Charles River Labs Will Pay $1.8 million to Settle NIH Contract False Claims Allegations

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By John T. Aquino

Charles River Laboratories International Inc. will pay the U.S. government $1.8 million to settle charges that it violated the False Claims Act by over-billing for costs on NIH contracts, the Justice Department announced March 13.

According to the DOJ, Charles River billed the National Institutes of Health for labor and associated costs of employees at its Raleigh, N.C., and Kingston, N.Y., facilities, who didn’t render the services as Charles River had claimed.

Charles River is a Wilmington, Mass.-based contract research organization and holds contracts with the NIH for services relating to the development, maintenance and distribution of colonies of animals as well as the provision of laboratory animals.

The FCA is the government’s primary civil remedy to redress false claims for government funds and property under government programs and contracts. In December, the DOJ said it had recovered $2.15 billion in 2016 from the health care sector—biopharmas, medical device companies, laboratories, hospitals and physicians—in settlement payments for allegations of FCA violations.

The DOJ said the Charles River claims settled by the agreement are allegations only and there has been no determination of liability.

Charles River Self Disclosed

Charles River investigated concerns about inaccurate billing for certain federal contracts with the assistance of the law firm of Davis, Polk & Wardwell LLP, Amy Cianciaruso, Charles River’s corporate vice president for public relations and corporate communications, told Bloomberg BNA in a March 14 email. It reported the problem to the appropriate federal agencies and ensured the proper repayment and resolution of the issue, she said.

“Based on the findings of the investigation and confirmation that this overbilling was confined to a limited amount of work performed at two of our research model facilities, we were able to cooperatively resolve this matter to the government’s full satisfaction,” Cianciaruso said.

The DOJ statement noted that Charles River reported the improper billing to the DOJ and the Department of Health and Human Services, of which the NIH is a part.

“Charles River’s self-disclosure and resolution of this matter underscores the importance of contractors preventing, detecting, and remediating overcharges of labor costs to HHS. Under our contractor self-disclosure program, OIG is committed to working with HHS contractors that detect fraud issues to review, take any appropriate action, and resolve these matters fairly” Gregory E. Demske, chief counsel to the inspector general, HHS Office of Inspector General, said in the statement.

Charles River, which has about 8,000 employees worldwide, reported annual global revenue of $1.3 billion in its 2015 annual report. The DOJ announcement was made the same day Charles River announced it has extended its longstanding, strategic, integrated drug discovery partnership with the Parma, Italy-based Chiesi Farmaceutici SpA in the field of respiratory disease.

Prior Investigations

The Charles River-NIH relationship has raised issues before with federal investigators. In 2011, the HHS OIG determined the NIH’s five-year, $27.1 million contract with Charles River to provide research laboratory technical services and animal care didn’t comply with appropriations statutes in terms of the time and amount of the contracts ().

In January 2014, Charles River was one of 12 companies that agreed to no-fault consent orders with the Federal Trade Commission to settle commission charges they falsely claimed they were in compliance with the U.S.-European Union and U.S.-Switzerland Safe Harbor programs, although they had let their certifications lapse, These programs concern the transfer of consumer data.

To contact the reporter on this story: John T. Aquino in Washington at jaquino@bna.com

To contact the editor responsible for this story: Randy Kubetin at RKubetin@bna.com

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