A $46 Million Warning: Veloxis Criminal And Civil Resolution Highlights Kickback And Sunshine Act Risks

Earlier this week, the U.S. Department of Justice (DOJ), through the U.S. Attorney’s Office for the District of Massachusetts, announced a more than $46 million criminal and civil resolution with Veloxis Pharmaceuticals, Inc. (Veloxis) arising from allegations that Veloxis paid kickbacks to healthcare professionals (HCPs) and specialty pharmacies to increase sales of Envarsus XR, the company’s kidney transplant immunosuppression drug. The resolution consists of a three-year deferred prosecution agreement (DPA), under which Veloxis will pay a $10.04 million criminal penalty; a $34.45 million False Claims Act (FCA) settlement with the federal government and participating states; a Corporate Integrity Agreement (CIA); and a $1.55 million civil penalty for alleged violations of the Open Payments Program, also known as the Sunshine Act. According to DOJ, the $1.55 million penalty is the largest recovery under the Sunshine Act since its enactment in 2010.

FCA Settlement

The government alleged that, from approximately October 2016 through June 2023, Veloxis and its employees conspired to provide improper remuneration to transplant HCPs to prescribe Envarsus. Veloxis admitted to providing lavish meals well in excess of Veloxis’ per meal limits, stays at luxury resorts (where spouses were included), personal travel, “high-end alcohol” and other gifts, and consulting payments, some of which were provided through advisory board and consulting arrangements that the government contends lacked a legitimate business purpose or involved work that was not actually performed.

The company concealed or mischaracterized certain expenses. Veloxis employees falsified expense reports by adding HCPs who did not attend events to reduce the per-attendee meal cost and by characterizing meals with HCPs as “internal” meetings to disguise the HCPs’ attendance.

The government relied in part on contemporaneous text messages between Veloxis employees and HCPs that linked the purported kickbacks to prescribing. For example, the government cited a trip that Veloxis paid for so an HCP could “see a sick family member” under the pretext of consulting. When the HCP thanked the Veloxis employee, they responded: “My ass is on the like [sic] to sell more! I need to use everyone [sic] of your closest friends and please don’t hold back!” The HCP responded, “[n]o problem my man!”

In addition, the government alleged that Veloxis entered into “Enhanced Services Agreements” under which it made per-patient and per-month payments to specialty pharmacies for services such as data collection and patient adherence support. The payments were made regardless of whether any of the contracted data collection and adherence services were actually performed and, even when data was provided, “typically no one at Veloxis reviewed or used the data.” These “disguised” payments were intended to induce the pharmacies to purchase Envarsus XR over competing products, including a cheaper generic.

The government contended that the alleged kickbacks to HCPs and specialty pharmacies caused false claims for Envarsus XR to be submitted to Medicare, Medicaid, and TRICARE. To resolve those allegations, Veloxis agreed to pay $34.45 million, including approximately $21.21 million to the United States and approximately $13.24 million to participating states.

The Criminal and Sunshine Act Resolutions

This was also a criminal case. Veloxis resolved the government’s allegations through a DPA spanning three years and a related criminal charge alleging a conspiracy to violate the Anti-Kickback Statute (AKS), along with a $10.04 million criminal penalty. Veloxis did not receive voluntary disclosure credit under DOJ’s Corporate Enforcement Policy because it did not voluntarily and timely disclose the conduct, but it did receive cooperation and remediation credit. DOJ credited Veloxis for facilitating employee interviews, providing information developed through its internal investigation, terminating employees responsible for misconduct, revising compliance policies, expanding compliance resources, and enhancing auditing and investigations. The criminal penalty reflects a 25% reduction from the low end of the otherwise applicable Sentencing Guidelines range.

The falsified expense reports also resulted in separate Sunshine Act liability. According to the government, Veloxis relied on inaccurate expense records when reporting transfers of value to the Centers for Medicare & Medicaid Services, causing certain payments to physicians to be underreported or not reported at all. Veloxis agreed to pay a $1.55 million civil penalty, which DOJ described as the largest Sunshine Act recovery to date.

Veloxis also entered into a five-year CIA with the U.S. Department of Health and Human Services, Office of Inspector General requiring, among other things, a compliance program addressing AKS risks and an independent compliance expert to evaluate its effectiveness.

Conclusion

For pharmaceutical manufacturers, the Veloxis resolution underscores how interactions with HCPs and specialty pharmacies can create exposure across multiple enforcement regimes, including the AKS, the FCA, and the Sunshine Act. The case also highlights the importance of effective controls around HCP engagements, consulting arrangements, specialty pharmacy agreements, expense reporting, and transparency reporting.