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Kingsport, Knoxville orthopedic clinics to pay $1.85 million to settle lawsuit

January 24th, 2014 10:53 pm by Matthew Lane

Kingsport, Knoxville orthopedic clinics to pay $1.85 million to settle lawsuit

GREENEVILLE — Two orthopedic clinics that knowingly billed state and federal health care programs for re-imported medications have agreed to pay $1.85 million in fines to settle state and federal False Claims Act allegations.

Appalachian Orthopaedic Clinics of Kingsport and Tennessee Orthopaedic Clinics of Knoxville were named in a February 2012 federal lawsuit claiming the two companies improperly billed Medicare and Medicaid for re-imported osteoarthritis medications known as viscosupplements.

To settle the lawsuit, Appalachian Orthopaedic has agreed to pay $550,000 while Tennessee Orthopaedic has agreed to pay $1.3 million.

According to the lawsuit, the U.S. Government claims the clinics knowingly purchased deeply discounted viscosupplements that were re-imported from foreign countries and billed them to state and federal health care programs in order to profit from the reimbursement system, when such re-imported viscosupplements were not reimbursable by those programs.

Viscosupplements, such as Synvisc® and Orthovisc®, are injections approved by the Food and Drug Administration for the treatment of osteoarthritis pain in the knee. The medications are reimbursed by Medicare, Medicaid and other federal health care programs at a set rate based on the average sales price of the domestic product.

Prosecutors say the re-imported product included labeling in foreign languages and in English for additional uses not approved in the United States, which demonstrated that the product was re-imported. In addition, the government alleged there was no manufacturer assurance that it had not been tampered with or that it was stored appropriately.

“This scheme is yet another example of illegal actions by healthcare providers to profit from drugs imported into the United States,” U.S. Attorney Bill Killian said in a press release.

The allegations were first raised in a lawsuit filed by Douglas Estey, a physician assistant at Covenant Medical Management and a speaker for Genzyme Corp., which manufactured Synvisc and sold it in the United States.

Estey filed the lawsuit against the clinics under the “whistleblower” provisions of the False Claims Act. The law allows private citizens with knowledge of fraud to bring civil actions on behalf of the government and to share in any recovery. As a result, Estey will receive $323,750.

“Attempts to increase profits by circumventing the law will not be tolerated,” said Derrick L. Jackson, Special Agent in Charge of the U.S. Department of Health and Human Services, Office of Inspector General in Atlanta. “Health care providers buying cut-rate, cheap drugs from foreign sources will end up paying a steep price.” 

Appalachian Orthopaedic is the largest and most comprehensive provider of orthopedic services in Northeast Tennessee and Southwest Virginia with offices in Kingsport, Johnson City and Bristol. Tennessee Orthopaedic has nine offices throughout East Tennessee, including Knoxville, Oak Ridge, Lenoir City and Seymour.

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