been operating under a Corporate Integrity Agreement with the Department of Health and Human Services (HHS) in connection with the settlement of other FCA allegations, cooperated in the government’s investigation.

Settlement

The $2.5 million settlement includes $550,000 recovered by the former sales representative, Heather Webb.

Rakin’s settlement is in addition to the $350 million Shire and certain subsidiaries paid in 2018, the largest medical device-related FCA recovery to date.  

Rakin did not admit to any liability as part of the settlement.