Articles Posted in Pharmaceutical Fraud

Brown Pill PileIn the largest settlement yet reached against a pharmaceutical company, the British drug manufacturer GlaxoSmithKline (“GSK”) has agreed to plead guilty to criminal charges and pay $3 billion in fines for marketing of three of its antidepressant drugs for off label uses (i.e., uses not approved by the FDA). The pharmaceutical giant pled guilty to the fraudulent promotion of Paxil, Wellbutrin, and Avandia. In addition, GSK pled guilty to a charge of failure to report safety data about a diabetes drug. The settlement also included civil penalties for improper marketing of six other drugs. The GSK settlement marks the capstone to what has been a record year for recoveries under the False Claims Act (“FCA”), a federal whistleblower law that allows whistleblowers (known as relators) to sue parties accused of defrauding the government. In May, Abbott Laboratories settled for $1.6 billion over its marketing of the psychiatric drug Depakote. The federal government is also likely to settle with Johnson & Johnson in the near future for as much an estimated $2 billion to dispose of allegations surrounding its off-label marketing of the antipsychotic drug Risperdal.

At least $10 billion have been agreed to in settlements so far this fiscal year under the False Claims Act. Off-label marketing of drugs was first accepted as a cognizable theory of recovery under the FCA in 2004, when Warner-Lambert, at that time a division of Pfizer, pleaded guilty to off-label marketing of its epilepsy drug Neurontin and agreed to a $430 million settlement. The claim against GSK originated from complaints filed under the FCA by four employees of the drug company, including a former senior marketing development manager and a regional vice president. The alleged conduct took place from the late 1990s to the mid-2000s. In addition to the allegations of off-label marketing, prosecutors claim that the company paid out illegal kickbacks to doctors in the form of trips, spa treatments, and hunting excursions. In the case of Paxil in particular, prosecutors allege that GSK engaged in fraudulent conduct to promote the drug for use in children, including helping to publish a medical journal article misreporting data from a clinical trial.

The False Claims Act is a federal whistleblower statute dating back to the Civil War. Originally passed as an anti-war profiteering measure, the statute has evolved significantly over time, particularly in the wake of a series of amendments since 1986 that have expanded whistleblower protections and broadened the number of types of claims that may be prosecuted. The law’s qui tam provisions confer standing on relators to sue on behalf of the government for false claims made in connection with payment from the government or to avoid liability. The government may elect to intervene in a suit filed under the FCA, but relators may proceed with their claims even if the government does not do so. Successful relators may recover between 15% and 30% of any final judgment or settlement. Any person who makes efforts to stop violations of the FCA may invoke the law’s provisions against retaliation by employers.


Handful of PillsIn a case that illustrates the growing number of off-label promotion cases filed under the False Claims Act, on May 7th it was announced that Abbott Laboratories had agreed to pay $1.6 billion to settle allegations that it engaged in fraudulent marketing of its drug Depakote. The global settlement included a criminal guilty plea and the settlement of various civil claims. Additionally, the Office of Inspector General of the Department of Health and Human Services (OIG) and Abbott have entered into a five-year corporate integrity agreement (CIA), which will allow for close regulation of Abbott’s conduct going forward.

The case against Abbott reportedly began in 2007 when a whistleblower filed a lawsuit in federal court in Virginia under the qui tam provisions of the False Claims Act, a federal law that allows whistleblowers (also known as relators) to sue on behalf of the government for fraud. Three additional whistleblower suits were filed subsequently by others against the drug manufacturer, prompting a massive government investigation that  reportedly involved witness interviews in 26 states and the production of more than one million documents.

Abbott admitted in its guilty plea to marketing Depakote, which has been approved by the FDA to treat epileptic seizures and biopolar mania and to prevent migraine headaches, as a treatment for schizophrenia and behaviors associated with dementia. The case bears a strong resemblance to the Neurontin off-label promotion case litigated in 1996 in which Pfizer settled with the federal government and whistleblower David Franklin for $430 million in the face of allegations that it had promoted the drug Neurontin, a drug approved by the FDA to treat epilepsy, for treatment of numerous off-label indications not approved by the FDA. Under the Federal Food, Drug, and Cosmetics Act (FDCA), pharmaceutical companies may not market drugs for uses that are “off label” (i.e., not approved by the FDA). The Abbott case also bears another resemblance to the 1996 Neurontin litigation: Abbott  funded two studies on the use of Depakote to treat schizophrenia, neither of which bore out favorable results for the drug Depakote. In the Neurontin case, Parke-Davis, a subsidiary of then-Warner Lambert, had conducted studies which showed that Neurontin was less effective than a sugar pill at treating the symptoms of acute mania.

Pill Bottle MoneyThe U.S. Supreme Court has agreed to hear a challenge to the Ninth Circuit’s recent ruling in a securities fraud class action lawsuit against Amgen Inc., the world’s largest biotechnology company. In the shareholder action, investors in Amgen have alleged that the company misrepresented safety concerns surrounding two of its products, the anemia drugs Aranesp and Epogen, in order to bolster its stock price. According to the investors’ lawsuit, the alleged misrepresentations took place over a period of three years. The Ninth Circuit Court of Appeals sided with the investors, who seek to be certified as a class of plaintiffs in order to aggregate their claims for damages suffered as a result of a precipitous decline in Amgen’s stock price. In the Ninth Circuit appeal, Amgen argued  the investors must demonstrate that the alleged misrepresentations caused the change in share price; the judges disagreed, finding that, if the other requirements for class certification are met, evidence regarding share price need not be presented until trial.

Circuit courts have issued conflicting decisions on this particular issue. The Second Circuit, based in New York, has held that investors must show that the fraud is causally linked to the change in stock price before a judge may certify a class; the Philadelphia-based Third Circuit found that such evidence was not necessary for class certification (although an affirmative showing that the alleged wrongdoing had no effect on trading, according to the Third Circuit’s ruling, would be sufficient to defeat class certification). The controversy comes on the heels of a Supreme Court decision, issued last year, in which the Court ruled that a group of investors could sue Halliburton Co. as a class without first showing that they lost money due to the alleged fraud. Investors in the Amgen case were led by Connecticut’s public employee pension plans.

Individuals may take action to combat fraudulent and abusive practices outside of the context of shareholder class action lawsuits. The False Claims Act, a federal qui tam whistleblower statute, allows private whistleblowers (also called relators) to sue on behalf of the government for false claims made in connection with receipt of government payments or avoidance of liability to the government. The government may elect to intervene in a whistleblower’s claim, but does not always do so, and whistleblowers may proceed with their claims irrespective of government intervention. The False Claims Act also provides employees protections from retaliation by their employers for taking efforts to stop violations of the Act. While the law initially required that a false claim be made directly to the government, a 2009 amendment to the statute has expanded the Act’s coverage to include false claims made to third parties, such as grantees or other beneficiaries of federal money. Relators may recover between 15% and 30% of any settlement or final judgment.

Yellow and Red PillsAbbott Labratories Inc., manufacturer of the pharmaceutical drug Depakote, has pleaded guilty to charges that the company misbranded Depakote by promoting unapproved uses of the drug to control schizophrenia as well as agitation and aggression in elderly patient with dementia, when neither use was approved by the Food and Drug Administration (“FDA”).

Abbott Labs maintained a dedicated sales force to promote the drug to nursing homes despite credible scientific evidence that the drug was safe and effective for treating and controlling agitation and aggression in elderly dementia patients.  Sales representatives were trained through an unambiguous and direct company effort to promote the drug for the off-label uses, including by suggesting it was not subject to the administrative and regulatory requirements associated with the administration of other antipsychotic drugs.  In doing so, the company sought to sidestep federal and state laws concerning the regulation of pharmaceutical drugs inorder to maximize profits at the expense of vulnerable elderly dementia populations.

As to the illegal marketing practices concerning schizophrenia,  the case marks the second time the government has reached a major agreement to resolve criminal and civil claims concerning the illegal marketing practices of a manufacturer of an epilepsy drug.  Back in 2004, a Pfizer subsidiary pleaded guilty to charges over the off-label marketing of Neurontin, a drug approved for epilepsy but aggressively marketed for a number of conditions the FDA had not clinically approved.  In that case, Greene LLP  partner Thomas M. Greene litigated a whistleblower complaint ultimately resulting in $430 million in criminal and civil penalties and established the a legal theory applied in hundreds of subsequent False Claims Act cases alleging improper pharmaceutical marketing practices involving off-label and unapproved use of pharmaceutical drugs.

Allergan recently brought an injunctive action against the FDA asserting the unconstitutionality of several of its provisions regulating off-label promotion. Advancing their First Amendment argument, Allergan employs many of the same arguments put forth in Caronia (for more information on this topic, see here).  However, a primary difference distinguishing Allergan from Caronia lies within Allergan’s Risk Evaluation and Mitigation Strategy. As Allergan argues, providing warnings in compliance with the FDA’s requests constitutes government-compelled speech (warranting strict scrutiny). Continue reading ›

The First Amendment of the United States Constitution protects the freedom of speech.  Not all forms of speech, however, receive total protection, such as yelling “fire” in a crowded theater if doing so is likely to cause injury.  So-called “commercial speech” is a category of speech afforded partial, but not total, protection by the country’s courts.  Regarding the First Amendment debate, the FDA faces a conflict: to balance the need for neutral and candid research within the medical community concerning off-label uses against the self interest of drug makers, who stand to profit if their drugs may be sold for more medical conditions. Continue reading ›

In the wake of a large settlement (for more, see here), GlaxoSmithKline attorney Lauren Stevens was indicted for obstruction and making false statements to the FDA. Allegedly, the attorney withheld incriminating documents and made misrepresentations in letters sent to the FDA. In addition to actions related to poor manufacturing, charges also relate to GSK programs to promote off-label uses of Wellbutrin. At the time, the antidepressant was promoted off-label for weight loss. Continue reading ›

The DOJ reported today that SB Pharmco Puerto Rico Inc., a subsidiary of GlaxoSmithKline, pleaded guilty to False Claims Act charges and agreed to a fine totaling $750 million. The total includes a criminal fine of $150 million and a civil False Claims Act fine of $600 million.

This case represents the first time the False Claims Act has been used to combat violations of FDA manufacturing standards. Continue reading ›

U.S. Senator Charles Grassley (R-Iowa), a long-time proponent of the False Claims Act and an anti-fraud advocate, has recently criticized reports of high-volume prescribers. In particular, Grassley addresses those prescribing extremely large quantities of mental health drugs. Recently, many pharmaceutical companies have agreed to large settlements involving the off-label promotion of these drugs, many of which are the must lucrative of the companies’ offerings.

In his report to Congress, Grassley identified a Miami doctor who allegedly wrote approximately 97,000 prescriptions in 18 months for mental health drugs- averaging about 177 prescriptions per day. He also cited a Texas doctor who wrote 14,170 prescriptions for Xanax in 2009. Continue reading ›

On November 17, 2008, two whistleblowers filed a qui tam action against Medtronic, a medical device manufacturer, alleging off-label promotion of Cardioplate, a heart device. The U.S. District Court in Houston recently granted Medtronic a motion to dismiss the case. The device is FDA approved for ablating (removing) tissue to control bleeding during general surgery and to coagulate cardiac tissue during general surgery. According to the dismissed complaint, Medtronic promoted Cardioplate for the treatment of atrial fibrillation (fast and irregular heartbeat), a use not approved by the FDA as safe and effective. Continue reading ›

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