The Justice Department announced today that it has intervened in a whistleblower lawsuit accusing Sikorsky Aircraft Corporation and subsidiaries Sikorsky Support Services Inc. and Derco Aerospace Inc. of overcharging the U.S. Navy on aircraft maintenance costs by using an illegal subcontract.
The lawsuit claims that Sikorsky approved an illegal subcontract called a “cost-plus-a-percentage” contract in which compensation is based on the cost of performing a service plus a percentage. These contracts are prohibited because the cost associated with the contract is unknown in advance and contractors don’t have any incentive to control costs. According to the Milwaukee Journal-Sentinel, the cost-plus-a-percentage contract caused the Navy to pay nearly $50 million in false billings for parts and materials used to maintain Navy aircraft.
The complaint was initially filed by whistleblower Mary J. Patzer, a former employee with Derco. Patzer started with the company as a financial analyst in 2002. By the time her tenure at the company ended in 2010, she was the point of contact for Derco’s defense contract audits. In her lawsuit, Patzer says she was fired shortly after reporting the alleged markups to a supervisor. The company’s reasoning for firing her: a “reduction in force.” She felt that filing her whistleblower complaint and holding her former employer accountable was simply the right thing to do.
If her case is successful, Patzer will be entitled to a whistleblower reward between 15 and 25 percent of any money the government recovers.
Organon, a pharmaceutical company with assets now owned by Merck, has agreed to pay $34 million to settle false claims allegations filed by two whistleblowers. The settlement resolves claims that Organon promoted the off label use of antidepressants, provided improper financial incentives to “nursing home pharmacy companies” and made misstatements about drug pricing which caused New York’s Medicaid program to overpay for drugs.
The settlement resolves four different claims:
- Organon allegedly promoted Remeron and Remeron SolTab – both antidepressants – for uses not specifically approved by the Food and Drug Administration (FDA). According to the Corporate Crime Reporter, Organon marketed the side effects of both drugs as benefits. According to the lawsuits, the company even marketed the drugs to minors.
- The lawsuits claim that Organon provided discounts and rebates to “nursing pharmacy companies” to entice them to prescribe Remeron and Remeron SolTab over other antidepressants.
- Medicaid requires that drug makers provide the government with the best possible price available for a given drug. The lawsuits claim that Organon failed to include discounts and rebates the company was offering to other customers, which resulted in New York’s Medicaid program overpaying for drugs.
- Organon allegedly used the inflated drug costs paid by the government to offset the discounts the company was offering nursing home pharmacy companies.
The whistleblower claims were filed in U.S. District Court for the Southern District of Texas and U.S. District Court for the District of Massachusetts. The allegations were made before Merck acquired Organon. Merck did not admit to any wrongdoing per the terms of the settlement.