Category Archives: FDA

ISTA Pharmaceuticals Inc. Pleads Guilty to Federal Felony Charges; Will Pay $33.5 Million to Resolve Criminal Liability and False Claims Act Allegations

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Pharmaceutical company ISTA Pharmaceuticals, Inc. pled guilty earlier today to conspiracy to introduce a misbranded drug into interstate commerce and conspiracy to pay illegal remuneration in violation of the Federal Anti-Kickback Statute, the Department announced today.  U.S. District Court Judge Richard J. Arcara accepted ISTA’s guilty pleas.  The guilty pleas are part of a global settlement with the United States in which ISTA agreed to pay $33.5 million to resolve criminal and civil liability arising from its marketing, distribution and sale of its drug Xibrom.

ISTA pled guilty in the Western District of New York to criminal charges that the company conspired to illegally introduce a misbranded drug, Xibrom, into interstate commerce.  Under the Food, Drug and Cosmetic Act (FDCA), it is illegal for a drug company to introduce into interstate commerce any drug that the company intends will be used for uses not approved by the Food and Drug Administration (FDA).  Xibrom is an ophthalmic, nonsteroidal, anti-inflammatory drug that was approved by FDA to treat pain and inflammation following cataract surgery.  In order to expand sales of Xibrom outside of its approved use, ISTA conspired to introduce misbranded Xibrom into interstate commerce.

Between 2005 and 2010, some ISTA employees promoted Xibrom for unapproved new uses, including the use of Xibrom following Lasik and glaucoma surgeries, and for the treatment and prevention of cystoid macular edema.  The evidence showed that continuing medical education programs were used to promote Xibrom for uses that were not approved by the FDA as safe and effective, and that post-operative instruction sheets for unapproved uses were paid for by some company employees and provided to physicians.  These activities are evidence of intended uses unapproved by FDA, which rendered the drug misbranded under the FDCA.

ISTA pled guilty to a felony based on evidence that some ISTA employees were told by management not to memorialize in writing certain interactions with physicians regarding unapproved new uses, and not to leave certain printed materials in physicians’ offices relating to unapproved new uses.  These instructions were given in order to avoid having their conduct relating to unapproved new uses being detected by others.  ISTA agreed that this conduct represented an intent to defraud under the law.

In addition, ISTA pled guilty to a conspiracy to knowingly and willfully offering or paying remuneration to physicians in order to induce those physicians to prescribe Xibrom, in violation of the federal Anti-Kickback Statute.  Under the law, it is illegal to offer or pay remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to physicians to induce them to refer individuals to pharmacies for the dispensing of drugs, for which payments are made in whole or in part under a Federal health care program.  In this matter, certain ISTA employees, with the knowledge and at the direction of ISTA, offered and provided physicians with free Vitrase, another ISTA product, with the intent to induce such physicians to refer individuals to pharmacies for the dispensing of the drug Xibrom.  In addition, ISTA provided other illegal remuneration, including a monetary payment to sponsor an event of a non-profit group associated with a particular physician, a golf outing, a wine-tasting event, paid consulting or speaker arrangements, and honoraria for participation in advisory meetings which were intended to be marketing opportunities, with the intent to induce physicians to refer individuals to pharmacies for the dispensing of the drug Xibrom.

Under the terms of the plea agreement, ISTA will pay a total of $18.5 million, including a criminal fine of $16,125,000 for the conspiracy to introduce misbranded Xibrom into interstate commerce, $500,000 for the conspiracy to violate the Anti-Kickback Statute, and $1,850,000 in asset forfeiture associated with the misbranding charge.

ISTA also entered into a civil settlement agreement under which it agreed to pay $15 million to the federal government and states to resolve claims arising from its marketing of Xibrom, which caused false claims to be submitted to government health care programs.  The civil settlement resolved allegations that ISTA promoted the sale and use of Xibrom for certain uses that were not FDA-approved and not covered by the Federal health care programs, including prevention and treatment of cystoid macular edema, treatment of pain and inflammation associated with non-cataract eye surgery, and treatment of glaucoma.  The United States further alleged that ISTA’s violations of the Anti-Kickback Statute resulted in false claims being submitted to federal health care programs.  The federal share of the civil settlement is $14,609,746.16, and the state Medicaid share of the civil settlement is $390,253.84.  Except as admitted in the plea agreement, the claims settled by the civil settlement agreement are allegations only, and there has been no determination of liability as to those claims.

“As today’s global resolution demonstrates, the Department of Justice is committed to making sure that pharmaceutical companies play by the rules,” said Stuart F. Delery, Acting Assistant Attorney General for the Civil Division.  “Health care fraud in any form undermines the integrity of our health care system and can drive up costs for all of us.”

“Today’s resolution sends a clear message that pharmaceutical companies cannot put profit ahead of people, by disregarding laws designed to protect the health of the American public,” said United States Attorney William J. Hochul, Jr.  “The fact that ISTA offered doctors illegal inducements – such as a wine tasting, golf outing, and payments to attend what were in essence marketing sessions – makes the company’s illegal conduct particularly deserving of the hefty penalty ISTA has agreed to pay.”

“It is especially concerning when companies actively take steps to conceal improper conduct which may jeopardize public health,” said Antoinette V. Henry, Special Agent in Charge, Metro-Washington Field Office, FDA Office of Criminal Investigations. “We will continue to work tirelessly with the Department of Justice and our law enforcement counterparts to uncover such conduct.”

In addition to the criminal fines and asset forfeiture, ISTA’s parent company, Bausch+Lomb, Incorporated (B+L), has agreed to maintain a Compliance and Ethics Program.  B+L has agreed that it will maintain policies and procedures that: (1) prohibit the involvement of sales and marketing personnel and others on the businesses’ commercial team in the final decision-making process with respect to educational grants in the United States, while also ensuring that the educational programming is focused on objective scientific and educational activities and discourse; (2) require sales agents to discuss only those product uses that are consistent with what is indicated on the product’s approved package labeling and to forward requests for information regarding uses of B+L’s products not approved by FDA to a Medical Affairs Professional; and (3) prohibit the company from engaging in any conduct that violates the Anti-Kickback Statute, including the offering or paying of any remuneration to any person to induce such person to prescribe any drug for which payment may be made in whole or in part under a Federal health care program.  The Program also requires that B+L’s President of Global Pharmaceuticals conduct an annual review of the effectiveness of B+L’s Program as it relates to the marketing, promotion, and sale of prescription pharmaceutical products, and certify that to the best of his or her knowledge, the Program was effective in preventing violations of Federal health care program requirements and the FDCA regarding sales, marketing, and promotion of B+L’s prescription pharmaceutical products.

The civil settlement resolves two lawsuits filed under the whistleblower provisions of the False Claims Act, which permit private parties to file suit on behalf of the United States for false claims and obtain a portion of the government’s recovery.  The civil lawsuits were filed in the Western District of New York and are captioned United States ex rel. Keith Schenker v. ISTA Pharmaceuticals, Inc. and United States, et al., ex rel. DJ PARTNERSHIP 2011, LLP  v. ISTA Pharmaceuticals, Inc.  As part of today’s resolution, Mr. Schenker will receive approximately $2.5 million from the federal share of the civil recovery.

Upon conviction for the criminal charges described above, ISTA will face mandatory exclusion from Federal healthcare programs.  Exclusion will mean that on the effective date of the exclusion, any ISTA labeled drugs in ISTA’s possession would no longer be reimbursable by Medicare, Medicaid, or other Federal healthcare programs.  In June 2012, B+L acquired ISTA.  Simultaneous with the False Claims Act settlement and the entry of the plea, the U.S. Department of Health and Human Services’ Office of Inspector General, ISTA, and B+L will enter into a Divestiture Agreement under which ISTA agrees to be excluded for 15 years, effective six months after the date of the settlement.  Under the terms of the Divestiture Agreement, ISTA will transfer all assets to B+L or a B+L subsidiary and will stop shipping ISTA labeled drugs within six months of the Divestiture Agreement.  Six months after the effective date of the Divestiture Agreement, all ISTA labeled drugs in the possession of ISTA or B+L will no longer be reimbursable by Medicare, Medicaid, and other Federal healthcare programs.  Those ISTA labeled drugs in the stream of commerce at that time will continue to be reimbursable.

“We agreed to enter into this Divestiture Agreement based on the facts of this case, including that B+L did not have a corporate relationship with ISTA during the improper conduct,” said Daniel R. Levinson, Inspector General of the U.S. Department of Health and Human Services.  “In addition, B+L acquired ISTA more than a year after the improper conduct ended, and B+L did not hire any of ISTA’s executives or senior management.”

The criminal case was prosecuted by Assistant Director Jeffrey Steger of the Consumer Protection Branch of the Civil Division of the Department of Justice and Assistant United States Attorney MaryEllen Kresse of the Office of the U.S. Attorney for the Western District of New York.  They were assisted by Associate Chief Counsel Kelsey Schaefer of the Food and Drug Division, Office of General Counsel, Department of Health and Human Services.  The case was investigated by the Food and Drug Administration’s Office of Criminal Investigations and Health and Human Services Office of Inspector General.  The civil settlement was handled by Trial Attorneys Colin Huntley and Benjamin Young of the Commercial Litigation Branch of the Civil Division of the Department of Justice and Assistant United States Attorney Kathleen Lynch of  the Office of the U.S. Attorney for the Western District of New York.

This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. 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 that effort is the False Claims Act, which the Justice Department has used to recover more than $10.4 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are over $14.3 billion.

Generic Drug Manufacturer Ranbaxy Pleads Guilty & Agrees to Pay $500 Million to Resolve False Claims Allegations, cGMP Violations and False Statements to the FDA

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In the largest drug safety settlement to date with a generic drug manufacturer, Ranbaxy USA Inc. , a subsidiary of Indian generic pharmaceutical manufacturer Ranbaxy Laboratories Limited, pleaded guilty today to felony charges relating to the manufacture and distribution of certain adulterated drugs made at two of Ranbaxy’s manufacturing facilities in India, the Justice Department announced today.   Ranbaxy also agreed to pay a criminal fine and forfeiture totaling $150 million and to settle civil claims under the False Claims Act and related State laws for $350 million.

 

The federal Food, Drug and Cosmetic Act (FDCA) prohibits the introduction or delivery for introduction into interstate commerce of any drug that is adulterated.   Under the FDCA, a drug is adulterated if the methods used in, or the facilities or controls used for, its manufacturing, processing, packing, or holding do not conform to, or are not operated or administered in conformity with, current Good Manufacturing Practice (cGMP) regulations.   This assures that a drug meets the requirements as to safety and has the identity and strength, and meets the quality and purity characteristics, which the drug purports or is represented to possess.

 

Ranbaxy USA pleaded guilty to three felony FDCA counts, and four felony counts of  knowingly making material false statements to the FDA.   The generic drugs at issue were manufactured at Ranbaxy’s facilities in Paonta Sahib and Dewas, India. Under the plea agreement, the company will pay a criminal fine of $130 million, and forfeit an additional $20 million.

 

“When companies sell adulterated drugs, they undermine the integrity of the FDA’s approval process and may cause patients to take drugs that are substandard, ineffective, or unsafe,” said Stuart F. Delery, Acting Assistant Attorney General for the Civil Division of the Department of Justice.  “We will continue to work with our law enforcement partners to ensure that all manufacturers of drugs approved by the FDA for sale in the United States, both domestic and foreign, follow the FDA guidelines that protect all of us.”

 

“This is the largest false claims case ever prosecuted in the District of Maryland, and the nation’s largest financial penalty paid by a generic pharmaceutical company for FDCA violations,” said U.S. Attorney for the District of Maryland Rod J. Rosenstein.  “The joint criminal and civil settlement, which reflects many years of work by FDA agents and federal prosecutors, holds Ranbaxy accountable for a pattern of violations and should improve the reliability of generic drugs manufactured in India by Ranbaxy.”

 

Ranbaxy USA admitted to introducing into interstate commerce certain batches of adulterated drugs that were produced at Paonta Sahib in 2005 and 2006, including Sotret, gabapentin, and ciprofloxacin.   Sotret is Ranbaxy’s branded generic form of isotretinoin, a drug used to treat severe recalcitrant nodular acne; gabapentin is a drug used to treat epilepsy and nerve pain; ciprofloxacin is a broad-spectrum antibiotic.   In a Statement of Facts filed along with the Information, Ranbaxy USA acknowledged that FDA’s inspection of the Paonta Sahib facility in 2006 found incomplete testing records and an inadequate program to assess the stability characteristics of drugs.   “Stability” refers to how the quality of a drug varies with time under the influence of a variety of factors, such as temperature, humidity, and light.  Such testing is used to determine appropriate storage conditions and expiration dates for the drug, as well as to detect any impurities in the drug.

Ranbaxy also acknowledged that the FDA’s 2006 and 2008 inspections of the Dewas facility found the same issues with incomplete testing records and an inadequate stability program, as well as significant cGMP deviations in the manufacture of certain active pharmaceutical ingredients and finished products.   Ranbaxy USA also acknowledged that in 2003 and 2005 the company was informed of cGMP violations by consultants it hired to conduct audits at the Paonta Sahib and Dewas facilities.   Those cGMP violations resulted in the introduction into interstate commerce of some adulterated drugs.

Ranbaxy USA further admitted to failing to timely file required reports known to FDA as “field alerts” for batches of Sotret and gabapentin that had failed certain tests.   With respect to Sotret, Ranbaxy USA was aware in January 2003 that a batch of Sotret failed an accelerated dissolution stability test but continued to distribute the batch into the United States for another 13 months.   With respect to gabapentin, Ranbaxy USA was aware at various times between June and August 2007 that certain batches of gabapentin were testing out-of-specification, had unknown impurities, and would not maintain their expected shelf life.   Nevertheless, Ranbaxy USA did not notify FDA and institute a voluntary recall until October 2007.

Ranbaxy USA also admitted to making false, fictitious, and fraudulent statements to the FDA in Annual Reports filed in 2006 and 2007 regarding the dates of stability tests conducted on certain batches of Cefaclor, Cefadroxil, Amoxicillin, and Amoxicillin and Clavulanate Potassium, which were manufactured at the Dewas facility.   Ranbaxy USA was found to have conducted stability testing of certain batches of these drugs weeks or months after the dates reported to FDA.   In addition, instead of conducting some of the stability tests at prescribed intervals months apart, the tests were conducted on the same day or within a few days of each other.   This practice resulted in unreliable test results regarding the shelf life of the drugs.   Ranbaxy USA also acknowledged that drug samples waiting to be tested were stored for unknown periods of time in a refrigerator, which did not meet specified temperature and humidity ranges for an approved stability chamber, and that this was not disclosed to the FDA.

The criminal case is U.S. v. Ranbaxy USA, Inc., JFM-13-CR-0238 (D. Md.).

Under the civil settlement, Ranbaxy has agreed to pay an additional $350 million to resolve allegations that it caused false claims to be submitted to government health care programs between April 1, 2003, and September 16, 2010, for certain drugs manufactured at the Paonta Sahib and Dewas facilities.   The United States contends that Ranbaxy manufactured, distributed, and sold drugs whose strength, purity, or quality differed from the drug’s specifications or that were not manufactured according to the FDA-approved formulation.   The United States further contends that, as a result, Ranbaxy knowingly caused false claims for those drugs to be submitted to Medicaid, Medicare, TRICARE, the Federal Employees Health Benefits Program, the Department of Veterans Affairs, and the U.S. Agency for International Development (USAID), which administers the U.S. President’s Emergency Plan for AIDS Relief (PEPFAR).

The federal government’s share of the civil settlement amount is approximately $231.8 million, and the remaining $118.2 million will go to the states participating in the agreement.

The civil settlement resolves a lawsuit filed in U.S. District Court for the District of Maryland under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private citizens to bring civil actions on behalf of the United States and share in any recovery.   As part of today’s resolution, the whistleblower, Dinesh Thakur, a former Ranbaxy executive, will receive approximately $48.6 million from the federal share of the settlement amount.   The case is U.S. ex rel. Thakur v. Ranbaxy Laboratories Limited, Case No. JFM-07-962 (D. Md.).

With the exception of the allegations to which Ranbaxy pleaded guilty in the Criminal Information, there has been no determination of liability as to the claims settled by the civil agreement.

Last year, FDA and Ranbaxy agreed to an injunction that prevents drugs produced at the Paonta Sahib and Dewas facilities from entering the U.S. market until the facilities have been brought into full compliance with the FDCA and its implementing regulations.

Since September 16, 2008, when the FDA placed drugs from those facilities on an Import Alert, Ranbaxy has not imported drugs from those facilities into the U.S.   In addition, the injunction requires Ranbaxy to review and verify data contained in Ranbaxy’s past drug applications to the FDA.   United States v. Ranbaxy Laboratories, Ltd., et al. , Case No. JFM-12-250 (D. Md).

“The FDA expects that companies will comply with the cGMP requirements mandated by law so that consumers can be assured that their medical products are safe and pure,” said John Roth, director of the FDA’s Office of Criminal Investigations. “The investigation that led to this settlement uncovered evidence showing that certain lots of specific drugs produced at the Paonta Sahib facility were defective, in that their strength differed from, or their purity or quality fell below, that which they purported to possess. The FDA and its law enforcement partners will continue to aggressively pursue companies and their executives who erode public confidence in the quality and safety of medical products by distributing products that do not comply with the law.”

“I would like to express my appreciation for the exceptional work of our investigators and that of their FDA and Department of Justice partners,” said Michael G. Carroll, USAID Deputy Inspector General.   “This settlement represents the culmination of years of investigative effort and signals our continuing commitment to the integrity of U.S. government systems and our determination to hold those who seek to defraud or mislead to account.”

The criminal case was prosecuted by the U.S. Attorney’s Office for the District of Maryland and the Civil Division’s Consumer Protection Branch.   The civil settlement was negotiated by the U.S. Attorney’s Office for the District of Maryland and the Civil Division’s Commercial Litigation Branch.   The case was investigated by agents from the FDA’s Office of Criminal Investigations and USAID’s Office of Inspector General.   The FDA’s Office of Chief Counsel, HHS Office of Counsel to the Inspector General, Office of the General Counsel-CMS Division, and the National Association of Medicaid Fraud Control Units also provided assistance.

This criminal and civil resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. 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 that effort is the False Claims Act, which the Justice Department has used to recover more than $10.3 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are over $14.3 billion.

Par Pharmaceutical Companies Inc. Pleads Guilty, Admits Misbranding Of Megace® Es

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Agrees to Pay $45M to Resolve Criminal and Civil Investigations

NEWARK, N.J. – New Jersey-based Par Pharmaceutical Companies Inc. (“Par”) pleaded guilty in federal court today and agreed to pay $45 million to resolve its criminal and civil liability in the company’s promotion of its prescription drug Megace® ES for uses not approved as safe and effective by the Food and Drug Administration (FDA) and not covered by federal health care programs, the Justice Department announced.

Chief Executive Officer Paul V. Campanelli pleaded guilty on behalf of Par before U.S. Magistrate Judge Madeline Cox Arleo earlier today in Newark federal court. Judge Arleo imposed sentence today, fining Par $18 million and ordering $4.5 million in criminal forfeiture. Par also agreed to pay $22.5 million to resolve its civil liability.

“The FDA requires drug makers to go through a stringent approval process before new drugs – or new uses for existing drugs – are made available to doctors and their patients,” U.S. Attorney Paul J. Fishman said. “Today, Par admitted that it chose to ignore that process in pursuit of more sales and greater profits. It is paying the price for its choice.”

“Today’s resolution emphasizes the importance of the U.S. government’s coordinated efforts to combat health care fraud. We expect companies to make honest, lawful claims about the drugs they sell. We will be vigorous in our enforcement efforts when they break the law, to ensure that they are held accountable,” said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Justice Department’s Civil Division.

“Individual accountability of Par’s board and executives is required under the comprehensive five-year integrity agreement OIG has with the company,” said Daniel R. Levinson, Inspector General of the U.S. Department of Health and Human Services.  “For example, company executives may have to forfeit annual bonuses if they or their subordinates engage in significant misconduct, and sales representatives may not be paid incentive compensation for the drug involved in the case, or successor branded versions of that drug.”

“The public has been well served by this investigation and the FDA commends the efforts of the U.S. Attorney’s Office in New Jersey, the Department of Justice and the other law enforcement agencies that worked with us to vigorously pursue this matter,” said Mark Dragonetti, Special Agent In Charge of the FDA’s Office of Criminal Investigation’s New York Field Office. “Today’s settlement demonstrates the FDA’s continued commitment to target companies that disregard the safeguards of the drug approval process and promote drugs for uses before they have been proven to be safe and effective.”

Par pleaded guilty to an Information charging it with a criminal misdemeanor for misbranding Megace® ES in violation of the Federal Food, Drug, and Cosmetic Act (“FDCA”). Megace® ES, a megestrol acetate drug product, was approved by the FDA to treat anorexia, cachexia, or other significant weight loss suffered by patients with AIDS (the “AIDS Indication”). The Megace® ES distributed nationwide by Par was criminally misbranded because its FDA-approved labeling lacked adequate directions for use in the treatment of non-AIDS-related geriatric wasting, a use that was intended by Par but never approved by the FDA. The FDCA requires companies such as Par to specify the intended uses of a product in an application to the FDA. Once approved, a drug may not be distributed in interstate commerce for unapproved or “off-label” uses until the company receives FDA approval for the new intended uses. In addition to the criminal fine and forfeiture, the plea agreement mandates that Par implement several compliance measures and annually provide the U.S. Attorney’s Office with a sworn certification from its chief executive officer that the company has not unlawfully marketed any of its pharmaceutical products.

The civil settlement agreement requires Par to pay $22.5 million to the federal government and various states to resolve claims arising from its off-label marketing. The civil settlement resolves allegations that Par, by promoting the sale and use of Megace® ES for uses that were not FDA-approved and not covered by Federal health care programs, caused false claims to be submitted to these programs. The United States further alleged that Par deliberately and improperly targeted sales to elderly nursing home residents with weight loss, whether or not such patients suffered from AIDS, and launched a long-term care sales force to market to this population. During this marketing campaign, Par was allegedly aware of adverse side effects associated with the use of megestrol acetate in elderly patients, including an increased risk of deep vein thrombosis, toxic reactions in elderly patients with impaired renal function, and mortality. The United States alleged that Par made unsubstantiated and misleading representations about the superiority of Megace® ES over generic megestrol acetate for elderly patients to encourage providers to switch patients from generic megestrol acetate to Megace® ES, despite having conducted no well-controlled studies to support a claim of greater efficacy for Megace® ES. Except as admitted in the plea agreement, the claims settled by the civil settlement agreement are allegations only, and there has been no determination of liability as to those claims.

In addition to the criminal and civil resolutions, Par also agreed to enter into a five-year Corporate Integrity Agreement with the Office of the Inspector General of the Department of Health and Human Services (“HHS-OIG”) that requires enhanced accountability, increased transparency, and wide-ranging monitoring activities conducted by both internal and independent external reviewers.

The plea agreement and CIA include provisions that require Par to implement changes to the way it does business.  The plea agreement and CIA prohibit Par from providing compensation to sales representatives or their managers based on the volume of sale of Megace ES, and in the CIA, based on the volume of Megace ES and any branded successor megestrol acetate drug.  Under the CIA, Par is also required to change its executive compensation program to permit the company to recoup annual bonuses from covered executives if they, or their subordinates, engage in significant misconduct.

The settlement resolves three lawsuits filed under the whistleblower provisions of the False Claims Act, which permit private parties to file suit on behalf of the United States and obtain a portion of the government’s recovery. The civil lawsuits were filed in the District of New Jersey and are captioned U.S. ex rel. McKeen and Combs v. Par Pharmaceutical, et al., U.S. ex rel. Thompson v. Par Pharmaceutical, et al., and U.S. ex rel. Elliott & Lundstrom v. Bristol-Myers Squibb, Par Pharmaceutical, et al. As part of today’s resolution, relators McKeen and Combs will receive $4.4 million.

This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. 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 that effort is the False Claims Act, which the Justice Department has used to recover more than $10.2 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are over $14.1 billion.

History of Megace® ES and Par’s Failed Attempts to Obtain FDA Approval 
of a Geriatric Wasting Indication for Megace® ES

According to the Information, a drug named Megace® OS – a predecessor to Megace® ES – was approved by the FDA in 1993 for the AIDS Indication. Between 2002 and 2005, Par’s market research showed that practitioners prescribed Megace® OS 1 for uses that were inconsistent with the approved labeling, including geriatric weight loss, and that the overwhelming majority of Megace® OS prescriptions were written for such off-label uses.

In 2002, Par first approached the FDA and discussed the company’s plan to seek approval of a new formulation of Megace® OS as a treatment option for geriatric patients with malnutrition. Par did not thereafter seek approval for that patient population. Instead, in June 2004, Par relied on the Megace® OS safety and effectiveness data in seeking approval for Megace® ES for the AIDS indication, i.e., the same indication as Megace® OS. Less than two months after the FDA approved Megace® ES for the AIDS indication, Par requested a meeting with the FDA to discuss Par’s intent to seek approval of Megace® ES for certain non-AIDS geriatric patients. Par never sought approval for that patient population, nor did Par ever conduct drug trials in the geriatric population.

Par’s “Conversion” Strategy, False Superiority Claims, and Promotion of 
Megace® ES for Geriatric Wasting

Despite knowing that Megace® ES had a limited market for its approved use, Par set aggressive sales goals for the product launch. After failing to attain these goals, Par adopted and implemented a marketing strategy designed to promote Megace® ES to geriatric wasting patients – the same population Par had twice discussed with the FDA. Par devised sales call panels which required Par sales representatives to market Megace® ES in nursing homes, as well as to practitioners who treated geriatric patients. These call panels identified physicians with the highest number of Megace® OS prescriptions as the top targets to “convert” from the old Megace® OS to Par’s Megace® ES product. Some Par sales managers required that their subordinates visit 10 to15 nursing homes a week to promote Megace® ES, and told them there would be possible employment consequences, including termination, if they did not promote Megace® ES in nursing homes.

While targeting an audience of health care practitioners that treated the elderly or geriatric population, Par promoted Megace® ES by making false and/or misleading claims that Megace® ES was superior to Megace® OS, including:

  1. Despite having no clinical support for the claim, Par sales representatives promoted Megace® ES as more effective than Megace® OS;
  2. Despite having no clinical support for the claim, Par sales representatives claimed that Megace® ES worked faster and was more effective than other products, and used the phrase “speed and ease” to promote Megace® ES;
  3. Par sales representatives were taught to try and “flip” a nursing home by asking the homes to convert all Megace® OS patients in the nursing home to Megace® ES, despite knowing that the nursing homes contained very few, if any, AIDS patients and the requested patients would therefore be using the product for off-label purposes;
  4. Par trained and directed its sales force to minimize or eliminate mentioning altogether the FDA-approved indication for Megace® ES during promotional sales calls, so as to draw as little attention as possible to the fact that Megace® ES was not approved for geriatric wasting; and
  5. Par managers trained, directed, and encouraged their sales representatives to ask health care practitioners for patient information protected by the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), so that the representatives could request that certain patients who were using Megace® OS be switched to Megace® ES.

U.S. Attorney Fishman said the corporate guilty plea, the civil settlement, and the corporate integrity agreement are the culmination of a multi-year investigation conducted jointly by special agents from HHS-OIG, under the direction of Special Agent in Charge Tom O’Donnell, special agents from FDA-OIG, under the direction of Special Agent in Charge Mark Dragonetti, and criminal investigators and paralegals with the U.S. Attorney’s Office.

U.S. Attorney Fishman thanked the Defense Criminal Investigative Service; the Office of Personnel Management-Office of Inspector General; the Department of Veterans’ Affairs Office of Inspector General; and TRICARE Program Integrity for assisting in the investigation. He also thanked the National Association of Medicaid Fraud Control Units (NAMFCU), with assistance from the Medicaid Fraud Control Unit of the Ohio Attorney General’s Office for their help in coordinating the settlements with the various states.

The government is represented in the prosecution of the criminal case by Assistant U.S. Attorney Joseph Mack of the U.S. Attorney’s Office Health Care and Government Fraud Unit and Special Assistant U.S. Attorney Shannon M. Singleton from the FDA’s Office of Chief Counsel.  Paralegals Jeffrey Skonieczny and Doug Minotti with the U.S. Attorney’s Office and Trial Attorney David Frank of the Department of Justice’s Consumer Protection Branch assisted on the criminal side of the case. The government is represented in the civil settlement by Assistant U.S. Attorney David Dauenheimer and Trial Attorney Eva Gunasekera from the Department of Justice’s Commercial Litigation Branch. The corporate integrity agreement was negotiated by Christina McGarvey and Gregory Lindquist from the Department of Health and Human Service’s Office of Inspector General.

U.S. Attorney Fishman reorganized the health care fraud practice at the U.S. Attorney’s Office, District of New Jersey, including creating a stand-alone Health Care and Government Fraud Unit, which handles both criminal and civil investigations and prosecutions of health care fraud offenses. Since 2010, the Office has recovered more than $500 million in health care fraud and government fraud settlements, judgments, fines, restitution, and forfeiture under the False Claims Act, the Food, Drug and Cosmetic Act, and other statutes.

District Court Enters Permanent Injunction Against Ohio-Based Drug Manufacturer and Company’s Senior Executives

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U.S. District Court Judge Lesley Wells entered a consent decree of permanent injunction against Ben Venue Laboratories Inc., a Bedford, Ohio-based drug manufacturer, the Justice Department announced today.  The permanent injunction was also entered against George P. Doyle, president and chief executive officer, Kimberly A. Kellermann, vice president of operations, and Douglas A. Rich, vice president of quality operations, for Ben Venue. The department, at the request of the Food and Drug Administration (FDA), asked the court to enter the consent decree.

Ben Venue manufactures numerous generic sterile injectable drug products, including cancer medications.   As set forth in the complaint filed by the United States on January 22, FDA conducted an inspection of defendants’ facility from Nov. 7 to Dec. 2, 2011, and documented 10 deviations from current good manufacturing practices.   According to the complaint, the FDA found, among other things, that the company failed to create and follow appropriate procedures to prevent contamination of drugs which were purported to be sterile.   The FDA also found that the company failed to properly clean and maintain its equipment to ensure the safety and quality of the drugs it manufactured.   In addition, the FDA determined that the company failed to conduct adequate investigations of drugs that did not meet their specifications.

 

Compliance with current good manufacturing practices requirements assures that drugs meet the safety requirements of the law and have the identity and strength and meet the quality and purity characteristics that they purport to or are represented to possess.   FDA regulations, which establish minimum current good manufacturing practices applicable to human drugs, require manufacturers to control all aspects of the processes and procedures by which drugs are manufactured in order to prevent the production of unsafe and ineffective products.

 

According to the complaint, t he deviations observed by FDA during the November – December 2011 inspection were similar to deviations observed by FDA during its many previous inspections of Ben Venue’s facility.   During FDA’s May 2011 inspection, FDA documented 48   deviations from current good manufacturing practices including an inadequate quality control unit, inadequate and untimely investigations, inadequately designed aseptic processing areas, poor employee aseptic practices, failure to prevent microbial contamination of drug products purporting to be sterile and failure to determine the root cause for microbial contaminants.

 

As described in the complaint, FDA’s long inspection and regulatory history of Ben Venue, including 35 inspections since 1997, and approximately 40 recalls since February 2002 associated with drugs manufactured at the Ben Venue facility (including 10 recalls in 2011 and 10 recalls in 2012), reflects a continuing pattern of significant deviations from current good manufacturing practices with its drugs.  Some recalls involved drugs contaminated with glass and other particulates.   Additional recalls were based on the company’s inability to assure the drug’s sterility.   Of the roughly 40 recalls, nine were classified by FDA as “Class I,” meaning that FDA determined that there was “a reasonable probability that the use of . . . a violative product will cause serious adverse health consequences or death.”

 

The consent decree entered resolves the complaint by requiring Ben Venue to take a wide range of actions to correct its violations and ensure that they do not happen again.  The injunction establishes a series of steps which must occur before Ben Venue can fully resume operations, including the retention of an expert to inspect the company’s facility, the development and then implementation of a remediation plan, and an inspection by FDA to confirm that the company’s manufacturing processes are fully compliant with the law.

 

“This consent decree restricts Ben Venue from manufacturing and distributing certain drugs until the company fully complies with the law,” said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Justice Department’s Civil Division.  “As this case demonstrates, the Department of Justice and FDA will work together to protect the health and safety of Americans by making sure that those who produce and distribute prescription drugs follow the law.”

“This resolution comes following nearly three dozen inspections which revealed inadequate quality control, including contaminated drugs, and led to approximately 40 recalls on products from this facility alone,” said Steven M. Dettelbach, U.S. Attorney for the Northern District of Ohio. “The Justice Department and the Food and Drug Administration will continue to place its highest priority on protecting consumers.”

 

Under the decree, Ben Venue may continue to manufacture and distribute a subset of their drugs (listed on Attachment A to the decree), which FDA has determined are currently in shortage (domestically or abroad) or are vulnerable to shortage.   However, prior to distribution of each batch of these drugs, the company’s expert must conduct a batch-by-batch review and certify that no deviations occurred during the manufacture of the drug that would adversely affect the safety or quality of the batch.

 

Principal Deputy Assistant Attorney General Delery thanked the FDA for referring this matter to the Department of Justice.  Jeffrey Steger, Assistant Director of the Consumer Protection Branch of the Justice Department and Michele Svonkin, Counsel at FDA’s Office of the Chief Counsel, brought this case on behalf of the United States.

Guest Columnist Al Scott, CFE: Emerging Health Care Fraud: Schemes Go Beyond Medicare, Medicaid Fraud (Part 1 of 2)

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In part 1 of 2 parts, Guest Columnist Al Scott, CFE, principal for NSD Bio Group LLC in Philadelphia, Pa., describes lesser-known but emerging health care frauds, including schemes involving fraudulent treatments, cures and devices, and crimes involving the manufacture, sale or distribution of unapproved FDA-regulated products. In part 2, he describes Chinese emerging enforcement approaches.

The opinions expressed in this column aren’t necessarily those of GeyerGorey LLP.  Special thanks to Fraud Magazine for authorizing us to republish Al’s work— ed.

Nov-Dec ’12 Fraud Magazine Rx for Fraud column – Emerging Health Care Fraud

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You can email Al at [email protected]

Indictment: Kidney Dialysis Patients Received Misbranded Drugs

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TOPEKA, KAN. – A Tennessee pharmacist is charged with substituting a cheaper drug imported from China for the iron sucrose that the Federal Drug Administration has approved for kidney dialysis patients, U.S. Attorney Barry Grissom said today.

Robert Harshbarger, Jr., 53, Kingsport, Tenn., doing business as American Inhalation Medication Specialists, Inc., is charged with one count of selling misbranded drugs, one count of mail fraud and five counts of health care fraud.

The indictment alleges that as a result of fraud by Harshbarger kidney dialysis patients treated by Kansas Dialysis Services, L.C., received iron sucrose that had not been certified by the FDA to meet quality and safety standards.

“Although there are no reports of patient harm associated with the drugs that are alleged to be misbranded in this indictment, patient health was put at risk,” said U.S. Attorney Barry Grissom. “The FDA cannot assure the safety and effectiveness of products that are not FDA approved and come from unknown sources and foreign locations, or that may not have been manufactured under proper conditions. These unknowns put patients’ health at risk because of uncertainty concerning the product’s content, purity and source.”

Grissom said there is no reason for current or former patients of Kansas Dialysis to be concerned at this time. The events outlined in the indictment ended in 2009. Any significant iron deficiencies would have been addressed during the course of a patient’s dialysis treatments. Nevertheless, any questions should be addressed to a physician, Grissom said.

The indictment alleges that Harhbarger’s company, American Inhalation Medication Specialists, Inc., of Kingsport, Tenn., received more than $875,000 from Kansas Dialysis and more than $845,000 from health care benefit programs including Medicare and Medicaid for misbranded iron sucrose sold from 2004 to 2009. Harshbarger misrepresented the iron sucrose drug as Venofer, which is the only iron sucrose drug approved by the FDA for both pre-dialysis and post-dialysis patients.

Harshbarger purchased iron sucrose from Chinese companies including Qingdao Shenbang Chemical Company in Qingdao, China, and Shanghai Rory Fine Chemicals Co., Ltd., in Shanghai, China. The iron sucrose from China was cheaper than purchasing Venofer.

If convicted, Harshbarger faces a maximum penalty of 20 years in federal prison and a fine up to $250,000 on the mail fraud count; a maximum penalty of 10 years and a fine up to $250,000 on each of the health care fraud counts; and a maximum penalty of three years and a fine up to $250,000 on the charge of selling a misbranded drug. The Food and Drug Administration and the Dept. of Health and Human Services, Office of Inspector General, investigated. Assistant U.S. Attorney Tanya Treadway is prosecuting.

OTHER INDICTMENTS

Two men who were executives of the Brooke Companies, a now defunct insurance franchising business in Kansas, have been indicted on federal financial fraud charges.

Robert D. Orr, 59, Denver, Colo., and Leland G. Orr, 50, Phillipsburg, Kan., are charged with one count of conspiracy to defraud the Securities and Exchange Commission and three counts of making false statements in filings to the SEC. In addition, Robert Orr is charged with two more counts of making false statements in SEC filings and one count of bankruptcy fraud.

The Orrs were executives of Brooke Corporation, a holding company headquartered in Overland Park and Phillipsburg, Kan., that was engaged primarily in insurance franchising, insurance agency financing and banking. Brook Corporation owned a majority interest in Brooke Capital, Aleritas and Brooke’s Savings Bank. Brooke Capital sold insurance agency franchises and provided bookkeeping and other support services for franchises. Aleritas sold the majority of loans it made to franchisees and typically remained responsible for loan servicing. The companies were known collectively as the Brooke Companies.

The indictment alleges that in 2007 and 2008 the Brooke Companies experienced increasingly dire liquidity conditions and rapidly declining franchise financial health. In attempting to conceal financial problems, Brooke Companies’ management misrepresented the number of viable franchises, the health of Aleritas’ loan portfolio and other material financial information to the SEC, investors and lenders. They conspired to present a false aggregate picture of the Brooke Companies’ financial condition and thereby to obtain money, dividend payments and cash transfers for themselves.

If convicted, they face a maximum penalty of 20 years in federal prison and a fine up to $5 million on each count of making a false statement in SEC filings; and a maximum of five years and a fine up to $250,000 on each of the other counts. The FBI investigated. Assistant U.S. Attorney Mike Warner is prosecuting.

Bryan K. Carter, 32, Topeka, Kan., is charged with unlawful possession of a firearm after a felony conviction. The crime is alleged to have occurred Dec. 13, 2011, in Shawnee County, Kan.

If convicted, he faces a maximum penalty 10 years and a fine up to $250,000. The Bureau of Alcohol, Tobacco, Firearms and Explosives investigated. Assistant U.S. Attorney Duston Slinkard is prosecuting.

Omar Romero Salgado, 18, currently in custody in the Shawnee County Jail, is charged with one count of possession with intent to distribute methamphetamine, one count of possession with intent to distribute Clonazepam, one count of possession of a firearm in furtherance of drug trafficking and one count of possession of a stolen firearm. The crimes are alleged to have occurred Oct. 30, 2012, in Shawnee County, Kan.

If convicted, he faces a maximum penalty of 20 years and a fine up to $1 million on the methamphetamine charge; a maximum penalty of five years and a fine up to $250,000 on the Clonazepam charge; a penalty of not less than five years and a fine up to $250,000 on the charge of possessing a firearm in furtherance of drug trafficking; and a maximum penalty of 10 years and a fine up to $250,000 on the charge of possession of a stolen firearm. The FBI investigated. Assistant U.S. Attorney Jared Maag is prosecuting.

Xavier Patrick McCullough, 24, currently in custody in the Shawnee County Jail, and Ryan Cole Palmer, 25, currently in custody in the Shawnee County Jail, are charged with one count of possession with intent to distribute marijuana, one count of possession with intent to distribute methamphetamine and one count of possession of a firearm in furtherance of drug trafficking.

If convicted, they face a maximum penalty of 20 years and a fine up to $1 million on the methamphetamine charge; not less than five years and a fine up to $250,000 on the firearm charge; and a maximum penalty of five years and a fine up to $250,000 on the marijuana charge. The Topeka Police Department and the FBI investigated. Assistant U.S. Attorney Jared Maag is prosecuting.

In all cases, defendants are presumed innocent until and unless proven guilty. The indictments merely contain allegations of criminal conduct.