Drug manufacturer plied transplant doctors with lavish meals, alcohol, and bogus consulting fees to push kidney immunosuppressant over cheaper generic
CARY, N.C. / BOSTON — Veloxis Pharmaceuticals Inc. has agreed to pay more than $46 million to resolve criminal and civil allegations that it plied kidney transplant doctors with luxury resort stays, expensive alcohol, and fake consulting fees to induce prescriptions of its immunosuppression drug Envarsus XR, federal prosecutors announced Tuesday.
The Cary, North Carolina-based manufacturer entered into a deferred prosecution agreement (DPA) in connection with a criminal information filed in the District of Massachusetts, charging the company with conspiracy to violate the federal Anti-Kickback Statute. As part of the resolution — which marks the largest recovery under the Sunshine Act since the law was passed in 2010 — Veloxis will pay a criminal penalty of over $10 million.
According to court documents and admissions, from October 2016 through June 2023, Veloxis and its employees engaged in an aggressive scheme to gain market share for Envarsus against a cheaper generic alternative that was taken only once daily. The company hosted so-called “advisory boards” that were actually luxurious retreats, complete with lavish dinners, expensive alcohol, and stays at high-end resorts for healthcare providers and, at times, their spouses or guests. Veloxis also made purported consulting payments to physicians for work that was never actually performed.
To conceal the illegal activity, Veloxis employees submitted falsified expense reports. They added fictitious names to dinner guest lists to decrease the apparent cost per attendee and omitted the names of physicians who attended the meals to dodge Sunshine Act reporting requirements. This dual deception obscured both the true cost of the bribes and the company’s failure to report payments to physicians.
Internal company communications laid bare the corrupt intent. In one instance, a Veloxis employee told a transplant surgeon requesting to attend a speaker program that the employee “need[ed] scripts. Lots of them.” Months earlier, the same employee told the surgeon he was “over Sales” and needed the surgeon “more than ever,” instructing him that it was “[t]ime to open your Rolodex and make things happen.”
Beyond wooing physicians, the civil settlement resolves allegations that Veloxis paid kickbacks to specialty pharmacies, disguising per-patient and per-month payments in written contracts as compensation for “enhanced services” like data collection or adherence services. Veloxis admitted it paid those pharmacies regardless of whether any data was provided or any services were actually rendered.
Under the civil agreement, Veloxis will pay $21,211,251 to the United States and an additional $13,238,749 to certain states to resolve Medicaid claims. The company also agreed to pay a $1.55 million civil penalty to the Centers for Medicare & Medicaid Services (CMS) for knowingly failing to report the true amounts of its physician payments under the Open Payments Program.
“Today’s resolution should serve as a warning to any healthcare company that tries to improperly influence the decisions of healthcare providers,” said Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division. “Kickbacks can erode medical decision-making, result in unnecessary prescriptions of branded drugs, and waste federal healthcare funds.”
U.S. Attorney Leah B. Foley for the District of Massachusetts added: “Attempting to improperly influence medical decision-making for financial gain is dangerous, yet it is exactly what Veloxis was doing. Instead of prioritizing patient safety, they were prioritizing profits. Treatment decisions need to be based on what’s best for the patient, not what’s best for the drug manufacturer’s bottom line, or what lavish meal or resort stay they can offer.”
FBI Boston Special Agent in Charge Ted E. Docks said the resolution holds the company accountable for operating with a “principal focus on sales,” while HHS-OIG Acting Deputy Inspector General Miranda L. Bennett emphasized that the “lavish perks and concealed payments” undermined trust in the healthcare system.
In addition to the financial penalties, Veloxis has entered into a five-year Corporate Integrity Agreement with HHS-OIG, mandating a robust compliance program, enhanced internal controls, and an independent review of its effectiveness. The company received credit for proactively disclosing incriminating evidence not known to the government, terminating employees responsible for the misconduct, and revising its policies and training programs.
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