Over the past ﬁve years, the Department of Justice has exacted substantial criminal and civil penalties through settlements with several of the nation’s largest pharmaceutical companies arising from wide-ranging allegations of heathcare fraud. A few notable themes emerge from these settlements:
• They involve a relatively narrow range of statutes; • Most require that the company enter into a corporate integrity agreement; • The company agrees to pay substantial ﬁnes and/or remediate losses to government payers; and • A vast majority are entered with the United States Attorney’s Ofﬁce for the District of
Several of the most signiﬁcant agreements are discussed below.
Most recently, in September, Pﬁzer and Pharmacia Upjohn Company, Inc. agreed with the US Attorney’s Ofﬁce in Boston to plead guilty to felony misbranding in connection with Pﬁzer’s off-label promotion of its pain drug, Bextra. Pﬁzer marketed Bextra at unapproved dosages and for acute pain notwithstanding that the FDA had explicitly rejected that indication. Pﬁzer agreed to pay the largest criminal penalty ever for a healthcare fraud violation–$1.195 billion in ﬁnes and a forfeiture of $105 million. It paid an additional $1 billion plus interest to resolve civil liability to government payers under the False Claims Act. Finally, Pﬁzer agreed to enter into a ﬁve-year Corporate Integrity Agreement with the Department of Health and Human Services that required it to implement policies, procedures and practices to ensure compliance with federal healthcare program requirements and FDA requirements.
Earlier in 2009, Eli Lily agreed with the US Attorney’s Ofﬁce for the Eastern District of Pennsylvania to plead guilty to misdemeanor misbranding in connection with Lily’s off-label marketing of its anti-psychotic drug, Zyprexa. The FDA approved Zyprexa for treatment of bipolar disorder and short-term treatment of schizophrenia. Lily admitted marketing Zyprexa in elderly populations for non-indicated uses including Alzheimer’s dementia. The government alleged in an Information that Lily trained its sales force to disregard the law and promote Zyprexa for off-label uses, and that Lily created marketing materials promoting those uses. Lily agreed to pay a $500 million criminal ﬁne and forfeit $100 million. It additionally agreed to pay $800 million to resolve civil liability to federal and state payers under the False Claims Act.
There is no obvious explanation for why Pﬁzer pled to felony misbranding while Lily only pled to a misdemeanor violation of the statute. Perhaps the result can be attributed to the exercise of prosecutorial discretion by two separate US Attorneys’ Ofﬁces. The consequence of the different dispositions is substantial: Lily is not barred from participating in federal healthcare programs. Pharmacia Upjohn, which entered the plea for Pﬁzer, is subject to such a ban.
Few signiﬁcant Pharma settlements over the past few years have involved individuals. One notable exception is the settlement between the US Attorney’s Ofﬁce for the Western District of Virginia and Purdue Frederick Company in May 2007. Purdue Pharma agreed to plead guilty to felony misbranding, while its President, Chief Legal Ofﬁcer and Medical Affair Director pled to misdemeanor misbranding. The agreement arose out of Purdue Pharma’s understatement of the safety risks for its drug, OxyContin. Although the company’s internal documents explicitly acknowledged its concern over the drug’s “abuse potential,” the company promoted OxyContin as less addictive, less subject to abuse and less likely to cause withdrawal than other pain medications. Purdue and the individual defendants agreed to pay $635K in criminal and civil ﬁnes. Purdue Pharma also entered into a ﬁve–year corporate integrity agreement with the Department of Health and Human Services.
In March 2007, the US Attorney’s Ofﬁce for the District of Massachusetts in Boston entered into an agreement with Pharmacia Upjohn to resolve kickback allegations regarding, and off-label promotion of, Genotropin, approved by the FDA to treat a limited range of hormonal deﬁciencies. Pharmacia Upjohn pled guilty to a felony violation for offering payments to induce physicians to recommend the purchase of, or themselves order, Genotropin. The government speciﬁcally declined to prosecute Pﬁzer with respect to Genotropin because of Pﬁzer’s self-disclosure of wrongdoing within one month of acquiring Pharmacia Upjohn. The company paid a criminal ﬁne of $19 million and entered into a deferred prosecution agreement for 36 months.
Other Recent Settlements
US Attorney’s Ofﬁce
If you wish to discuss any of these matters further, Joseph Zwicker can be reached by telephone at (617) 248-5065 or by email at email@example.com.
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