Charles River settles NIH overbilling allegation with $1.8M

Justice Department building inscription
Charles River pays $1.8 million to settle overbilling allegations with the Department of Justice.

Charles River Laboratories has agreed to pay the U.S. government $1.8 million to settle allegations that it overbilled the NIH for contract services it didn’t provide.

According to a release by the Department of Justice, the CRO billed the NIH for labor and related costs of employees at its Raleigh, NC., and Kinston, NY., facilities, but actually didn’t offer the services. Charles River charged the NIH for those services through a contract under which the CRO provides the government research body with lab animals and help develops, maintains and distributes colonies of animals.

In a statement shared with FierceBiotech, the company said it started an internal investigation into inaccurate billing with the help of law firm Davis Polk & Wardwell after an employee reported the issue to senior management. The CRO then reported the issue to HHS’ Office of the Inspector General and the DOJ, and the company “cooperated with these agencies to ensure the proper repayment and resolution of this matter.”

The company’s own investigation confirmed the overbilling activity from its Research Models and Services business for work related to “a small subset of our government contracts,” the company said in its statement. Given the relatively speaking small amount of work, the company was able to settle the issue “to the government’s full satisfaction.”

Even though the DOJ made it clear that the claims settled by the $1.8 million are allegations only, such improper billing activity violates the False Claims Act, which is a common way for the government to recover false claims of government funds, according to the DOJ. The DOJ recovered over $4.7 billion through FCA cases in fiscal year 2016, and among them, $2.5 billion came from the healthcare industry, including drug and medical device companies, hospitals and nursing homes, labs, and physicians.

“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,” said Special Agent in Charge Phillip M. Coyne of the HHS-OIG.

The office previously found problems (PDF) in 2011 with a five-year contract totaled $27.1 million between the NIH’s National Institute on Drug Abuse and Charles River. The CRO provided research laboratory technical services, animal care and other services through that contract. But the HHS-OIG discovered that during fiscal years 2007 to 2009, the institute didn’t comply with the time and amount requirements specified in appropriations statutes. Among several findings, the NIDA paid the CRO $111,000 in error.