National Football League

Ex-Chief Saleaumua rewarded for whistleblowing

Published Apr. 22, 2011 12:54 a.m. ET

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One of the nation's largest pharmaceutical distributors will to pay $8 million to settle claims that it violated federal law by doling out $440,000 to lure business from pharmacies owned by former Kansas City Chiefs player Dan Saleaumua, prosecutors said Thursday.

Cardinal Health Inc., which is based in Dublin, Ohio, agreed to pay the government as part of a lawsuit filed by Saleaumua and consultant Kevin Rinne, the Department of Justice said. A company spokeswoman said Cardinal denied wrongdoing but agreed to the settlement to avoid an expensive legal fight.

Prosecutors said Cardinal, which was the franchisor of Saleaumua's seven Medicine Shoppe pharmacies, caused Saleaumua to accept a deal that he didn't know was illegal kickback. He and Rinne will share $760,000 for blowing the whistle on the kickbacks.

"American taxpayers are the victims of illegal kickback schemes that result in Medicare and Medicaid paying millions of dollars more than they should for prescription drugs," said U.S. Attorney Beth Phillips in Kansas City. "Today's $8 million settlement underscores our commitment to combatting health care fraud and protecting taxpayers."

Cardinal maintains that the payments weren't kickbacks and didn't increase costs to the government, spokeswoman Corey Kerr said. Cardinal is the nation's third-largest distributor of pharmaceuticals, medical, lab and surgical products.

Saleaumua Inc., the company that owned the Kansas City pharmacies, was receiving its drugs from distributor McKesson Corp. when a Cardinal representative contacted Saleaumua in January 2006, to see if the company was interested in switching distributors, according to the Justice Department.

As part of the deal, Cardinal said it would give the company, known as SI, an additional 2.3 percent discount off normal wholesale prices for the drugs purchased. SI declined because of possible costs and logistical headaches associated with moving to a new distributor, prosecutors said.

Soon afterward, Cardinal sweetened its offer to include the 2.3 percent discount and $50,000 in cash to make the switch. After SI declined again, the offer was raised to $100,000, which SI tentatively accepted.

When Saleaumua contacted McKesson to inform the company of the switch, McKesson offered $150,000 to SI to keep its business.

The next day, Cardinal offered $300,000 to switch, then McKesson offered $400,000. Cardinal countered with $300,000 in cash and $140,000 toward purchase of Cardinal's PDX inventory tracking system. Saleaumua accepted that offer and switched distributors.

The government alleges that the kickback skewed the formula used to determine the amount Saleaumua's pharmacies received in Medicaid and Medicare reimbursements, and caused SI to violate the anti-kickback statute.

But neither Saleaumua nor Rinne, the SI consultant, knew it was illegal to accept what Cardinal had characterized as an upfront discount.

Kerr, the Cardinal spokeswoman, said her company believes it would have prevailed in court but wanted to avoid an expensive legal battle.

"We don't believe that payment was a kickback," she said. "That transaction didn't result in the government paying more than it was obligated to pay for pharmaceuticals provided by the customer to federal health care program beneficiaries.

"It's an upfront discount to a retail independent customer," she said. "That $440,000, it's a payment we believe is legitimate and legal and complied with applicable law."

Saleaumua played for the Kansas City Chiefs from 1989 through 1996.