Chicago-based EHR vendor Allscripts has agreed to pay $145 million to settle a civil and criminal investigation by the U.S. Department of Justice into alleged business practices by its subsidiary Practice Fusion that violated HIPAA and anti-kickback laws.
The company said it will continue to finalize the agreement with the DOJ which includes additional parameters past the financial settlement.
Allscripts acquired Practice Fusion last year for $100 million in a deal widely described as a “fire sale.” At its peak, the San Francisco-based company was valued at $1.5 billion.
It emerged that around a year before the purchase, the Department of Justice started to investigate Practice Fusion in relation to how it received a software IT certification from the HHS, as well as a lack of compliance with the anti-kickback statute and HIPAA.
In fact, concerns about the DOJ investigation depressed the market for Practice Fusion leading Allscripts to rescind its initial acquisition offer of $250 million because of concerns about the cost and effort of
In Allscripts ‘second quarter earnings call, executives painted the settlement as in line with what other companies have paid to resolve similar issues with the DOJ, especially considering that the government’s scope of investigation continued to expand in the wake of the acquisition.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
“The main focus has been on actions that occurred prior to our ownership, and thus, we were highly motivated to reach an accord with the DOJ as soon as possible so that we could put this chapter behind us,” Allscripts President Rick Poulton said on the investor call.
“While the amount we have agreed to pay of $145 million is not insignificant, it is in line with other settlements in the industry, and we are happy to have reached the agreement in principle.”
One example is the case of eClinicalWorks, which paid $155 million to settle its allegations of violations of anti-kickback statutes and wrongfully obtaining certification for its software.
Allscripts itself reported revenues of $445 million for the second quarter and an EBITDA totaled $75 million. The EBITDA figure represents a $1 million decline from the same time last year. The company’s share price is down more than 30 percent from when it announced the acquisition of Practice Fusion last January.
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