United States of America ex rel. Donald R. Galmines v. Novartis Pharmaceuticals Corporation



Novartis Pharmaceuticals Corporation has paid more than $35 million to resolve federal and state False Claims Act allegations resulting from the off-label marketing for infant use of Elidel, a cream approved by the Food and Drug Administration to treat eczema in patients older than two when conventional therapy is ineffective “or not advisable,” and only for short-term use.

The settlement resolves a qui tam whistleblower case brought by former Novartis sales representative Donald Galmines. The case was filed in a Philadelphia federal court in July 2006.

“Off-label marketing” occurs when pharmaceutical companies work to convince physicians or other health care providers to prescribe medications for purposes, or for patient populations, unapproved by the FDA. In fact, animal studies suggested that Elidel could cause skin cancer and non-Hodgkin’s lymphoma, and the FDA specifically refused to approve it for use on infants younger than 24 months.

However, most cases of eczema manifest during infancy, and are treated effectively with topical corticosteroids. Mr. Galmines alleged that he was instructed to tell doctors that Elidel was safe and effective for use on infants, and capitalize on what Novartis referred to as “steroid phobia” to boost the prescribing of Elidel.

Mr. Galmines also alleged that Novartis violated federal and state kickback laws by paying physicians to attend lavish dinners and conferences where off-label uses of Elidel were advocated.

“I thought that being a sales representative for Novartis was the best job I could ever have,” said Galmines, 44, of Frankfort, Illinois. “We were instructed that Elidel was so safe it could be put on up to 80% of a baby’s body. And we were never told that it might cause cancer.” As to the kickbacks, Mr. Galmines was trained to invite doctors and their families or staffs to dinners in expensive restaurants where Elidel might not even be discussed, in order to buy their loyalty. “Doctors told me that as long as the gifts kept coming, they’d prescribe to anyone I told them to,” Galmines said.

Novartis’s marketing activities were so successful that in 2004, the FDA convened a “Pediatric Advisory Committee” to study the cancer risk and quell infant prescribing. In March 2005, FDA announced a “Black Box Warning” for Elidel. The Black Box is the FDA’s strongest advice to physicians and consumers regarding unapproved uses.

In 2009, the federal and state governments decided not to intervene in the case, and Mr. Galmines pursued the litigation on their behalf. Mr. Galmines and his counsel litigated the case for several years, including review of millions of sales-representative “call notes,” millions of pages of corporate documents, and testimony from almost two dozen witnesses.

“The government only intervenes in about one in five whistleblower cases,” said Frederick Morgan, one of Mr. Galmines’s attorneys. But the False Claims Act allows whistleblowers to go forward on behalf of the taxpayers if the government chooses not to take over. “We had no doubt that Mr. Galmines was right, and we viewed the marketing of this drug for use in infants as a serious matter which caused real harm to Medicaid beneficiaries and programs” Morgan said.

The False Claims Act requires payment to successful whistleblowers of from 15% to 30% of the total recovery. The United States and states have paid Mr. Galmines 29% of the amounts they received from Novartis.

Mr. Galmines also brought a separate case based on the off-label marketing of Elidel to treat infants in Texas, which is one of 30 states with their own qui tam fraud laws. That case was settled in 2012 for $19 million in damages and fees, bringing the total Mr. Galmines has recovered for state and federal taxpayers to more than $54 million.

Mr. Galmines is represented by Frederick Morgan, Jennifer Verkamp, and Maxwell Smith of Morgan Verkamp LLP in Cincinnati, and Marc Weingarten of Philadelphia. The United States was represented by Assistant United States Attorneys Gregory David and Margaret Hutchinson, and Justice Department Trial Attorney Alan Gale.

The eight states on whose behalf a recovery was negotiated are represented by the Attorneys General of each, with coordination by Robert Patten, Massachusetts Deputy Attorney General. Those states are Indiana, Illinois, Hawaii, Louisiana, Massachusetts, Michigan, Tennessee, and Virginia, and the total paid by Novartis to the states is about $4.3 million.

The case is United States, et al. ex rel. Galmines v. Novartis Pharmaceuticals Corp., Civil No. 06-3213. The civil complaint and settlement agreements are available at www.morganverkamp.com.

 Morgan Verkamp LLC is a Cincinnati law firm whose practice is focused on whistleblower cases under federal and state False Claims Acts and IRS and SEC whistleblower laws. Its principals, Rick Morgan and Jennifer Verkamp, have handled qui tam cases nationwide for 21 years.

Contact:  Frederick M. Morgan, Jr. or Jennifer M. Verkamp


U.S. ex rel. Galmines v. Novartis, Fourth Amended Complaint for Violations of the False Claims Act

US ex rel Galmines v Novartis, Federal Settlement Agreement

Louisiana State Agreement; Massachusetts State Agreement; Michigan State Agreement; Tennessee State Agreement; Virginia State Agreement; Hawaii State Agreement; Illinois State Agreement; Indiana State Agreement


State Farm Fire and Casualty Company v. United States ex rel. Cori Rigsby, et al.

Below is a link to the Amicus Curiae brief to the Supreme Court of the United States that Morgan Verkamp LLC submitted on behalf of Taxpayers Against Fraud Education Fund


Taxpayers Against Fraud Education Fund as Amicus Curiae in Support of Respondents can be read here: Brief of TAFEF Amicus Curiae in Support of Respondents

United States ex rel. Julio Escobar; Carmen Correa v. Universal Health Services, Inc.

Supplemental Brief for Amicus Curiae Taxpayers Against Fraud Education Fund in Support of Appellants and Reversal of District Court’s March 24, 2014 Order TAFEF Supplemental Amicus Brief

Brief for Amicus Curiae Taxpayers Against Fraud Education Fund in Support of Appellants and Reversal TAFEF Amicus Curiae Brief

Brief of Taxpayers Against Fraud Education Fund as Amicus Curiae in Support of Respondents TAFEF-Amicus-Brief-USSupCt-Escobar

United States ex rel. Beaujon v. Hebrew Homes Health Network, Inc.

United States ex rel. Beaujon v. Hebrew Homes Health Network, Inc.

Practice Area: Healthcare
Result: Settled in 2015 for $17,000,000
Miami, Florida

Relator Stephen Beaujon was the Chief Financial Officer for one of Florida’s largest nursing home networks, Hebrew Homes, when he discovered that his company was offering physicians illegal kickbacks in exchange for patient referrals – a scheme that Mr. Beaujon alleged in his lawsuit was largely orchestrated by the company’s president, William Zubkoff. The United States did not intervene in the case, which ultimately settled for $17 million, which the Justice Department held out as the largest settlement paid by a nursing home for violations of the Anti-Kickback Statute. Hebrew Homes also agreed to enter into a Corporate Integrity Agreement, which required the company to change its policies and allows the Government to more closely monitor the company’s actions. Access the Department of Justice’s press release here to learn more; for the Corporate Integrity Agreement, click here.



On behalf of their client Michael Epp, the law firms Morgan Verkamp LLC (Cincinnati) and Pietragallo Gordon Alfano Bosick & Raspanti, LLP (Philadelphia) note the settlement of claims initiated by Mr. Epp alleging fraud on the part of Supreme Foodservice, the “prime vendor” of food and related items to the Department of Defense and coalition troops in Afghanistan from 2005 until at least 2009.


Under agreements finalized today between Supreme Foodservice GmBH, Justice Department lawyers in Washington, D.C. and Philadelphia, and Mr. Epp, Supreme will pay the United States $101,000,000 in damages under the False Claims Act. Supreme Foodservice GmBH and related entities have entered guilty pleas to charges of major fraud, conspiracy to commit major fraud, and wire fraud. The criminal plea agreements require payment of $288,300,000 in fines and restitution, making the total recovery on the prime vendor contract $389,300.000. The allegations are detailed in a criminal Information filed this morning in U.S. District Court in Philadelphia.


“We believe this is the largest fraud recovery against any contractor relating to the Afghanistan and Iraq wars, the largest recovery in a military procurement case initiated by a qui tamwhistleblower, and one of the largest fraud recoveries against any defense contractor,” said Frederick Morgan, one of Mr. Epp’s attorneys. “That the defendants pled guilty to major fraud is testament to the tenacity of the federal prosecutors and the strength of the evidence.”


Mr. Epp’s civil complaint, brought in March 2010 under the qui tam provisions of the United States Civil False Claims Act, alleges in part that Supreme Foodservice used a shell corporation to inflate the cost to the government of produce served to the troops; illegally increased the cost of bottled water by misrepresenting acquisition costs; and obtained kickbacks from vendors disguised as “prompt payment” discounts. Mr. Epp is a German citizen who worked for Supreme in Dubai, where its Prime Vendor operation was based. Such contracts are used by the military to allow it to purchase all needed food and beverage items from a single company, which procures from manufacturers and suppliers and delivers to the government. He managed Supreme’s supply chain under the Prime Vendor contract until early 2007.


In addition to the detailed knowledge of Supreme’s fraud set out in his complaint, Mr. Epp provided the government investigating teams with tens of thousands of e-mail messages and documents which were integral to the ability of the United States to bring these matters to a successful close. Morgan Verkamp personnel, led by Paralegal Specialist Mary Jones, spent thousands of hours analyzing the documents for the government teams, and Mr. Epp repeatedly traveled to Philadelphia from the Middle East to meet with the government’s attorneys and investigators. “This case demonstrates the power the False Claims Act brings to people who know about fraud against the United States taxpayers, even if they live abroad,” Morgan said. “By using the False Claims Act to bring Mr. Epp’s information to the Justice Department in a structured and cooperative manner, we were able to provide a level of assistance which would have been impossible without the qui tam law.”


The False Claims Act rewards whistleblowers for bringing information to the government, and Mr. Epp is to receive $16,160,000 pursuant to the False Claims Act’s “relator share” provision. Jennifer M. Verkamp of Morgan Verkamp said “The False Claims Act returns billions of dollars to American Taxpayers based on relatively small payments to whistleblowers. Here, for less than six percent of the total recovery, the Justice Department not only obtained a trove of information about these crimes and frauds, but also the detailed knowledge of a close observer to help connect the dots, and extensive support by private lawyers representing Mr. Epp. This is exactly what the Act was intended to achieve.”


“The False Claims Act is based on partnership between private whistleblowers and their lawyers, and the United States and its lawyers,” said Marc S. Raspanti of Pietragallo Gordon Alfano Bosick & Raspanti, “and this case exemplifies this partnership at its best.”


The Department of Justice’s civil investigation was run by Trial Attorney Art J. Coulter, Assistant Branch Director Michael Tingle, and Director Michael Granston of the Commercial Frauds Branch of the Civil Division, all of Washington, D.C.; and by Assistant United States Attorneys Colin Cherico, Joel Sweet, Mary Catherine Frye, and Margaret Hutchinson of the U.S. Attorney’s Office for the Eastern District of Pennsylvania.


The criminal investigation was run by Assistant United States Attorney Bea Witzleben, also of the Eastern District. Principal investigative support was provided by Defense Criminal Investigative Service Special Agent Kishara Gant of the DCIS Philadelphia Field Office, with support from DCIS Special Agent Andrew Dunphy.


The civil case, United States ex rel. Epp v. Supreme Foodservice A.G., No. 10-CV-1134, remains pending before Hon. Mary A. McLaughlin of the United States District Court for the Eastern District of Pennsylvania. The civil complaint, the settlement agreement, the criminal information, and other documents will be available at www.morganverkamp.com.


Morgan Verkamp LLC is a Cincinnati law firm whose practice is focused on whistleblower cases under the federal and state False Claims Acts. Its principals, Rick Morgan and Jennifer Verkamp, have handled qui tam cases nationwide for 19 years. Pietragallo Gordon Alfano Bosick & Raspanti, LLP is a regional firm which has handled many False Claims Act cases under the leadership of Michael A. Morse and Mr. Raspanti for more than 25 years.


Amended Complaint for Violations of the False Claims Act, 9-11-12

Fully Executed Civil Settlement Agreement, 12-8-14

USA v SFS, Criminal Information

Bostwick Laboratories Agrees To Pay United States $6,048,000 To Settle Allegations That It Offered Incentives To Physicians In Exchange For Referrals And Billed For Unordered Tests And Services

FOR IMMEDIATE RELEASE – October 14, 2014

On behalf of its client Michael Daugherty, Morgan Verkamp, LLC is pleased to announce that Bostwick Laboratories, Inc., an anatomic and pathology lab based in Uniondale, New York, has agreed to pay the United States $6,048,000 to resolve allegations regarding violations of the False Claims Act.


The False Claims Act allows private citizens to bring cases in the name of the United States against government contractors charged with fraud. False Claims Act cases, also called qui tamcases, recover damages back to the Treasury for false claims made to federal programs, including federal healthcare programs.


The qui tam complaint was filed in May 2008. It alleges that Bostwick Laboratories improperly billed Medicare and Medicaid for tests and services referred in violation of the Anti-Kickback Statute and for tests performed without a doctor’s order or consent. The Justice Department decided in June 2011 not to intervene in the case. In 2012, Senior District Judge S. Arthur Spiegel issued a well- reasoned order denying the defendants’ motions to dismiss. U.S. ex rel. Daugherty v. Bostwick Laboratories, et al., 2012 U.S. Dist. LEXIS 178641 (S.D. Ohio Dec. 18, 2012).


The case against Bostwick Laboratories settled after the company entered into settlement discussions with Mr. Daugherty and the United States based on its inability to pay the full value of the damages sought in the qui tam action.


Jennifer Verkamp of Morgan Verkamp said, “Mr. Daugherty exposed public health insurance fraud in one of the most costly, and most frequently abused, segments of health care. When laboratories and other suppliers and providers pay kickbacks to obtain business from providers, honest companies cannot compete, and the entire system suffers.” Ms. Verkamp noted that Daugherty’s allegations against Dr. Bostwick himself are still pending and are expected to go to trial in late 2015.


The Department of Justice is represented by Assistant United States Attorney Andrew Malek and Civil Division Trial Attorney Alison Cendali, of Washington, D.C., who were instrumental in reaching settlement terms with Bostwick Laboratories. The case is U.S. ex rel. Daugherty v. Bostwick Labs, et al., No. 1:08-cv-354, in the U.S. District Court, Southern District of Ohio.


Morgan Verkamp, LLC represents clients nationwide in cases under the False Claims Act.

Omnicare Agrees to Pay $120 Million to Settle Kickback Claim

October 23, 2013, Bloomberg News, “Omnicare Agrees to Pay $120 Million to Settle Kickback Claim” by Margaret Fisk


Follow the link below for the full story published by Bloomberg News.



Omnicare (NYSE: OCR) Agrees to Pay United States $120,000,000 to Settle Allegations of Illegal Discounts to Nursing Homes in Exchange for Patient Referrals

Morgan Verkamp LLC – Cincinnati, Ohio (Contact: Frederick M. Morgan, Jr., Tel. (513) 651-4400)Calfee, Halter & Griswold LLP – Cleveland, Ohio (Contact: Virginia A. Davidson, Tel. (216) 622-8588) Sanford Heisler LLP – New York, New York (Contact: Ross Brooks, Tel. (646) 402-5668)Berger Montague, PC – Philadelphia, Pennsylvania (Contact: Daniel R. Miller, Tel (215) 875-5702)


October 23, 2013 Omnicare (NYSE: OCR) Agrees to Pay United States $120,000,000 to Settle Allegations of Illegal Discounts to Nursing Homes In Exchange for Patient Referrals

Cincinnati-based Omnicare, a Fortune 400 company and the nation’s largest provider of pharmacy services to nursing home patients, has agreed to pay the United States $120 Million to resolve kickback and false-claims allegations brought by Donald Gale, an Ohio pharmacist who worked for the company from 1993 until 2010. Mr. Gale sued Omnicare pursuant to the United States Civil False Claims Act. The agreement between Mr. Gale and Omnicare, which was announced in open court in Cleveland on Tuesday, will not be final until it is approved by the Civil Division of the United States Department of Justice, avoids a jury trial scheduled for Monday, October 28.  Omnicare acknowledged the settlement in SEC filings this morning, indicating a material impact on the corporation.


Mr. Gale’s complaint alleges a kickback scheme called “swapping,” asserting tht Omnicare paid nursing home owners kickbacks in the form of heavily-discounted prescription drugs for Medicare Part A inpatients. The nursing homes are financially responsible for Part A patients’ medical because Medicare pays a flat fee to the facility. Omnicare offered the nursing homes daily, or “per diem,” pricing. Mr. Gale’s Complaint alleges that the per diem pricing for hundreds of facilities was substantially below the fair market value of the goods provided, and that this violated the Medicare Anti- Kickback Statute and the False Claims Act because Omnicare gave the discounts intending that the nursing homes would refer, or “swap,” their non-Part A patients, most of whom participate in the Medicare Part D prescription-drug benefit program, to Omnicare. Omnicare then charged full price for their prescription drugs and other pharmacy services. The HHS Office of Inspector General has made clear since 1999, when Medicare Part A services were converted to the “Prospective Payment system,” that swapping was prohibited by the Anti-Kickback Statute.


Mr. Gale was the General Manager of an Omnicare pharmacy in Wadsworth, Ohio.  His civil complaint was filed under seal in January 2010. The case was unsealed in 2011, after the U.S. Attorney for the Northern District of Ohio elected not to intervene. This decision, which occurs in about 85% of False Claims Act cases, cleared the way for Mr. Gale to pursue the case on behalf of the taxpayers. The case has been vigorously litigated since early 2012.


Omnicare has paid prior False Claims Act settlements alleging payment of kickbacks to nursing homes and receipt of kickbacks from drug companies. It has, since 2006 operated under a series of Corporate Integrity Agreements with the HHS Office of Inspector General.


The False Claims Act, also called “Lincoln’s Law,” was first signed by President Lincoln in 1863. Amendments in 1986 made it the primary weapon of the United States against fraud and abuse by government contractors. The FCA permits a private citizen like Mr. Gale to bring a case in the name of the United States, and to recover a portion of any recovery. If the Justice Department approves the Omnicare settlement, Mr. Gale’s share of the proceeds will be 25 to 30% of the federal recovery.


According to Frederick Morgan of the Morgan Verkamp law firm in Cincinnati, “Don Gale is living proof that no matter how large the corporation, one person can make an enormous difference. He showed great courage in coming forward to bring Omnicare’s swapping arrangements to the attention of the United States, and in weathering months of fierce litigation and trial preparation, with no certainty of recovery. Mr. Gale assembled a talented and devoted team of litigators who worked tirelessly to prepare this complex case for trial, resulting in the eleventh-hour settlement which we have asked the Justice Department to approve.” Morgan believes that this is one of the largest settlements of a qui tam case which the Justice Department did not take over.


The False Claims Act creates a unique and powerful public/private partnership for the pursuit of fraud claims by whistleblowers. Mr. Gale’s legal team worked in close coordination with attorneys of the Department of Justice’s Civil Division in Washington and the Office of Northern District of Ohio United States Attorney Steven M. Dettlebach.
Mr. Gale is represented by Rick Morgan, Jennifer Verkamp, and Sara Vann of Morgan Verkamp LLC; Virginia Davidson and Eric Zell of Calfee Halter & Griswold LLP; Ross Brooks and Roland Marquez of Sanford Heisler LLP; and Daniel Miller and Shauna Itri of Berger Montague.


The case remains pending until final resolution before United States District Judge James S. Gwin of the United StatesDistrict Court for the Northern District of Ohio. Judge Gwin has asked the parties to resolve all remaining issues withinDistrict Courtthree weeks.

Whistleblowers, Incentives, and Ethics

On March 2, 2012 Jennifer Verkamp spoke at the annual meeting of the Association of Practical and Professional Ethics (APPE) as part of a panel on “Whistleblowers, Incentives, and Ethics.”

Ms. Verkamp spoke about her experience with whistleblowers and the effect of whistleblowing on their lives, as well as on the importance of ethical businesses with strong compliance programs.

Rick Morgan radio interview on Ohio False Claims Act

Ed “Flash” Ferenc spoke at length with Rick Morgan on June 2, 2011 regarding the Ohio False Claims Act bill, now pending before the Ohio Senate.  The bill is strongly supported by a number of prominent Senate republicans and Attorney General Mike DeWine.  You can hear the interview here.