Alleged Head of Wildlife Smuggling Ring Extradited from Australia

Monday, July 24, 2017

Guan Zong Chen (“Graham Chen”), a Chinese national was arraigned today in federal court in Boston, Massachusetts on charges that he led a conspiracy to illegally export (smuggle) $700,000 worth of wildlife items made from rhinoceros horn, elephant ivory and coral from the United States to Hong Kong. Chen was arrested last year when he traveled from China to Australia and today’s hearing was his first court appearance on an indictment returned by a Boston grand jury in 2015 and unsealed in anticipation of the hearing.

According to the eight-count indictment, Chen purchased the wildlife artifacts at U.S. auction houses located in California, Florida, Ohio, Pennsylvania, New York and Texas. He conspired with another Chinese national, a recent college graduate in China to travel to the United States to pick up the purchased items and either hand carry or arrange for them to be mailed to another co-conspirator that owned a shipping business in Concord, Massachusetts. The shipper then repacked the wildlife items and exported (smuggled) them to Hong Kong with documents that falsely stated their contents and value and without obtaining required declarations and permits. In April 2014, Chen visited the United States and visited the shipper in Concord, Massachusetts. During the visit with the shipper, CHEN instructed the shipper to illegally export (smuggle) a sculpture made from elephant ivory to Hong Kong on Chen’s behalf and falsely declared it to be made of wood and worth $50.

The unsealing of the indictment and court appearance were was announced today by Acting Assistant Attorney General Jeffrey H. Wood of the Justice Department’s Environment and Natural Resources Division and Acting U.S. Attorney William D. Weinreb of the District of Massachusetts. In announcing the case today, Acting Assistant Attorney General Wood and Acting U.S. Attorney Weinreb expressed their appreciation to the Australian Federal Police and the Australian Attorney-General’s Department for their help in apprehending Chen and extraditing him to the United States.

Trade in rhinoceros horn, elephant ivory and coral have been regulated since 1976 under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), a treaty signed by over 175 countries around the world to protect fish, wildlife, and plants that are or may become imperiled due to the demands of international markets. Animals listed under CITES cannot be exported from the United States without prior notification to, and approval from, the U.S. Fish & Wildlife Service.

was apprehended as part of Operation Crash, an ongoing effort by the Department of the Interior’s Fish and Wildlife Service, in coordination with the Department of Justice to detect, deter, and prosecute those engaged in the illegal killing of and trafficking in protected species including rhinoceros and elephants.

An indictment contains allegations that crimes have been committed. A defendant is presumed innocent until proven guilty beyond a reasonable doubt.

The investigation is continuing and is being handled by the U.S. Fish & Wildlife Service’s Office of Law Enforcement and the Justice Department’s Environmental Crimes Section, with assistance from the U.S. Attorney’s Office for the District of Massachusetts and support on the extradition from DOJ’s Office of International Affairs and the U.S. Marshals Services in the District of Massachusetts. The government is represented by Senior Litigation Counsel Richard A. Udell and Trial Attorney Gary N. Donner of the Justice Department’s Environmental Crimes Section of the Environment and Natural Resources Division.

Owner of New England Compounding Center Sentenced for Racketeering Leading to Nationwide Fungal Meningitis Outbreak

Monday, June 26, 2017
Outbreak Was the Largest Public Health Crisis Ever Caused by a Pharmaceutical Product

The owner and head pharmacist of New England Compounding Center (NECC) was sentenced today to nine years in prison in connection with the 2012 nationwide fungal meningitis outbreak, the Department of Justice announced today.

Barry Cadden, 50, of Wrentham, Massachusetts, was sentenced by U.S. District Court Judge Richard G. Stearns to serve 108 months in prison and three years of supervised release, and forfeiture and restitution in an amount to be determined later. In March 2017, Cadden was convicted by a federal jury of racketeering, racketeering conspiracy, mail fraud and introduction of misbranded drugs into interstate commerce with the intent to defraud and mislead.

“Barry Cadden put profits ahead of patients,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “Under his direction, employees assured customers that they were getting safe drugs, while Cadden ignored grave environmental failures, used expired active ingredients, and took innumerable other production shortcuts that led to numerous, entirely preventable deaths. As Cadden’s sentence reflects, the Justice Department’s Consumer Protection Branch is committed to prosecuting those who put the health of Americans at risk.”

“Barry Cadden put profits over patients,” said Acting U.S. Attorney William D. Weinreb for the District of Massachusetts. “He used NECC to perpetrate a massive fraud that harmed hundreds of people. Mr. Cadden knew that he was running his business dishonestly, but he kept doing it anyway to make sure the payments kept rolling in. Now he will have to pay for his crimes.”

“Protecting Americans from unsafe and contaminated drugs is at the core of our mission,” said FDA Commissioner Scott Gottlieb, M.D. “Patients should not have to worry about the safety and sterility of the drugs they are prescribed. Since this tragedy, Congress has given the FDA important new authorities, and the agency has implemented key policies, all to provide a greater assurance of safety over compounded medicines. As part of these efforts, we will continue to hold accountable those who violate the law and put patients at risk.”

“Today, Barry Cadden was held responsible for one of the worst public health crises in this country’s history, and the lives of those impacted because of his greed, will never be the same,” said Special Agent in Charge Harold H. Shaw of the FBI, Boston Field Division. “This deadly outbreak was truly a life-changing event for hundreds of victims, and the FBI is grateful to have played a role, alongside our law enforcement partners, in bringing this man to justice.”

In 2012, 753 patients in 20 states were diagnosed with a fungal infection after receiving injections of preservative-free methylprednisolone acetate (MPA) manufactured by NECC. Of those 753 patients, the U.S. Centers for Disease Control and Prevention (CDC) reported that 64 patients in nine states died. The outbreak was the largest public health crisis ever caused by a pharmaceutical product.

Specifically, Cadden directed and authorized the shipping of contaminated MPA to NECC customers nationwide. In addition, he authorized the shipping of drugs before test results confirming their sterility were returned, never notified customers of nonsterile results, and compounded drugs with expired ingredients. Furthermore, certain batches of drugs were manufactured, in part, by an unlicensed pharmacy technician at NECC. Cadden also repeatedly took steps to shield NECC’s operations from regulatory oversight by the FDA by claiming to be a pharmacy dispensing drugs pursuant to valid, patient-specific prescriptions. In fact, NECC routinely dispensed drugs in bulk without valid prescriptions. NECC even used fictional and celebrity names on fake prescriptions to dispense drugs, such as “Michael Jackson,” “Freddie Mae” and “Diana Ross.”

“Today’s sentencing demonstrates the ongoing commitment of the Defense Criminal Investigative Service (DCIS) to protect the integrity of TRICARE, the U.S. Defense Department’s health care program,” stated Special Agent in Charge Leigh-Alistair Barzey of DCIS, Northeast Field Office. “DCIS will continue to work with its law enforcement partners to identify and investigate individuals who disregard pharmaceutical and drug regulations and endanger the health and safety of U.S. military members and their families.‎”

“No veterans receiving VA care were harmed by the fungal meningitis outbreak,” said Special Agent in Charge Donna L. Neves for the Department of Veterans Affairs, Office of Inspector General (VA-OIG). “The VA Office of Inspector General, together with its law enforcement partners, will persist in working drug adulteration cases to ensure veterans continue to receive safe and effective medications for the purpose of healing their ailments.”

“Today’s sentencing is an example of the dedicated work of law enforcement, along with the U.S. Attorney’s Office Health Care Fraud Unit in their steadfast pursuit of justice in the largest public health crisis caused by a pharmaceutical product in this nation’s history,” said Inspector in Charge Shelly Binkowski of the U.S. Postal Inspection Service. “The U.S. Postal Inspection Service will continue to be vigilant in investigating cases where the U.S. mail is used to put our nation’s citizens at risk.”

Assistant U.S. Attorneys George P. Varghese and Amanda P.M. Strachan of Weinreb’s Health Care Fraud Unit and Trial Attorney John W.M. Claud of the Justice Department’s Consumer Protection Branch prosecuted the case.

 

Daiichi Sankyo Inc. Agrees to Pay $39 Million to Settle Kickback Allegations Under the False Claims Act

Daiichi Sankyo Inc., a global pharmaceutical company with its U.S. headquarters in New Jersey, has agreed to pay the United States and state Medicaid programs $39 million to resolve allegations that it violated the False Claims Act by paying kickbacks to induce physicians to prescribe Daiichi drugs, including Azor, Benicar, Tribenzor and Welchol, the Justice Department announced today.

“The Anti-Kickback Statute prohibits payments intended to influence a physician’s ordering or prescribing decisions,” said Acting Assistant Attorney General Joyce R. Branda for the Civil Division.  “The Department of Justice is committed to preserving the independence and objectivity of those decisions, which are cornerstones of our public health programs.”

The Anti-Kickback Statute was enacted to ensure that physicians’ medical judgment is not compromised by improper payments and gifts by other health care providers.  The statute generally prohibits anyone from offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by federal health care programs, including Medicare and Medicaid.

In this case, the government alleged that Daiichi paid physicians improper kickbacks in the form of speaker fees as part of Daiichi’s Physician Organization and Discussion programs, known as “PODs,” which were run from Jan. 1, 2005, through March 31, 2011, as well as other speaker programs that were run from Jan. 1, 2004, through Feb. 4, 2011.  Allegedly, payments were made to physicians even when physician participants in PODs took turns “speaking” on duplicative topics over Daiichi-paid dinners, the recipient spoke only to members of his or her own staff in his or her own office, or the associated dinner was so lavish that its cost exceeded Daiichi’s own internal cost limitation of $140 per person.

“Drug companies are prohibited from using lavish entertainment and padded speaker program payments to induce physicians to prescribe their drugs for beneficiaries of federal health care programs,” said U.S. Attorney Carmen Ortiz for the District of Massachusetts.  “Settlements like this one show that the government will continue to pursue health care companies that use kickbacks to promote their products.”

As part of the settlement, Daiichi has agreed to enter into a corporate integrity agreement with the Department of Health and Human Services-Office of Inspector General (HHS-OIG), which obligates the defendants to undertake substantial internal compliance reforms for the next five years.

“Schemes such as this are particularly abhorrent,” said Inspector General Daniel R. Levinson for the U.S. Department of Health and Human Services.  “Manufacturers and physicians who engage in them are cheating Medicare and Medicaid out of millions of dollars and threatening programs upon which many elderly and disabled Americans rely.  My office will take whatever steps necessary to guard against improper alliances between manufacturers of drugs and those who prescribe them.  Through our corporate integrity agreement we will be closely monitoring Daiichi.”

The settlement announced today stems from a complaint filed by Kathy Fragoules, a former Daiichi sales representative, under the whistleblower provisions of the False Claims Act, which authorize private parties to sue on behalf of the United States, and to receive a portion of any recovery.  Fragoules will receive $6.1 million of the federal recovery.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $23.3 billion through False Claims Act cases, with more than $14.9 billion of that amount recovered in cases involving fraud against federal health care programs.

The investigation and litigation was conducted by the Civil Division, the U.S. Attorney’s Office for the District of Massachusetts, the U.S. Department of Veterans Affairs, the Department of Defense Criminal Investigative Service, HHS-OIG and the FBI.  The claims settled by this agreement are allegations only and there has been no determination of liability.

The case is captioned U.S. ex rel. Fragoules v. Daiichi Sankyo, Inc., Civil Action No. 10-10420 (D. Mass.).

15-017

Biomet Companies to Pay Over $6 Million to Resolve False Claims Act Allegations Concerning Bone Growth Stimulators

EBI LLC, doing business as Biomet Spine and Bone Healing Technologies and Biomet Inc. have agreed to pay $6.07 million to resolve allegations that EBI violated the False Claims Act by paying kickbacks to induce use of its bone growth stimulators and billing federal health care programs for refurbished stimulators, the Department of Justice announced today.  EBI is a medical device company located in Parsippany, New Jersey, that sells bone growth stimulators, which are used to repair fractures that are slow to heal.  It is a subsidiary of Biomet, which is based in Warsaw, Indiana.

“Medical device companies must not use improper financial incentives to influence the decision to use their products,” said Acting Deputy Assistant Attorney General August Flentje of the Justice Department’s Civil Division.  “This settlement demonstrates the department’s commitment to protect patients, and the taxpayers who fund their care, by ensuring that medical decisions are based on the patients’ medical needs rather than the financial interests of others.”

The United States alleged that, from 2001 to 2008, EBI paid staff at doctors’ offices to influence doctors to order its bone growth stimulators.  These payments were allegedly provided pursuant to personal service agreements with staff members. The United States concluded that these payments violated the Anti-Kickback Act and resulted in false billings to various federal health care programs, including Medicare.  The settlement also resolves EBI’s disclosure that it received federal reimbursements for bone growth stimulators that had been refurbished.

“This settlement demonstrates our resolve in ensuring that patients receive, and the government pays for, health care that is based on sound medical judgment, and not compromised by kickbacks,” said U.S. Attorney Carmen M. Ortiz of the District of Massachusetts.

“Kickbacks taint medical decision-making, cause overutilization of services, and lead to increased taxpayer and patient costs,” said Special Agent in Charge Phillip Coyne of the U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG).  “These improper inducements have no place in government health programs relied on by millions of Americans.”

The settlement resolves in part an allegation filed in a lawsuit by Yu Yue, a former product manager for EBI, in federal court in New Jersey.  The lawsuit was filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery.  Yu’s share has not yet been determined.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $23 billion through False Claims Act cases, with more than $14.8 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement was the result of a coordinated effort by the Commercial Litigation Branch of the Civil Division; the U.S. Attorney’s Office for the District of Massachusetts; HHS-OIG; the U.S. Postal Service Office of Inspector General; the Defense Criminal Investigative Service; the U.S. Department of Veterans Affairs, Office of Inspector General and the U.S. Food and Drug Administration, Office of Criminal Investigations.

Ms. Yu’s case is captioned United States ex rel. Yu v. Biomet, Inc., Civil Action No. 09-1731 (D.N.J.).  The claims resolved by the settlement are allegations only; there has been no determination of liability.

Johnson & Johnson to Pay More Than $2.2 Billion to Resolve Criminal and Civil Investigations (last matter GeyerGorey’s Patricia Davis worked prior to her retiring from USDOJ and joining our firm)

WASHINGTON – Global health care giant Johnson & Johnson (J&J) and its subsidiaries will pay more than $2.2 billion to resolve criminal and civil liability arising from allegations relating to the prescription drugs Risperdal, Invega and Natrecor, including promotion for uses not approved as safe and effective by the Food and Drug Administration (FDA) and payment of kickbacks to physicians and to the nation’s largest long-term care pharmacy provider.  The global resolution is one of the largest health care fraud settlements in U.S. history, including criminal fines and forfeiture totaling $485 million and civil settlements with the federal government and states totaling $1.72 billion.

“The conduct at issue in this case jeopardized the health and safety of patients and damaged the public trust,” said Attorney General Eric Holder.  “This multibillion-dollar resolution demonstrates the Justice Department’s firm commitment to preventing and combating all forms of health care fraud.  And it proves our determination to hold accountable any corporation that breaks the law and enriches its bottom line at the expense of the American people.”

The resolution includes criminal fines and forfeiture for violations of the law and civil settlements based on the False Claims Act arising out of multiple investigations of the company and its subsidiaries.

“When companies put profit over patients’ health and misuse taxpayer dollars, we demand accountability,” said Associate Attorney General Tony West.  “In addition to significant monetary sanctions, we will ensure that non-monetary measures are in place to facilitate change in corporate behavior and help ensure the playing field is level for all market participants.”

In addition to imposing substantial monetary sanctions, the resolution will subject J&J to stringent requirements under a Corporate Integrity Agreement (CIA) with the Department of Health and Human Services Office of Inspector General (HHS-OIG).  This agreement is designed to increase accountability and transparency and prevent future fraud and abuse.

“As patients and consumers, we have a right to rely upon the claims drug companies make about their products,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery.  “And, as taxpayers, we have a right to ensure that federal health care dollars are spent appropriately.  That is why this Administration has continued to pursue aggressively – with all of our available law enforcement tools — those companies that corrupt our health care system.”

J&J Subsidiary Janssen Pleads Guilty to Misbranding Antipsychotic Drug

In a criminal information filed today in the Eastern District of Pennsylvania, the government charged that, from March 3, 2002, through Dec. 31, 2003, Janssen Pharmaceuticals Inc., a J&J subsidiary, introduced the antipsychotic drug Risperdal into interstate commerce for an unapproved use, rendering the product misbranded.  For most of this time period, Risperdal was approved only to treat schizophrenia.  The information alleges that Janssen’s sales representatives promoted Risperdal to physicians and other prescribers who treated elderly dementia patients by urging the prescribers to use Risperdal to treat symptoms such as anxiety, agitation, depression, hostility and confusion.  The information alleges that the company created written sales aids for use by Janssen’s ElderCare sales force that emphasized symptoms and minimized any mention of the FDA-approved use, treatment of schizophrenia.  The company also provided incentives for off-label promotion and intended use by basing sales representatives’ bonuses on total sales of Risperdal in their sales areas, not just sales for FDA-approved uses.

In a plea agreement resolving these charges, Janssen admitted that it promoted Risperdal to health care providers for treatment of psychotic symptoms and associated behavioral disturbances exhibited by elderly, non-schizophrenic dementia patients.  Under the terms of the plea agreement, Janssen will pay a total of $400 million, including a criminal fine of $334 million and forfeiture of $66 million.  Janssen’s guilty plea will not be final until accepted by the U.S. District Court.

The Federal Food, Drug, and Cosmetic Act (FDCA) protects the health and safety of the public by ensuring, among other things, that drugs intended for use in humans are safe and effective for their intended uses and that the labeling of such drugs bear true, complete and accurate information.  Under the FDCA, a pharmaceutical company must specify the intended uses of a drug in its new drug application to the FDA.  Before approval, the FDA must determine that the drug is safe and effective for those specified uses.  Once the drug is approved, if the company intends a different use and then introduces the drug into interstate commerce for that new, unapproved use, the drug becomes misbranded.  The unapproved use is also known as an “off-label” use because it is not included in the drug’s FDA-approved labeling.

“When pharmaceutical companies interfere with the FDA’s mission of ensuring that drugs are safe and effective for the American public, they undermine the doctor-patient relationship and put the health and safety of patients at risk,” said Director of the FDA’s Office of Criminal Investigations John Roth.  “Today’s settlement demonstrates the government’s continued focus on pharmaceutical companies that put profits ahead of the public’s health.  The FDA will continue to devote resources to criminal investigations targeting pharmaceutical companies that disregard the drug approval process and recklessly promote drugs for uses that have not been proven to be safe and effective.”

J&J and Janssen Settle Civil Allegations of Targeting Vulnerable Patients  with the Drugs Risperdal and Invega for Off-Label Uses

In a related civil complaint filed today in the Eastern District of Pennsylvania, the United States alleges that Janssen marketed Risperdal to control the behaviors and conduct of the nation’s most vulnerable patients: elderly nursing home residents, children and individuals with mental disabilities.  The government alleges that J&J and Janssen caused false claims to be submitted to federal health care programs by promoting Risperdal for off-label uses that federal health care programs did not cover, making false and misleading statements about the safety and efficacy of Risperdal and paying kickbacks to physicians to prescribe Risperdal.

“J&J’s promotion of Risperdal for unapproved uses threatened the most vulnerable populations of our society – children, the elderly and those with developmental disabilities,” said U.S. Attorney for the Eastern District of Pennsylvania Zane Memeger.  “This historic settlement sends the message that drug manufacturers who place profits over patient care will face severe criminal and civil penalties.”

In its complaint, the government alleges that the FDA repeatedly advised Janssen that marketing Risperdal as safe and effective for the elderly would be “misleading.”  The FDA cautioned Janssen that behavioral disturbances in elderly dementia patients were not necessarily manifestations of psychotic disorders and might even be “appropriate responses to the deplorable conditions under which some demented patients are housed, thus raising an ethical question regarding the use of an antipsychotic medication for inappropriate behavioral control.”

The complaint further alleges that J&J and Janssen were aware that Risperdal posed serious health risks for the elderly, including an increased risk of strokes, but that the companies downplayed these risks.  For example, when a J&J study of Risperdal showed a significant risk of strokes and other adverse events in elderly dementia patients, the complaint alleges that Janssen combined the study data with other studies to make it appear that there was a lower overall risk of adverse events.  A year after J&J had received the results of a second study confirming the increased safety risk for elderly patients taking Risperdal, but had not published the data, one physician who worked on the study cautioned Janssen that “[a]t this point, so long after [the study] has been completed … we must be concerned that this gives the strong appearance that Janssen is purposely withholding the findings.”

The complaint also alleges that Janssen knew that patients taking Risperdal had an increased risk of developing diabetes, but nonetheless promoted Risperdal as “uncompromised by safety concerns (does not cause diabetes).”  When Janssen received the initial results of studies indicating that Risperdal posed the same diabetes risk as other antipsychotics, the complaint alleges that the company retained outside consultants to re-analyze the study results and ultimately published articles stating that Risperdal was actually associated with a lower risk of developing diabetes.

The complaint alleges that, despite the FDA warnings and increased health risks, from 1999 through 2005, Janssen aggressively marketed Risperdal to control behavioral disturbances in dementia patients through an “ElderCare sales force” designed to target nursing homes and doctors who treated the elderly.  In business plans, Janssen’s goal was to “[m]aximize and grow RISPERDAL’s market leadership in geriatrics and long term care.”  The company touted Risperdal as having “proven efficacy” and “an excellent safety and tolerability profile” in geriatric patients.

In addition to promoting Risperdal for elderly dementia patients, from 1999 through 2005, Janssen allegedly promoted the antipsychotic drug for use in children and individuals with mental disabilities.  The complaint alleges that J&J and Janssen knew that Risperdal posed certain health risks to children, including the risk of elevated levels of prolactin, a hormone that can stimulate breast development and milk production.  Nonetheless, one of Janssen’s Key Base Business Goals was to grow and protect the drug’s market share with child/adolescent patients.  Janssen instructed its sales representatives to call on child psychiatrists, as well as mental health facilities that primarily treated children, and to market Risperdal as safe and effective for symptoms of various childhood disorders, such as attention deficit hyperactivity disorder, oppositional defiant disorder, obsessive-compulsive disorder and autism.  Until late 2006, Risperdal was not approved for use in children for any purpose, and the FDA repeatedly warned the company against promoting it for use in children.

The government’s complaint also contains allegations that Janssen paid speaker fees to doctors to influence them to write prescriptions for Risperdal.  Sales representatives allegedly told these doctors that if they wanted to receive payments for speaking, they needed to increase their Risperdal prescriptions.

In addition to allegations relating to Risperdal, today’s settlement also resolves allegations relating to Invega, a newer antipsychotic drug also sold by Janssen.  Although Invega was approved only for the treatment of schizophrenia and schizoaffective disorder, the government alleges that, from 2006 through 2009, J&J and Janssen marketed the drug for off-label indications and made false and misleading statements about its safety and efficacy.

As part of the global resolution, J&J and Janssen have agreed to pay a total of $1.391 billion to resolve the false claims allegedly resulting from their off-label marketing and kickbacks for Risperdal and Invega.  This total includes $1.273 billion to be paid as part of the resolution announced today, as well as $118 million that J&J and Janssen paid to the state of Texas in March 2012 to resolve similar allegations relating to Risperdal.  Because Medicaid is a joint federal-state program, J&J’s conduct caused losses to both the federal and state governments.  The additional payment made by J&J as part of today’s settlement will be shared between the federal and state governments, with the federal government recovering $749 million, and the states recovering $524 million.  The federal government and Texas each received $59 million from the Texas settlement.

Kickbacks to Nursing Home Pharmacies

The civil settlement also resolves allegations that, in furtherance of their efforts to target elderly dementia patients in nursing homes, J&J and Janssen paid kickbacks to Omnicare Inc., the nation’s largest pharmacy specializing in dispensing drugs to nursing home patients.  In a complaint filed in the District of Massachusetts in January 2010, the United States alleged that J&J paid millions of dollars in kickbacks to Omnicare under the guise of market share rebate payments, data-purchase agreements, “grants” and “educational funding.”  These kickbacks were intended to induce Omnicare and its hundreds of consultant pharmacists to engage in “active intervention programs” to promote the use of Risperdal and other J&J drugs in nursing homes.  Omnicare’s consultant pharmacists regularly reviewed nursing home patients’ medical charts and made recommendations to physicians on what drugs should be prescribed for those patients.  Although consultant pharmacists purported to provide “independent” recommendations based on their clinical judgment, J&J viewed the pharmacists as an “extension of [J&J’s] sales force.”

J&J and Janssen have agreed to pay $149 million to resolve the government’s contention that these kickbacks caused Omnicare to submit false claims to federal health care programs.  The federal share of this settlement is $132 million, and the five participating states’ total share is $17 million.  In 2009, Omnicare paid $98 million to resolve its civil liability for claims that it accepted kickbacks from J&J and Janssen, along with certain other conduct.

“Consultant pharmacists can play an important role in protecting nursing home residents from the use of antipsychotic drugs as chemical restraints,” said U.S. Attorney for the District of Massachusetts Carmen Ortiz.  “This settlement is a reminder that the recommendations of consultant pharmacists should be based on their independent clinical judgment and should not be the product of money paid by drug companies.”

Off-Label Promotion of the Heart Failure Drug Natrecor

The civil settlement announced today also resolves allegations that J&J and another of its subsidiaries, Scios Inc., caused false and fraudulent claims to be submitted to federal health care programs for the heart failure drug Natrecor.  In August 2001, the FDA approved Natrecor to treat patients with acutely decompensated congestive heart failure who have shortness of breath at rest or with minimal activity.  This approval was based on a study involving hospitalized patients experiencing severe heart failure who received infusions of Natrecor over an average 36-hour period.

In a civil complaint filed in 2009 in the Northern District of California, the government alleged that, shortly after Natrecor was approved, Scios launched an aggressive campaign to market the drug for scheduled, serial outpatient infusions for patients with less severe heart failure – a use not included in the FDA-approved label and not covered by federal health care programs.  These infusions generally involved visits to an outpatient clinic or doctor’s office for four- to six-hour infusions one or two times per week for several weeks or months.

The government’s complaint alleged that Scios had no sound scientific evidence supporting the medical necessity of these outpatient infusions and misleadingly used a small pilot study to encourage the serial outpatient use of the drug.  Among other things, Scios sponsored an extensive speaker program through which doctors were paid to tout the purported benefits of serial outpatient use of Natrecor.  Scios also urged doctors and hospitals to set up outpatient clinics specifically to administer the serial outpatient infusions, in some cases providing funds to defray the costs of setting up the clinics, and supplied providers with extensive resources and support for billing Medicare for the outpatient infusions.

As part of today’s resolution, J&J and Scios have agreed to pay the federal government $184 million to resolve their civil liability for the alleged false claims to federal health care programs resulting from their off-label marketing of Natrecor.  In October 2011, Scios pleaded guilty to a misdemeanor FDCA violation and paid a criminal fine of $85 million for introducing Natrecor into interstate commerce for an off-label use.

“This case is an example of a drug company encouraging doctors to use a drug in a way that was unsupported by valid scientific evidence,” said First Assistant U.S. Attorney for the Northern District of California Brian Stretch.  “We are committed to ensuring that federal health care programs do not pay for such inappropriate uses, and that pharmaceutical companies market their drugs only for uses that have been proven safe and effective.”

Non-Monetary Provisions of the Global Resolution and Corporate Integrity Agreement

In addition to the criminal and civil resolutions, J&J has executed a five-year Corporate Integrity Agreement (CIA) with the Department of Health and Human Services Office of Inspector General (HHS-OIG).  The CIA includes provisions requiring J&J to implement major changes to the way its pharmaceutical affiliates do business.  Among other things, the CIA requires J&J to change its executive compensation program to permit the company to recoup annual bonuses and other long-term incentives from covered executives if they, or their subordinates, engage in significant misconduct.  J&J may recoup monies from executives who are current employees and from those who have left the company.  The CIA also requires J&J’s pharmaceutical businesses to implement and maintain transparency regarding their research practices, publication policies and payments to physicians.  On an annual basis, management employees, including senior executives and certain members of J&J’s independent board of directors, must certify compliance with provisions of the CIA.  J&J must submit detailed annual reports to HHS-OIG about its compliance program and its business operations.

“OIG will work aggressively with our law enforcement partners to hold companies accountable for marketing and promotion that violate laws intended to protect the public,” said Inspector General of the U.S. Department of Health and Human Services Daniel R. Levinson.  “Our compliance agreement with Johnson & Johnson increases individual accountability for board members, sales representatives, company executives and management.  The agreement also contains strong monitoring and reporting provisions to help ensure that the public is protected from future unlawful and potentially harmful off-label marketing.”

Coordinated Investigative Effort Spans Federal and State Law Enforcement

This resolution marks the culmination of an extensive, coordinated investigation by federal and state law enforcement partners that is the hallmark of the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which fosters government collaborations to fight fraud.  Announced in May 2009 by Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius, the HEAT initiative has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.

The criminal cases against Janssen and Scios were handled by the U.S. Attorney’s Offices for the Eastern District of Pennsylvania and the Northern District of California and the Civil Division’s Consumer Protection Branch.  The civil settlements were handled by the U.S. Attorney’s Offices for the Eastern District of Pennsylvania, the Northern District of California and the District of Massachusetts and the Civil Division’s Commercial Litigation Branch.  Assistance was provided by the HHS Office of Counsel to the Inspector General, Office of the General Counsel-CMS Division, the FDA’s Office of Chief Counsel and the National Association of Medicaid Fraud Control Units.

This matter was investigated by HHS-OIG, the Department of Defense’s Defense Criminal Investigative Service, the FDA’s Office of Criminal Investigations, the Office of Personnel Management’s Office of Inspector General, the Department of Veterans Affairs, the Department of Labor, TRICARE Program Integrity, the U.S. Postal Inspection Service’s Office of the Inspector General and the FBI.

One of the most powerful tools in the fight against Medicare and Medicaid financial fraud is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $16.7 billion through False Claims Act cases, with more than $11.9 billion of that amount recovered in cases involving fraud against federal health care programs.

The department enforces the FDCA by prosecuting those who illegally distribute unapproved, misbranded and adulterated drugs and medical devices in violation of the Act.  Since 2009, fines, penalties and forfeitures that have been imposed in connection with such FDCA violations have totaled more than $6 billion.

The civil settlements described above resolve multiple lawsuits filed under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private citizens to bring civil actions on behalf of the government and to share in any recovery.  From the federal government’s share of the civil settlements announced today, the whistleblowers in the Eastern District of Pennsylvania will receive $112 million, the whistleblowers in the District of Massachusetts will receive $27.7 million and the whistleblower in the Northern District of California will receive $28 million.  Except to the extent that J&J subsidiaries have pleaded guilty or agreed to plead guilty to the criminal charges discussed above, the claims settled by the civil settlements are allegations only, and there has been no determination of liability. Court documents related to today’s settlement can be viewed online at www.justice.gov/opa/jj-pc-docs.html.

Massachusetts Man Convicted of Mortgage Fraud

BOSTON – A Milton man was convicted today of bank and wire fraud charges in connection with a property flipping scheme.

Edward Johnson, 52, pleaded guilty before U.S. District Judge Denise J. Casper to bank fraud and six counts of wire fraud.

From May through July 2006, Johnson recruited two financially unqualified individuals to buy multiple properties in Dorchester and Mattapan. To secure their participation in the scheme, Johnson, or others acting with him, promised these individuals that they would have no responsibility for any expenses or payments on the property. Johnson promised that the individuals would hold the titles in their name for a few months until the property was improved and sold, and in exchange, they would receive a payment for each property purchased. The individuals acted under the assumption that this would improve their credit so they could eventually buy their own homes. Johnson, and others, submitted false mortgage applications on behalf of these individuals that misrepresented their income, employment, prior indebtedness, and intention to reside in the purchased properties. The mortgages were not paid as promised and all of the properties went into foreclosure.

Sentencing is scheduled for June 27, 2013. On the charge of bank fraud, the sentence under the statute is a maximum of 30 years in prison, followed by five years of supervised release and a $1 million fine. For wire fraud, the sentence under the statute is a maximum of 20 years in prison, followed by three years of supervised release and a $250,000 fine.

United States Attorney Carmen M. Ortiz; Cary Rubenstein, Special Agent in Charge of the U.S. Department of Housing and Urban Development, Office of the Inspector General, New York Regional Office; Kevin Niland, Inspector in Charge of the U.S. Postal Inspection Service; Richard DesLauriers, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division; and Boston Police Commissioner Edward Davis, made the announcement today. The case is being prosecuted by Assistant U.S. Attorneys Lori J. Holik and Sandra S. Bower of Ortiz’s Economic Crimes Unit.

Pfizer Agrees to Pay $55 Million for Illegally Promoting Protonix for Off-Label Use

FOR IMMEDIATE RELEASE
Wednesday, December 12, 2012
Pfizer Agrees to Pay $55 Million for Illegally Promoting Protonix for Off-Label Use

Pfizer Inc. will pay $55 million plus interest to resolve allegations that Wyeth LLC illegally introduced and caused the introduction into interstate commerce of a misbranded drug, Protonix, between February 2000 and June 2001, the Justice Department announced today.

 

Wyeth manufactured and promoted Protonix tablets. Protonix is a proton pump inhibitor (PPI) that was used by physicians to treat various forms of gastro-esophageal reflux disease (GERD).  Wyeth sought and obtained approval from the Food and Drug Administration (FDA) to promote Protonix for short-term treatment of erosive esophagitis–a condition associated with GERD that can only be diagnosed with an invasive endoscopy. However, the government alleges that Wyeth fully intended to, and did, promote Protonix for all forms of GERD, including symptomatic GERD, which was far more common and could be diagnosed without an endoscopy.

 

Under the Federal Food Drug and Cosmetic Act, manufacturers must obtain FDA approval for any indication for use for which a manufacturer intends to market a drug.   A drug is misbranded if its labeling does not bear adequate directions for use by a layman safely and for the purposes for which it is intended.   A prescription drug must be prescribed by a physician and is only exempt from the adequate directions for use requirement if a number of conditions are met, including that the manufacturer only intended to sell that drug for an FDA-approved use.   A prescription drug marketed for unapproved off-label uses does not qualify for the exemption and is misbranded.

 

As alleged in the government’s complaint, Wyeth’s illegal promotional campaign for Protonix was multi-faceted. Before Wyeth even began promoting Protonix, the FDA warned Wyeth that its proposed promotional materials were misleading because Wyeth had “overstated” its “erosive esophagitis indication” by “suggesting that Protonix is safe and effective in the treatment of patients with . . . GERD. Protonix is not indicated for treatment of GERD symptoms that occur in the absence of esophageal erosions.”   Despite the FDA’s admonishment, the government alleges that Wyeth trained its sales force to promote Protonix for all forms of GERD, beyond its limited erosive esophagitis indication, and that Wyeth sales representatives frequently promoted Protonix to physicians for unapproved uses, such as symptomatic GERD.

 

In addition, Wyeth allegedly promoted Protonix as the “best PPI for nighttime heartburn.” even though there was never any clinical evidence that Protonix was more effective than any other PPI for nighttime heartburn. The allegations in the complaint are that this superiority slogan was formulated at the highest levels of the company. Wyeth retained an outside market research firm, at the cost of tens of thousands of dollars, to ensure that sales representatives delivered that misleading superiority message.

 

Finally, the government alleges that Wyeth used continuing medical education (CME) programs to promote Protonix for unapproved uses. CME programs are sponsored by accredited independent providers, such as universities, nonprofit organizations, or specialty societies. Pharmaceutical companies are permitted to provide financial support for CME programs, but they are not permitted to use CME programs as promotional vehicles for off-label indications.According to the complaint, Wyeth spent millions of dollars providing “unrestricted educational grants” to CME providers, and these grants invariably included promises that Wyeth would not attempt to influence the content of the program in any way. Nevertheless, the government alleges that one of Wyeth’s core marketing tactics for Protonix was to use CME programs to drive off-label use of the drug. According to the complaint, the Protonix “brand team” influenced virtually every aspect of these CME programs:   program topics, speaker selection, organization, and content. In addition, the government alleges that Wyeth even insisted that the CME program materials use the same color and appearance as Protonix promotional materials–a tactic that Wyeth and the vendor called “branducation.”

 

“Today’s settlement once again demonstrates our commitment to making sure drug manufacturers follow the rules,” said Stuart Delery, Principal Deputy Assistant Attorney General of the Department of Justice’s Civil Division.   “Drug manufacturers should not be permitted to profit from misbranding their products; the disgorgement remedy here ensures that this does not happen in this case.”

 

“Wyeth tried to cheat the system by obtaining a limited FDA approval for Protonix, fully intending to promote this drug for additional, unapproved uses,” said U.S. Attorney Carmen M. Ortiz. “Wyeth ignored the FDA’s warning not to promote Protonix off-label, and then went so far as to contaminate CME programs that physicians rely on for unbiased, independent scientific information. Today’s settlement reinforces this office’s historic commitment to holding drug companies responsible for their misconduct.”

 

This case was litigated by Assistant U.S. Attorneys David Schumacher and Susan Winkler of Ortiz’s Health Care Fraud Unit, together with former Trial Attorney Kevin Larsen and Deputy Director Jill Furman in the Department of Justice Consumer Protection Branch.   This case was investigated by the FDA’s Office of Criminal Investigations; the Office of Inspector General of the Department of Health and Human Services, the Department of Veterans’ Affairs, and the FBI.

 

This civil complaint and settlement resolve the United States’ investigation of Wyeth related to the promotion of Protonix for unapproved uses.   The claims settled by this agreement are allegations only, allegations which Pfizer denies; there has been no determination of liability. Pfizer acquired Wyeth in October 2009.   Since August 2009, Pfizer has been under a Corporate Integrity Agreement with the Department of Health and Human Services, which agreement remains in effect.