Cephalon Pays $425 Million For Medicaid Fraud
10 CommentsBy Ed Silverman // September 29th, 2008 // 11:43 am
This looks to be the biggest such case involving a biotech. And this involves three - count ‘em, three - drugs that were allegedly marketed for years on an off-label basis in order to greatly widen the potential patient populations, according to court documents. The Cephalon payment includes $375 million in a nationwide Medicaid fraud settlement and $50 million for a corporate criminal plea (here’s the settlement agreement).
The drugs in question - Actiq, a “medicated lozenge on a handle” approved only for pain in cancer patients and later linked to some 100 deaths; the Gabitril epilepsy med for adults and children over 12 years, but was pitched as an alternative to Valium and Zanax, and for treating for depression; and Provigil, a narcolepsy med that was promoted for treating migraines.
The whistleblower lawsuit was filed in 2003 by Lucia Paccione, who worked as a sales rep for Cephalon for nine years in Philadelphia and parts of nearby New Jersey. Sales reps, for instance, were encouraged to leave samples with docs who normally would not have prescribed Gabitril for their patients and also paid honoraria to psychiatrists to recommend the drug to other docs during speaking engagements.
“These are potentially harmful drugs that were being peddled as if they were, in the case of Actiq, actual lollipops instead of a potent pain medication intended for a specific class of patients,” US Attorney Laurie Magid says in a statement. “This company subverted the very process put in place to protect the public from harm, and put patients’ health at risk for nothing more than boosting its bottom line.”
A settlement was actually reached 10 months ago (back story), although Cephalon will pay another $12 million in accrued interest expense, plead guilty to a single misdemeanor violation of the US Food, Drug, and Cosmetic Act (guilty plea agreement and sentencing memo), and enter into a five-year Corporate Integrity Agreement with the Office of the Inspector General of the US Department of Health and Human Services. Cephalon also settled its two outstanding investigations in Connecticut and Massachusetts for a total of $6.85 million (Cephalon statement).
Insider
Great news for Lucia!
Drug reps - step up and blow the whistle!
Big Pharma Guy
Absolutely incredibly disgusting! I’ve been in Big pharma for years, but have to admit I’ve become embarrassed to be part of the industry. The company will agree on a fine, admit no wrongdoing, and its’ top executives will never have to take accountability for their actions. It’s the current wave in the industry - take the riskd to make a profit and if you get caught deny everything. How many companies have doen this now - 8, 10, more? This is heavy stuff and should not be taken lightly. of course, the execs are laughing all the way to the bank while people got sick and even died!!!!
Justice in MI
BMG writes: “This is heavy stuff and should not be taken lightly. of course, the execs are laughing all the way to the bank while people got sick and even died!!!!”
Just for the record - if a patient was injured as a result of having used one of these drugs for one of the off-label uses promoted, preemption would still prevent that pt. from filing suit. There is no felony fraud finding anywhere in this case. That is part of the point of a “misdemeanor” guilty plea. Not enough to constitute a fraud finding.
The Caped Crusader
This is a very big development. Fraud in pharma takes many forms. This settlement demonstrates that the FDA and the Dept of Justice have evolved and recognized that promotional efforts by drug companies even without a kickback scheme attached are true fraud indeed under the false claims act!
They are highly effective at delivering results and costing taxpayers millions for drug expenses that are unnecessary and put patients at risk all in the name of greed. Without evidence of safety or efficacy of their products in a specific population as required by law, their efforts should be punished and hitting them financially is one of the best ways possible.
The lawfirm of Phillips and Cohen is one of the most outstanding legal firms in this area of law. They did the public a great service here.
No amount of money can repair the damage done to the whistleblower in this case they represented due to blackballing and ruining his chances at a career. I hope and wish him the very best. He is a patriot and a hero.
Justice in MI
“This settlement demonstrates that the FDA and the Dept of Justice have evolved…”
I beg to differ. The vast majority of whistleblower qui tams go nowhere. No doubt some of them are unworthy. But I do not believe that is the overall situation.
The question I raised of fraud goes to whether there is a “fraud exception” to preemption. As far as I know, there is nothing in this result that would qualify. Zilch. Rather, the usual - settlements, integrity agreements, and a single misdemeanor charge.
The Caped Crusader
Justice,
My point is simply a legal one reflecting the dignifigance that the Dept of Justice rarely has interest in purely off-label caaes and this is a welcome departure. Sometimes effective promotion can have disasterous results to public safety. Narcotic Lollipops made there way into kids mouths due to their greed. That form of fentanyl has truly been oversold for conditions never intended on approval has accelerated our public drug addiction crisis. We have to make them pay for this effort. If its money you wanted then we will take it back and then some with the FCA.
harpy
The single misdemeanor charge may not look like much, but in this situation it’s huge! It is rare in these cases to get any kind of admission of guilt in any respect. The majority are allowed to deny wrongdoing and pay the fine. The single misdemeanor is a baby step, but it’s a step in the right direction.
You’ve mentioned preemption, Justice, how does it affect a qui tam case like this? The False Claims Act expressly allows citizens to bring suit on behalf of the government - will preemption change this? It seems to be a different ball of wax.
Justice in MI
Agree with both Caped and Harpy. As Caped writes, it is rare that DOJ pursues these cases. That was what I was noting. Also rare that any guilty plea at all, as Harpy says.
Also agree qui tam suits different ball of wax. However, if company convicted of deliberate (felony) fraud in that context, it seems to me conceivable that that would constitute potential grounds for an individual injured in context of promoted off-label use to bring suit _if_ preemption understood to include a “fraud exception.”
As it stands, preemption as advocated by Bush administration does not include such an exception (see USGOV brief in Kent case), and - if there were such an exception - it would probably depend on felony, not misdemeanor, conviction of fraud. All this, of course, open to interpretation in courts - has not been sorted out and will probably require Supreme Court will do so post-Levine. (Kent was 4-4 because of a number of flukes and Roberts’ recusal.)
harpy
Ah, I see. Good point, Justice. I hasn’t thought of it that way.
Honestly, I think DoJ is overwhelmed. Recent Washington Post article stated they have enough qui tam suits to keep them busy for the next ten years! And, out of 900+ cases, over 500 have to do with the healthcare industry. With so many to choose from I think we’ll be seeing not only stiffer penalties, but more criminal convictions. There’s still plenty of low-hanging fruit to go after.
Justice in MI
Thanks for article, Harpy. I’m just guessing, really. As a country non-lawyer, I’m beginning to realize just how difficult it is to get a handle on what the heck the relevant law is in any particular case.
Simple solution: Preempt everything. Washington Post, you’re out first…..