Articles Posted in Pharmaceutical Fraud

This month, the Department of Justice (“DOJ”) announced that Shire Pharmaceuticals will pay $350 million to settle False Claims Act (“FCA”) allegations that Shire and the company it acquired in 2011, Advanced BioHealing (“ABH”), used kickbacks and other prohibited sales methods to compel hospitals, Doctors, and their firms to overuse its product “Dermagraft.”

Shire is a pharmaceutical company headquartered in Ireland. Its United States headquarters are located in Lexington, Massachusetts.

The allegations resolved by the settlement were brought in six lawsuits filed under the qui tam whistleblower provisions of the FCA. Those provisions permit private parties to sue on behalf of U.S. and state governments for false claims.

Stethoscope 2AstraZeneca and Cephalon have both reached settlements with the US Department of Justice (DOJ), totaling $54 million. AstraZeneca has agreed to pay the United States and participating states a total of $46.5 million with interest. Cephalon, which is now owned by Teva, has agreed to pay the United States and participating states a total of $7.5 million. The companies were accused of deliberately underreporting Average Manufacturer Prices (AMPs) to public health programs. The cases were brought by a whistleblower, Ronald J. Streck, under the qui tam provisions of the False Claims Act. Continue reading ›

Pill-Bottle-Money1-150x150Inspire Pharmaceuticals, a specialty pharmaceutical company with its principal place of business in Lake Forest, Illinois, has reached a settlement agreement of $5.9 million with the US Department of Justice (DOJ). The settlement money will go to the United States and various state governments. According to the US District Attorney’s press release, Inspire admitted to starting a marketing campaign in 2008 to broaden the customer base for AzaSite by focusing on, among other things, AzaSite’s claimed anti-inflammatory effects, which were not approved by the Food and Drug Administration (FDA), and were not demonstrated by substantial evidence or substantial clinical experience. INSPIRE further admitted that AzaSite was prescribed for blepharitis, and that claims to treat blepharitis were submitted to federal healthcare programs for payment. This case was initially brought forward by a whistleblower in 2010 under the qui tam provisions of the False Claims Act. The United States quickly intervened, taking over the case. Continue reading ›

Pill-Bottle-MoneyThis week, Bristol-Myers Squibb Co. (“BMS”) and Otsuka America Pharmaceutical Inc. (“Otsuka”) asked a federal court judge in Ohio to dismiss a complaint filed against them by two relators that alleges that the pharmaceutical companies offered illegal kickbacks to physicians in order to induce them to promote off-label uses of the antipsychotic drug Abilify. Induced prescriptions for off-label uses are not eligible for reimbursement by government health care programs. The kickbacks allegedly violated the Anti-Kickback Statute. Both allegations predicate liability under the False Claims Act. Two former sales representatives employed by BMS are specifically alleging that, beginning in 2005, the companies engaged in a nationwide scheme to fraudulently promote Abilify to doctors of pediatric and geriatric patients. Aripiprazole, marketed jointly by BMS and Otsuka as Abilify, generated sales of over $6 billion in 2013. Such sales make it one of the highest-grossing prescription drugs worldwide. Continue reading ›

Yellow-and-Red-Pills-300x224The U.S. Department of Justice announced last week that Shire Pharmaceuticals LLC (“Shire”) has agreed to pay $56.5 million to settle allegations brought by several whistleblowers that it violated the False Claims Act. At issue was the Pennsylvania-based company’s improper marketing, promotion, and distribution of Adderall XR, Vyvanse, and Daytrana approved by the U.S. Food and Drug Administration (“FDA”) for the treatment of attention deficit hyperactive disorder (“ADHD”) and Pentasa and Lialda, approved by the FDA for the treatment of mild to moderate active ulcerative colitis. Although the uses for the drugs may be considered diverse, the company had allegedly made a number of claims to prescribers involving the appropriateness and benefits of the drugs without any corresponding supporting data. Former Shire executive Gerardo Torres filed the first of two qui tam complaints in a federal court in Pennsylvania in 2008 while three former Shire sales representatives filed the second in a federal court in Illinois in 2009.

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Pill Bottle MoneyPharmaceutical manufacturer Mallinckrodt LLC has agreed to pay $3.5 million to settle allegations that it made illegal payments to physicians to prescribe anti-depressants and sleep aids produced by the company. The improper payments allegedly created the submission of false claims to Medicare and Medicaid between January 2005 and June 2010 in violation of the federal False Claims Act and several parallel state false claims statutes.

The complaint filed in 2008 by former Mallinckrodt employee John Prieve alleged that the company paid physicians consulting fees and fees for their participation in speaking programs, meetings, for completing forms, and for clinical trials as an incentive to prescribe Restoril, Magnacet, Tofranil-PM, and their generic equivalents. Prieve alleged that the majority of the physicians would not have prescribed these drugs absent the financial incentives as the drugs were “third rate” and “outdated” being first approved by the FDA decades ago.

Prieve filed his complaint alleging fraud on government healthcare programs on behalf of the United States under the qui tam provisions of the False Claims Act. As the realtor, Prieve is entitled to up to 30% of any final judgment or settlement as well as protection from employer retaliation. Prieve will receive $603,000 for his role in exposing the alleged fraud in this case.

FDA approvedThe United States Department of Justice (“DOJ”) has intervened in two False Claims Act suits filed against the pharmaceutical giant Novartis, alleging the company paid unlawful kickbacks to physicians and pharmacies in violation of federal law. Novartis is the second-largest pharmaceutical company in the world by sales, the global headquarters of which are located in Basel, Switzerland, and American operations based in New Jersey. Both suits were filed in the U.S. Attorney’s Office for the Southern District of New York, located in Manhattan. The suits allege violations of a federal law known as the Anti-Kickback Statute.

In the first suit filed by federal prosecutors,  the United States alleges that Novartis paid kickbacks to pharmacies in exchange for switching patients from CellCept, a brand name immunosuppressant manufactured by Hoffmann-La Roche (a competing Swiss pharmaceutical company), or a generic version, to Myfortic, Novartis’s immunosuppressant drug. The payments to pharmacies were characterized as “rebates” and “discounts,” a common practice by which drug companies seek to disguise unlawful attempts to induce pharmacy referrals of drugs to be reimbursed by federal health insurance programs.

Only days later, a second suit was filed in connection with Novartis’s allegedly pervasive use of kickbacks to physicians in exchange for prescriptions of Novartis products. According to the complaint, Novartis paid doctors “honoraria” fees for endorsing and speaking about certain drugs, including hypertension drugs Lotrel and Valturna as well as its diabetes medication, Starlix. While it is not per se unlawful for physicians to accept compensation for appearing at events sponsored by pharmaceutical companies or speaking favorably about a company’s drug, such fees are often nothing more than unlawful kickbacks in disguise. In this case, the government claims that Novartis sponsored events and paid doctors to attend events which were essentially social gatherings for doctors with only de minimis educational value. In many instances, doctors spent little or no time discussing the drugs at issue, and some of the purported speaker events either did not occur at all or had very few attendees. The kickback scheme is also alleged to have included elaborate dinners; one such meal at a restaurant in Washington, D.C. cost $672 dollars per person.

Doctor with PillsAmgen, a California-based biotechnology company, has reached a settlement with the United States Department of Justice (DOJ), as a result of which the company will pay $24.9 million to resolve claims of Medicare and Medicaid fraud brought under the False Claims Act. The United States alleges that Amgen paid unlawful kickbacks to long-term care facility pharmacy providers in exchange for steering Medicare and Medicaid patients to use of the drug Aranesp, Amgen’s anti-anemia drug. The pharmacy providers are alleged to be Omnicare Inc., PharMerica Corp., and Kindred Healthcare Inc. Kickbacks were paid in proportion to the volume of the drug purchased by each pharmacy, according to the government’s complaint. Providers that participate in federal health insurance programs are prohibited under the federal Anti-Kickback Statute (“AKS”) from offering or soliciting remuneration in exchange for referrals resulting in the purchase of a product or service eligible for reimbursement by the federal program. While not all such payments are illegal, payments which vary depending upon the volume of referrals are usually condemned by the statute. Providers that seek reimbursement under Medicare or Medicaid despite non-compliance with federal statutes such as the AKS may be liable for submitting, or causing to be submitted, false claims for payment in violation of the False Claims Act.

The Amgen kickbacks were allegedly paid in the form of grants, honoraria, speakers’ fees, and travel expenses to employees at the pharmacy providers. In return, according to the government, the pharmacies implemented a “therapeutic interchange” program whereby nursing home patients were taken off of a competing firm’s anti-anemia medication and switched to Aranesp. Consequently, the Medicare and Medicaid programs paid for countless Aranesp prescriptions for which reimbursement was not permitted because the referrals resulted from unlawful kickbacks. Additionally, the United States claimed that Amgen pressured some pharmacists to recommend use of Aranesp for patients for whom the drug was not medically necessary. Under the terms and conditions of participation, Medicare and Medicaid do not reimburse for medically unnecessary medical care, and such promotion by the drug’s manufacturer may also have violated the Federal Food, Drug, and Cosmetic Act (“FDCA”), which prohibits pharmaceutical manufacturers from promoting drugs for uses unapproved by the FDA or for medically unnecessary uses.

Initially, the allegations against Amgen were made in a private whistleblower suit filed under the qui tam provisions of the False Claims Act. Under the qui tam provisions, individuals with knowledge of fraud against the government may sue on behalf of the United States. Qui tam suits are filed under seal, and subsequently the whistleblowers (referred to as “relators”) disclose the allegations in the complaint to the DOJ. After an initial period of investigation, the DOJ determines whether or not the United States will exercise its right to intervene in the litigation. Regardless of whether the government intervenes, relators may proceed privately with their claims and receive an award equal to a percentage of the government’s total recovery. A relator who prevails without government intervention stands to recover between 25-30% of any final judgment or settlement in favor of the United States. In the Amgen case, the DOJ elected to intervene in a qui tam suit filed in 2011 by a former Amgen employee.

FDA approvedA recent opinion handed down by a panel of the United States Court of Appeals for the Second Circuit in U.S. v. Caronia has raised serious questions about the constitutionality of criminal prosecutions for illegal promotion of drugs under the Federal Food, Drug, and Cosmetic Act (“FDCA”), a statute which many proponents of consumer protection regard as indispensable for the effective regulation of drug safety in the United States. Alfred Caronia, a Specialty Sales Consultant hired by Orphan Medical, Inc. (a drug manufacturer since acquired by Jazz Pharmaceutical) in March of 2005 to promote the drug Xyrem, was convicted on two counts of misbranding and conspiracy to misbrand under the FDCA in 2009 after a jury trial in federal district court in Long Island, NY. Caronia appealed his conviction to the Second Circuit, which has jurisdiction over the federal district courts in New York State, Connecticut, and Vermont, and the panel vacated his conviction on the grounds that criminal convictions predicated upon the “off-label” promotion of drugs (that is, promotion of drugs for indications not approved by the FDA) constitute speaker- and content-based restrictions of speech in violation of the First Amendment. The panel’s decision was 2-1, with a vigorous dissent from Circuit Judge Debra Livingston.

The text of FDCA §331(a) prohibits the “misbranding” of drugs; a drug is defined as “misbranded” if, among others, the manufacturer fails to provide adequate instructions for the intended use of the drug under §352(f). Furthermore, regulations promulgated by the FDA make clear that the government may demonstrate a drug’s intended use through evidence of statements in promotion of the drug for uses for which it is neither labeled nor advertised. Thus, when pharmaceutical representatives promote the use of a drug for indications unapproved by the FDA, the conduct is probative of misbranding in violation of the FDCA. While the federal government investigates misbranding offenses for the purposes of criminal prosecution, the practice of off-label promotion also gives rise to false claims under the federal False Claims Act. Off-label promotion was first recognized by a court as actionable fraud under the False Claims Act in 2003, when U.S. District Judge Patti Saris denied summary judgment in a False Claims Act suit alleging off-label promotion by Warner-Lambert and Pfizer. Since the novel theory was validated in 2003 (culminating in a historic $430 million settlement in 2004), off-label promotion has led to billions of dollars in recoveries for both the government and private whistleblowers filing suit under the qui tam (whistleblower) provisions of the False Claims Act. Whistleblowers (known as “relators”) who file suit under the False Claims Act may recover between 15% and 30% of any final judgment or settlement as a reward for coming forward.

Xyrem was approved by the FDA in 2002  for narcolepsy patients who experience cataplexy, a condition associated with weak or paralyzed muscles. In 2005, the FDA approved Xyrem to treat narcolepsy patients with excessive daytime sleepiness (“EDS”), a neurological disorder caused by the brain’s inability to regulate sleep-wake cycles. Xyrem’s active ingredient is gamma-hydroxybutryate (“GHB”), commonly referred to as the “date rape drug” due to its prevalence in the commission of sexual assaults, and consequently the FDA limited the drug’s approval to the two indications and required the manufacturer to place a “black box” warning on the label. A black box warning is the most serious type of warning that the FDA can mandate; among others, Xyrem’s black box warning disclaimed the drug’s efficacy in patients under 16 years of age as well as the elderly. Careful FDA regulation of potentially harmful drugs such as Xyrem is intended to ensure that consumers are not exposed to unreasonable danger from use.

FDA approvedFaced with allegations brought by the South Carolina Attorney General claiming that its drug Seroquel causes harmful side-effects and was promoted for off-label uses, AstraZeneca has abandoned a lawsuit against the South Carolina AG, agreeing instead to pay $26 million to resolve all of the state’s claims related to Seroquel.

In late December of 2012, a state court judge in South Carolina denied the state AG’s motion to dismiss a suit claiming that AstraZeneca’s Fourteenth Amendment due process rights were violated by the contingency fee arrangements between the AG’s Office and three private law firms. The lawsuit invoked a legal strategy pursued by other major pharmaceutical companies, including Merck, that face claims of off-label promotion and other fraudulent practices. According to AstraZeneca, because the AG’s Office would retain 10% of any recovery under the contingency agreement, the AG essentially had a financial stake in the outcome of the litigation and had compromised his independence. The state court judge’s denial of the motion to dismiss signaled that the protracted litigation would be allowed to continue, and cast doubt upon the ability of the South Carolina Attorney General to pursue the state law claims against the pharmaceutical company. Despite the judge’s ruling, AstraZeneca has assented to a $26 million settlement to resolve the legal claims against it. The company’s decision may reflect the inefficiency of a legal strategy predicated upon litigating two lawsuits simultaneously. The South Carolina attorney general sought to recover funds spent to treat side-effects for Seroquel, an antipsychotic medication, and for reimbursements for alleged off-label uses. Since South Carolina’s Medicaid program generally does not reimburse for off-label prescriptions (that is, prescriptions for uses of a drug that have not been approved by the FDA), the state may seek to recover funds spent to reimburse for such prescriptions.

South Carolina is one of twenty U.S. states that does not have its own version of the federal False Claims Act (“FCA”), a statute containing qui tam (whistleblower) provisions that allow private citizens with knowledge of fraud to sue on behalf of the government. The FCA allows for recovery of treble damages and a penalty of up to $11,000 per violation, creating a strong incentive for whistleblowers (known as relators) to come forward; if successful, relators stand to recover between 15% and 30% of any final judgment or settlement on behalf of the government. The Act imposes liability for false claims for payment, and also for failure to return over-payments from the government. Recent changes to the FCA have expanded the scope of liability and increased the statute’s protections against employer retaliation. Unfortunately for potential whistleblowers, there is no South Carolina False Claims Act.  The AstraZeneca litigation highlights the potential benefits that would accrue to a state like South Carolina if it were to adopt its own False Claims Act, empowering private individuals to come forward with information concerning fraud and abuse of the state’s funds.

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