CareFusion Corp agreed to pay $40.1 million to settle a federal government lawsuit accusing it of paying kickbacks to boost sales of a pre-surgical skin treatment, and marketing the product for unapproved uses.
The accord announced on Thursday by the U.S. Department of Justice resolves allegations that CareFusion violated the federal False Claims Act by paying $11.6 million to a doctor to promote its ChloraPrep product to healthcare providers.
That doctor, Charles Denham, received the kickbacks while serving as co-chair of the safe practices committee of the nonprofit National Quality Forum, which makes recommendations on healthcare practices, the Justice Department said.
"Corrupting the standard-setting process through kickbacks can affect the healthcare treatment choices that doctors and hospitals may make for patients," Stuart Delery, assistant attorney general for the Justice Department's civil division, said in a statement.
The lawsuit also claimed that CareFusion promoted ChloraPrep from September 2009 through August 2011 for unapproved uses.
The U.S. Food and Drug Administration had approved ChloraPrep to prepare patients' skin for surgery or injections.
CareFusion said on Thursday that it set aside funds for the settlement in the first quarter of 2013.
Chief Executive Officer Kieran Gallahue said the San Diego-based company is pleased to settle, and has made "significant investments" to improve its quality and compliance practices, including in sales and marketing.
Denham could not immediately be reached for comment.
The accord resolved a whistleblower lawsuit first brought in September 2010 by Cynthia Kirk, a former vice president of regulatory affairs at a CareFusion infection prevention unit.
She will receive $3.26 million through the settlement, which along with the lawsuit was unsealed this week by the federal court in Kansas City, Kansas.
In afternoon trading, CareFusion shares were up 81 cents at $41.12.
The case is U.S. ex rel. Kirk v. CareFusion Corp et al, U.S. District Court, District of Kansas, No. 10-02492.
(Editing by Jan Paschal)