Silicon Valley start-up Practice Fusion has agreed to pay $145 million in fines to resolve criminal and civil charges related to obtaining kickbacks from pharmaceutical companies for promoting their products and misrepresenting the capabilities of its software to get government certifications. According to a report from the Department of Justice, Practice Fusion used its electronic medical record system for doctors to encourage physicians to prescribe opiates. It also solicited and received kickbacks from several drugmakers in exchange for using the software to boost sales of their products.
According to documents filed in a Vermont federal court, Practice Fusion struck 14 such deals with pharmaceutical companies between 2013 and 2017. One agreement with an unnamed pharmaceutical company, later revealed to be OxyContin maker Purdue Pharma, netted the company a payment of nearly $1 million. Purdue was not criminally charged in the case or accused of wrongdoing. The names of the other participants have not been revealed.
Practice Fusion was a darling of the health-tech industry in 2015. The Practice Fusion health-records software platform was used by tens of thousands of healthcare providers. Instead of charging for its software, the company generated the bulk of its revenue by advertising to doctors. The company was so successful that it hired banks to evaluate a 2017 IPO that would have valued the company at up to $1.5 billion.
The $145 million being paid to resolve the criminal and civil allegations includes $113.4 million to the federal government, and up to $5.2 million to states. The remainder of the fines are to settle other claims. Practice Fusion also entered into a deferred prosecution agreement as part of the settlement. The company is now owned by AllScripts, a larger company in the space. Brian Farley, Allscripts’ chief administrative officer and general counsel, said that the conduct was disclosed prior to the acquisition in January of 2018.
