Cardinal Health allegedly paid kickbacks to veteran-owned small businesses to sell more radiopharmaceutical products, according to a recently unsealed False Claims Act lawsuit.
The wholesale distribution giant would allegedly single out service-disabled and veteran-owned small businesses that were unqualified to handle drugs with small amounts of radioactive agents used for diagnosing and treating cancer via Positron Emission Tomography scans, among other applications. The whistleblower alleged that would give Cardinal unfair and illegal access to government contracts it would not have otherwise been entitled to, edging out other qualified small-business owners, according to the complaint filed in a Washington federal court in late 2017.
Cardinal allegedly paid the "front companies," including Caring Hands and Logment, kickbacks in the form of bid mark-ups and Cardinal effectively won the contract as a behind-the-scenes subcontractor, pocketing the remaining contract award and performing most of the work. Cardinal, which operates one of the largest radiopharmaceutical networks with 163 radiopharmacies across the country, has been awarded more than $300 million in radiopharmacy contracts since 2013, according to the compliant.
The government declined to intervene on May 7, when the case was unsealed.
"Other small specialty pharmacies, for which the small business designations were intended to support, naturally were harmed by this conspiracy," the complaint reads.
Cardinal said in a statement that it is pleased the Department of Justice did not participate in the suit, adding that the company has been entirely transparent throughout the contracts in question.
"The development and distribution of radiopharmaceuticals is highly specialized, and Cardinal Health operates in strict accordance with all applicable state and federal regulations," the company said.
Caring Hands' principal place of business is one unit in a strip mall, while Logmet's only business address is a single-family residence, both of which lack the necessary safety and efficacy protocols, according to the lawsuit.
"There is no evidence that these front companies were performing any services in those far away jurisdictions," the complaint reads. "Even if you were to assume these front companies could perform so nominal services, because they hold no qualifications in the area of nuclear pharmacy, that work would be limited to prescription order taking or invoicing."
UPPI, which represents nearly 90 radiopharmaceutical manufacturers, is seeking damages for other service-disabled and veteran-owned small businesses that were allegedly harmed by the anticompetitive practices.
The plaintiffs cited a similar scheme that led to a $26.8 million settlement in 2015. The Federal Trade Commission alleged that Cardinal monopolized 25 markets from 2003 to 2008 for the sale of radiopharmaceuticals to hospitals and clinics.
Cardinal employed various tactics to coerce and induce radiopharmaceutical manufacturers to refuse to grant distribution rights to new competitors, the FTC alleged.