SAN FRANCISCO (AP) -- A St. Louis-based drug maker will pay $3.5 million to settle allegations that it paid doctors to prescribe "outdated, third rate" antidepressants and sleep aids, the U.S. attorney's office in San Francisco announced Thursday.
A former employee of Mallinckrodt LLC originally filed the lawsuit in 2008 under the federal False Claims Act. The employee alleged that between 2005 and 2010, the company paid doctors consulting and speaking fees and other inducements in exchange for prescribing drugs that otherwise would not have been prescribed.
"While we deny the allegations in this matter, we are glad they are resolved," company spokeswoman Erica Abbett said in a statement. "What's important to us now is to move forward and continue providing safe and effective products to patients."
The former employee, John Prieve, filed the lawsuit under a federal law that allows whistleblowers to sue companies accused of defrauding the government. Prieve alleged the federally funded Medicare and Medicaid programs paid for some of the prescriptions in question.
Prieve will receive $603,000.
The lawsuit alleged the company targeted doctors who prescribed the type of antidepressants and sleep pills Mallinkrodt manufactured. It further alleged that several of the drugs were first approved decades ago.
"Without financial inducement to the providers, the majority of prescriptions for defendants' drugs would absolutely not be prescribed," the lawsuit stated.
"This settlement demonstrates this Office's commitment to protecting the integrity of the Medicare and Medicaid programs and ensuring that physicians are making care decisions without undue influence," U.S. Attorney Melinda Haag said in a statement.
Shares of Mallinckrodt began trading on the New York Stock Exchange on July 1 after the company was spun off from its parent company, Ireland-based Covidien. Mallinckrodt's stock rose $1.16 Thursday to close at $43.09.
Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.