Forest Pharmaceuticals to Pay Over $313 Million to Resolve Crimincal and False Claims Act Allegations

The U.S. Department of Justice announced on Septermber 15, 2010, that Forest Pharmaceuticals Inc. (Forest), a subsidiary of New York City-based Forest Laboratories Inc., has agreed to plead guilty to charges relating to obstruction of justice, the distribution of an unapproved new drug (Levothroid), and the illegal promotion of Celexa for use in treating children and adolescents suffering from depression. The companies also agreed to settle pending False Claims Act allegations that Forest submitted fraudulent claims to federal health care programs for the drugs Levothroid, Celexa, and Lexapro.   Forest has agreed to pay more than $313 million to resolve criminal and civil liability arising from these matters.

The settlement covers various lawsuits filed under the qui tam, or whistleblower, provisions of the False Claims Act, which allows private citizens with knowledge of fraud to bring civil actions on behalf of the United States and share in any recovery.   As part of the civil settlement, more than $88 million will be distributed to the federal government and more than $60 million will be distributed to and shared by the states.   As part of today’s resolution, the private whistleblowers will receive approximately $14 million from the federal share of the settlement amount.  

Under the Food, Drug and Cosmetic Act (FDCA), a manufacturer is required to submit a New Drug Application (NDA) to the Food and Drug Administration (FDA) and obtain the agency’s approval before distributing a “new drug” in interstate commerce.   In the NDA, the manufacturer is required to set forth information concerning the manufacturing processes and composition of the drug, and provide sufficient data generated in adequate and well-controlled clinical investigations to demonstrate that the drug is safe and effective for its specified use.   After the FDA approves the product as safe and effective for a specified use, any promotion by the manufacturer for “off label” uses  renders the product misbranded.

The False Claims Act allegations charged Forest with the continued distribution of unapproved Levothroid after August 14, 2001, and for failing to advise the Centers for Medicare and Medicaid Services that the drug no longer qualified for coverage by government health care programs, thereby causing false claims to be submitted to those programs. Forest halted its commercial distribution of its unapproved version of Levothroid as of Aug. 9, 2003.   

Regarding Celexa, the criminal information and the False Claims Act complaint filed by the United States allege that Forest Pharmaceuticals promoted the drug for unapproved pediatric use.   Despite a limited approval only for adult depression, Forest Pharmaceuticals promoted Celexa for use in treating children and adolescents suffering from depression.   The government further alleges that Forest Pharmaceuticals’ off-label promotion consisted of various sales techniques, including directing its sales representatives to promote pediatric use of Celexa in sales calls to physicians who treated children and adolescents, and hiring outside speakers to talk to pediatric specialists about the benefits of prescribing Celexa to children and teens.  

The False Claims Act complaint also alleges that Forest engaged in such marketing conduct in connection with Lexapro, which, at that time, also lacked any approvals for pediatric use.  The civil complaint further alleges that Forest used illegal kickbacks to induce physicians and others to prescribe Celexa and Lexapro. Kickbacks allegedly included cash payments disguised as grants or consulting fees, expensive meals and lavish entertainment.   The civil complaint alleges that as a result of the foregoing conduct, Forest caused false claims to be submitted to federal health care programs.

 “Forest Pharmaceuticals deliberately chose to pursue corporate profits over its obligations to the FDA and the American public,” said Carmen Ortiz, U.S. Attorney for the District of Massachusetts.   “The company knew that it did not have FDA approval to distribute Levothroid.   Instead of complying with the FDA’s phase-down schedule, which would have permitted the company to continue to distributing a limited amount of its unapproved drug, Forest Pharmaceuticals instead decided to flout the law rather than lose sales.   This was completely unacceptable.” 

Since January 2009, the False Claims Act has been used to recover$3.391 billion in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in FCA cases since January 2009 are $ 4.4691 billion.

Saint John’s Health Center Agrees to Pay $5.25 Million To Resolve Fraud Allegations

On August 25, 2010, United States Attorney André Birotte, Jr., announced that Saint John’s Health Center in Santa Monica, California has agreed to pay the United States $5.25 million to resolve a case filed under the False Claims Act. The settlement resolves allegations that the hospital submitted false inflated claims to the Medicare program for “outlier payments” that are designed to compensate hospitals for providing extraordinarily costly care to patients.

The United States alleged that Saint John’s engaged in “turbocharging,” meaning that it dramatically increased the charges billed to Medicare for care provided to hospital inpatients far in excess of any increase in the costs associated with that care. By allegedly turbocharging from 1996 through 2003, Saint John’s was able to obtain significant amounts of Medicare outlier payments that it was not entitled to receive.

In the settlement agreement finalized today, Saint John’s agreed to resolve the allegations without an acknowledgment of wrongdoing, and agreed to pay the $5.25 million settlement within five days of this announcement.

Hewlett-Packard Will Pay $55 Million to Resolve Fraud Allegations

Allergan Pleads Guilty Off-Label Promotion of Botox®; Will Pay $600 Million to Resolve Allegations

WASHINGTON – American pharmaceutical manufacturer Allergan Inc. has agreed to plead guilty and pay $600 million to resolve its criminal and civil liability arising from the company’s unlawful promotion of its biological product, Botox® Therapeutic, for uses not approved as safe and effective by the Food and Drug Administration (FDA), the Justice Department announced today.  The resolution includes 1) a criminal fine and forfeiture totaling $375 million and a 2) civil settlement with the federal and state governments of $225 million.

Under the Food, Drug and Cosmetic Act (FDCA), a company in its application to the FDA must specify each intended use of a biological product.  After the FDA approves the product as safe and effective for a specified use, any promotion by the manufacturer for other uses – known as “off-label” uses – renders the product misbranded.  According to the criminal information, Allergan made it a top corporate priority to maximize sales of Botox® for such off-label uses.

The criminal information alleges that Allergan exploited its on-label cervical dystonia (CD) indication to grow off-label pain and headache (HA) sales.  In 2003, Allergan developed the “CD/HA Initiative” as a “rescue strategy” in the event of negative results from its clinical trials to ensure continued expansion into the pain and headache markets.  As part of this initiative, Allergan claimed that cervical dystonia was “underdiagnosed” and that doctors could diagnose cervical dystonia based on headache and pain symptoms, even when the doctor “doesn’t see any cervical dystonia.”

Allergan’s off-label marketing tactics also included calling on doctors who typically treat patients with off-label conditions.  In 2003, Allergan doubled the size of its reimbursement team to assist doctors in obtaining payment for off-label Botox® injections.  Allergan held workshops to teach doctors and their office staffs how to bill for off-label uses, conducted detailed audits of doctors’ billing records to demonstrate how they could make money by injecting Botox®, and operated the Botox® Reimbursement Hotline, which provided a wide array of free on-demand services to doctors for off-label uses.  Allergan also lobbied government health care programs to expand coverage for off-label uses, directed physician workshops and dinners focused on off-label uses, paid doctors to attend “advisory boards” promoting off-label uses, and created a purportedly independent online neurotoxin education organization to stimulate increased use of Botox® for off-label indications.

“The FDA had approved therapeutic uses of Botox for only four rare conditions, yet Allergan made it a top corporate priority to maximize sales of far more lucrative off-label uses that were not approved by FDA,” said Sally Yates, U.S. Attorney for the Northern District of Georgia. 

“The FDA exists to assure that drugs marketed to the American people are safe and effective” said Dr. Margaret Hamburg, Commissioner, Food and Drug Administration. “The ‘off-label’ promotion of drugs threatens public health and the role of the FDA, which has served our country well and has protected Americans from unsafe and ineffective drugs.”

This settlement is part of the government’s emphasis on combating health care fraud.  One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover approximately $3.1 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 have topped $4 billion.

If you are seeing fraud on the government, contact us by calling 800-377-1812 for strictly confidential advice from experienced counsel, with no fee obligation.