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Justice Department Joins McKesson Whistleblower Lawsuit

Oct 7, 2008 | Parker Waichman Alonso LLP

The U.S. Justice Department has joined a whistleblower lawsuit filed against medical device supplier  McKesson Corp. that charges the company  paid illegal kickbacks and created a fake medical supply company in order to cheat Medicare.  According to The Wall Street Journal, McKesson is one of the nation's largest suppliers of medical equipment, including feeding devices and oxygen supplies.

The case against McKesson was filed in federal court in Mississippi by a private citizen under the whistleblower provisions of the False Claims Act.  The False Claims Act allows private citizens to sue on behalf of the U.S. government for alleged fraud by government contractors and to share in any money recovered.

Since whistleblower protections where added to the False Claims Act in 1986, the legislation has encouraged hundreds of people to expose wrongdoing that is a threat to public welfare. In fact, since 1986, almost $17 billion dollars have been returned to the U.S. Treasury in this way, and whistleblower rewards have exceed $2.5 billion.

According to The Wall Street Journal, the McKesson whistleblower lawsuit alleges  that the company used its subsidiary, McKesson Medical-Surgical MediNet Inc., to make arrangements for its supplies to be used in nursing facilities owned by Beverly Enterprises Inc., now known as Golden Living. Allegedly, McKesson promised Beverly facilities that significant profits could be gained from making it appear to Medicare that it was Beverly, not McKesson or MediNet, that was supplying the equipment and supplies.

To facilitate the illegal transactions, MediNet set up and managed a phony medical equipment supplier, CSMS that appeared to be affiliated with Beverly.  In exchange for referring sales to McKesson, Beverly kept millions of dollars in Medicare payments for services and supplies that were supplied by MediNet.

McKesson said it is cooperating with the Justice Department investigation, but believes the charges in the whistleblower lawsuit are "without merit."  Golden Living said that it believes its medical-equipment supply company, CSMS, did nothing wrong.