Pharmaceutical company QOL Medical, and its CEO Frederik E Cooper, have agreed to pay $47m to the Department of Justice over charges that they paid illegal remuneration and therefore submitted false claims to Medicare, TRICARE, VA, and Medicaid, in violation of the False Claims Act (FCA) and Anti-Kickback Statute (AKS).

According to the DOJ, QOL and Cooper overstated the sensitivity and accuracy of company-funded diagnostic tests as part of a kickback scheme to generate sales for their product Sucraid. Sucraid is a treatment for the rare genetic disorder Congenital Sucrase-Isomaltase Deficiency (CSID), which causes difficulty digesting sugar.

“Not all kickbacks come in the form of cash going into a doctor’s or a patient’s pocket. Here, the defendants relied on free breath tests and misleading sales tactics to drive patients to their product. This conduct unnecessarily drained money from the federal health care programs and improperly influenced treatment decisions by physicians and their patients.” said Acting United States Attorney Joshua S. Levy.

The AKS prohibits pharma companies from paying to induce an order of a drug paid for a federal healthcare program, and any federal healthcare claim that violates the AKS necessarily violates the FCA.

The settlement required that QOL and Cooper admit to the key facts underlying the allegations.

Payments for lab tests lead to drug sales

From 2018 to 2022, QOL distributed free Carbon-13 breath tests to healthcare providers, ostensibly for the diagnosis for CSID, and paid for a laboratory to analyze them.

The company requested that providers use the tests on patients complaining of common gastrointestinal issues. While the company indicated that the Carbon-13 tests could establish a diagnosis of CSID, these claims were inaccurate. Instead, the tests could only determine low sucrase activity, which could be caused by several conditions.

In fact, of the 75,000 tests QOL paid for, 30% came back positive – and QOL also paid the lab that ran the Carbon-13 tests to stop making marketing claims that they could pick up on other conditions.

Under the oversight of Cooper, QOL harvested anonymous but detailed data from the tests, and instructed its sales team to make calls about Sucraid to health care providers whose Carbon-13 test results came back positive. QOL’s training materials further advised company representatives to inform providers that a positive breath test could only be resolved by Sucraid treatment.

These outlandish claims drew the attention of QOL’s employees themselves, who ultimately blew the whistle. As a result, they will share $8m of the total monetary penalty.