Exhibit 10.1

 

SETTLEMENT AGREEMENT

 

This Settlement Agreement (“Agreement”) is entered into among the United States
of America, acting through the United States Department of Justice and on behalf
of the Office of Inspector General (“OIG-HHS”) of the Department of Health and
Human Services (“HHS”) (collectively, the “United States”), and United
Therapeutics Corporation (hereafter collectively referred to as “the Parties”),
through their authorized representatives.

 

RECITALS

 

A.                                    United Therapeutics Corporation (“UT”) is
a Delaware corporation with principal executive offices in Silver Spring,
Maryland. UT manufacturers and markets pharmaceutical products in the United
States, including Adcirca, Remodulin, Tyvaso, and Orenitram (collectively the
“Subject Drugs”), all of which are indicated to treat pulmonary arterial
hypertension (“PAH”).

 

B.                                    The United States contends that UT caused
to be submitted claims for payment for the Subject Drugs to the Medicare
Program, Title XVIII of the Social Security Act, 42 U.S.C. § 1395-1395lll
(“Medicare”).

 

C.                                    When a Medicare beneficiary obtains a
prescription drug covered by Medicare Part B or Part D, the beneficiary may be
required to make a payment, which may take the form of a “copayment,”
“coinsurance,” or “deductible” (collectively “copays”). The Anti-Kickback
Statute, 42 U.S.C. § 1320a-7b, prohibits pharmaceutical companies from paying
remuneration to induce Medicare beneficiaries to purchase, or their physicians
to prescribe, drugs that are reimbursed by Medicare.

 

D.                                    Caring Voice Coalition (“CVC”), an entity
claiming 501(c)(3) status for tax purposes, operates funds that pay the copays
of certain patients, including Medicare patients. During the time period from
January 1, 2010, through December 31, 2014, CVC operated a PAH

 

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fund that paid the copays of certain patients, including Medicare patients,
prescribed the Subject Drugs and certain non-UT drugs also indicated to treat
PAH.

 

E.                                     The United States contends that it has
certain civil claims, as specified in Paragraph 2 below, against UT for engaging
in the following conduct during the period from January 1, 2010, through
December 31, 2014 (hereinafter referred to as the “Covered Conduct”):

 

UT made donations to CVC’s PAH fund and used it as a conduit to pay the copay
obligations of thousands of Medicare patients taking the Subject Drugs, to
eliminate price sensitivity of patients purchasing or physicians prescribing the
Subject Drugs, and to induce those patients’ purchases of the Subject Drugs.
From February 2010 through January 2014, UT routinely obtained data from CVC
detailing how many patients on each Subject Drug CVC had assisted and how much
CVC had spent on those patients. In deciding whether and how much to donate to
CVC, UT considered the revenue it would receive from prescriptions for Medicare
patients who received assistance from CVC to cover their copays for the Subject
Drugs.  UT used data from CVC to confirm that UT’s revenue far exceeded the
amount of UT’s donations to CVC. At the same time, UT had a policy of not
permitting Medicare patients to participate in its free drug program, which was
open to other financially needy patients, even if those Medicare patients could
not afford their copays for UT drugs. Instead, in order to generate revenue from
Medicare and to induce purchases of the Subject Drugs, UT referred Medicare
patients prescribed the Subject Drugs to CVC, which resulted in claims to
federal healthcare programs to cover the cost of the drugs.

 

F.                                      In consideration of the mutual promises
and obligations of this Settlement Agreement, the Parties agree and covenant as
follows:

 

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TERMS AND CONDITIONS

 

1.                                      UT shall pay to the United States two
hundred ten million dollars ($210,000,000), plus interest at an annual rate of
2.25% from July 27, 2017, through the day before full payment (the “Settlement
Amount”) no later than ten days after the Effective Date of this Agreement by
electronic funds transfer pursuant to written instructions to be provided by the
Office of the United States Attorney for District of Massachusetts.

 

2.                                      Subject to the exceptions in Paragraph 4
(concerning excluded claims) below, and conditioned upon UT’s full payment of
the Settlement Amount, the United States releases UT, together with its
predecessors, and its current and former divisions, parents, subsidiaries,
successors and assigns, from any civil or administrative monetary claim the
United States has for the Covered Conduct under the False Claims Act, 31 U.S.C.
§§ 3729-33, the Civil Monetary Penalties Law, 42 U.S.C. § 1320a-7a, the Program
Fraud Civil Remedies Act, 31 U.S.C. §§ 3801-12 or any statutory provision for
which the Civil Division of the Department of Justice has actual and present
authority to assert and compromise pursuant to 28 CFR Part 0, Subpart I, .45(d);
and the common law theories of payment by mistake, unjust enrichment, and fraud.

 

3.                                      In consideration of the obligations of
UT in this Agreement and the Corporate Integrity Agreement (“CIA”) entered into
between OIG-HHS and UT, and conditioned upon UT’s full payment of the Settlement
Amount, the OIG-HHS agrees to release and refrain from instituting, directing,
or maintaining any administrative action seeking exclusion from Medicare,
Medicaid, and other Federal health care programs (as defined in 42 U.S.C. §
1320a-7b(f)) against UT under 42 U.S.C. § 1320a-7a (Civil Monetary Penalties
Law) or 42 U.S.C. § 1320a-7(b)(7) (permissive exclusion for fraud, kickbacks,
and other prohibited activities) for the Covered Conduct, except as reserved in
this Paragraph and in Paragraph 4 (concerning excluded claims), below.  The
OIG-HHS expressly reserves all rights to comply with any statutory obligations
to

 

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exclude UT from Medicare, Medicaid, and other Federal health care programs under
42 U.S.C. § 1320a-7(a) (mandatory exclusion) based upon the Covered Conduct.
Nothing in this Paragraph precludes the OIG-HHS from taking action against
entities or persons, or for conduct and practices, for which claims have been
reserved in Paragraph 4, below.

 

4.                                      Notwithstanding the release given in
paragraph 2 and 3 of this Agreement, or any other term of this Agreement, the
following claims of the United States are specifically reserved and are not
released:

 

a.                                      Any liability arising under Title 26,
U.S. Code (Internal Revenue Code);

 

b.                                      Any criminal liability;

 

c.                                       Except as explicitly stated in this
Agreement, any administrative liability, including mandatory exclusion from
Federal health care programs;

 

d.                                      Any liability to the United States (or
its agencies) for any conduct other than the Covered Conduct;

 

e.                                       Any liability based upon obligations
created by this Agreement;

 

f.                                        Any liability of individuals;

 

g.                                       Any liability for express or implied
warranty claims or other claims for defective or deficient products or services,
including quality of goods and services;

 

h.                                      Any liability for failure to deliver
goods or services due;

 

i.                                          Any liability for personal injury or
property damage or for other consequential damages arising from the Covered
Conduct;

 

5.                                      UT waives and shall not assert any
defenses UT may have to any criminal prosecution or administrative action
relating to the Covered Conduct that may be based in whole or in part on a
contention that, under the Double Jeopardy Clause in the Fifth Amendment of the

 

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Constitution, or under the Excessive Fines Clause in the Eighth Amendment of the
Constitution, this Agreement bars a remedy sought in such criminal prosecution
or administrative action. Nothing in this paragraph or any other provision of
this Agreement constitutes an agreement by the United States concerning the
characterization of the Settlement Amount for purposes of the Internal Revenue
laws, Title 26 of the United States Code.

 

6.                                      UT fully and finally releases the United
States, its agencies, officers, agents, employees, and servants, from any claims
(including attorney’s fees, costs, and expenses of every kind and however
denominated) that UT has asserted, could have asserted, or may assert in the
future against the United States, and its agencies, officers, agents, employees,
and servants related to the Covered Conduct and the United States’ investigation
and prosecution thereof.

 

7.                                      The Settlement Amount shall not be
decreased as a result of the denial of claims for payment now being withheld
from payment by any Medicare contractor (e.g., Medicare Administrative
Contractor, fiscal intermediary, carrier) or any state payer, related to the
Covered Conduct; and UT agrees not to resubmit to any Medicare contractor or any
state payer any previously denied claims related to the Covered Conduct, agrees
not to appeal any such denials of claims, and agrees to withdraw any such
pending appeals.

 

8.                                      UT agrees to the following:

 

a.                                      Unallowable Costs Defined:  All costs
(as defined in the Federal Acquisition Regulation, 48 C.F.R. § 31.205-47; and in
Titles XVIII and XIX of the Social Security Act, 42 U.S.C. §§ 1395-1395kkk-1 and
1396-1396w-5; and the regulations and official program directives promulgated
thereunder) incurred by or on behalf of UT, its present or former officers,
directors, employees, shareholders, and agents in connection with:

 

(1)                                 the matters covered by this Agreement;

 

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(2)                                 the United States’ audit(s), and any civil
or criminal investigations of the matters covered by this Agreement;

 

(3)                                 UT’s investigation, defense, and corrective
actions undertaken in response to the United States’ audit(s) and any civil or
criminal investigation(s) in connection with the matters covered by this
Agreement (including attorney’s fees);

 

(4)                                 the negotiation and performance of this
Agreement;

 

(5)                                 the payment UT makes to the United States
pursuant to this Agreement; and

 

(6)                                 the negotiation of, and obligations
undertaken pursuant to the CIA to: (i) retain an independent review organization
to perform annual reviews as described in Section III of the CIA; and
(ii) prepare and submit reports to the OIG-HHS,

 

are unallowable costs for government contracting purposes and under the Medicare
Program, Medicaid Program, TRICARE Program, and Federal Employees Health
Benefits Program (“FEHBP”) (hereinafter referred to as Unallowable Costs).
However, nothing in paragraph 8.a.(6) that may apply to the obligations
undertaken pursuant to the CIA affects the status of costs that are not
allowable based on any other authority applicable to UT.

 

b.                                      Future Treatment of Unallowable Costs: 
Unallowable Costs shall be separately determined and accounted for by UT, and UT
shall not charge such Unallowable Costs directly or indirectly to any contracts
with the United States or any State Medicaid program, or seek payment for such
Unallowable Costs through any cost report, cost statement, information
statement, or payment request submitted by UT or any of its subsidiaries or
affiliates to the Medicare, Medicaid, TRICARE, or FEHBP Programs.

 

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c.                                       Treatment of Unallowable Costs
Previously Submitted for Payment: UT further agrees that, within 90 days of the
Effective Date of this Agreement, it shall identify to applicable Medicare and
TRICARE fiscal intermediaries, carriers, and/or contractors, and Medicaid and
FEHBP fiscal agents, any Unallowable Costs (as defined in this Paragraph)
included in payments previously sought from the United States, or any State
Medicaid program, including, but not limited to, payments sought in any cost
reports, cost statements, information reports, or payment requests already
submitted by UT or any of its subsidiaries or affiliates, and shall request, and
agree, that such cost reports, cost statements, information reports, or payment
requests, even if already settled, be adjusted to account for the effect of the
inclusion of the unallowable costs. UT agrees that the United States, at a
minimum, shall be entitled to recoup from UT any overpayment plus applicable
interest and penalties as a result of the inclusion of such Unallowable Costs on
previously-submitted cost reports, information reports, cost statements, or
requests for payment.

 

Any payments due after the adjustments have been made shall be paid to the
United States pursuant to the direction of the Department of Justice and/or the
affected agencies. The United States reserves its rights to disagree with any
calculations submitted by UT or any of its subsidiaries or affiliates on the
effect of inclusion of Unallowable Costs (as defined in this Paragraph) on UT or
any of its subsidiaries or affiliates’ cost reports, cost statements, or
information reports.

 

d.                                      Nothing in this Agreement shall
constitute a waiver of the rights of the United States to audit, examine, or
re-examine UT’s books and records to determine that no Unallowable Costs have
been claimed in accordance with the provisions of this Paragraph.

 

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9.                                      This Agreement is intended to be for the
benefit of the Parties only. The Parties do not release any claims against any
other person or entity, except to the extent provided for in Paragraph 10
(waiver for beneficiaries paragraph), below.

 

10.                               UT agrees that it waives and shall not seek
payment for any of the health care billings covered by this Agreement from any
health care beneficiaries or their parents, sponsors, legally responsible
individuals, or third party payors based upon the claims defined as Covered
Conduct.

 

11.                               Each Party shall bear its own legal and other
costs incurred in connection with this matter, including the preparation and
performance of this Agreement.

 

12.                               Each party and signatory to this Agreement
represents that it freely and voluntarily enters in to this Agreement without
any degree of duress or compulsion.

 

13.                               This Agreement is governed by the laws of the
United States. The exclusive jurisdiction and venue for any dispute relating to
this Agreement is the United States District Court for the District of
Massachusetts. For purposes of construing this Agreement, this Agreement shall
be deemed to have been drafted by all Parties to this Agreement and shall not,
therefore, be construed against any Party for that reason in any subsequent
dispute.

 

14.                               This Agreement constitutes the complete
agreement between the Parties. This Agreement may not be amended except by
written consent of the Parties.

 

15.                               The undersigned counsel represent and warrant
that they are fully authorized to execute this Agreement on behalf of the
persons and entities indicated below.

 

16.                               This Agreement may be executed in
counterparts, each of which constitutes an original and all of which constitute
one and the same Agreement.

 

17.                               This Agreement is binding on UT’s successors,
transferees, heirs, and assigns.

 

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18.                               All parties consent to the United States’
disclosure of this Agreement, and information about this Agreement, to the
public.

 

19.                               This Agreement is effective on the date of
signature of the last signatory to the Agreement (Effective Date of this
Agreement). Facsimiles and electronic transmissions of signatures shall
constitute acceptable, binding signatures for purposes of this Agreement.

 

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THE UNITED STATES OF AMERICA

 

DATED:

12/19/17

 

BY:

/s/ Gregg Shapiro

 

 

 

 

GREGG SHAPIRO

 

 

 

 

ABRAHAM GEORGE

 

 

 

 

DEANA EL-MALLAWANY

 

 

 

 

Assistant United States Attorneys
United States Attorney’s Office
District of Massachusetts

 

 

 

 

 

 

 

 

 

 

DATED:

12/19/17

 

BY:

/s/ Augustine Ripa

 

 

 

 

AUGUSTINE RIPA

 

 

 

 

SARAH ARNI

 

 

 

 

Attorneys

 

 

 

 

Commercial Litigation Branch
Civil Division

 

 

 

 

United States Department of Justice

 

 

 

 

 

 

 

 

 

 

DATED:

12/18/17

 

BY:

/s/ Lisa M. Re

 

 

 

 

LISA M. RE

 

 

 

 

Assistant Inspector General for Legal Affairs
Office of Counsel to the Inspector General
Office of Inspector General

 

 

 

 

United States Department of Health and Human Services

 

 

 

 

 

 

UT - DEFENDANT

 

 

 

 

 

 

 

 

 

 

DATED:

12/15/17

 

BY:

/s/ Andrew J. Fisher

 

 

 

 

ANDREW J. FISHER

 

 

 

 

EVP, Chief Strategic Officer and Deputy General Counsel

 

 

 

 

 

 

 

 

 

 

DATED:

12/15/17

 

BY:

/s/ W. Sarraille

 

 

 

 

JACK W. PIROZZOLO
WILLIAM SARRAILLE
ROBERT KEELING

 

 

 

 

Sidley Austin LLP

 

 

 

 

Counsel for United Therapeutics Corporation

 

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