ISTA excluded from Medicare in $33.5M off-label settlement

Pharma's latest settlement with the Department of Justice involves a small-potatoes monetary penalty--only $33.5 million total--but it includes something most settlements haven't, at least so far. As part of the deal, ISTA Pharmaceuticals, a subsidiary of Bausch + Lomb, will be excluded from federally funded healthcare programs like Medicare and Medicaid.

Announced just days before Bausch + Lomb's sale to Valeant Pharmaceuticals ($VRX) was unveiled, the $33.5 million deal wraps up allegations that ISTA marketed its eye drug Xibrom. Most of the specifics of this case resemble other off-label and kickback settlements; the company wined and dined doctors and offered free products to induce doctors to prescribe Xibrom for approved and unapproved uses, the Justice Department says.

There's one significant difference in the allegations: The feds say the company instructed reps to avoid leaving a paper trail of their off-label discussions with doctors. Prosecutors had enough evidence of this to persuade ISTA to plead guilty to a felony fraud charge. "These instructions were given in order to avoid having their conduct relating to unapproved new uses being detected by others," the Justice Department said. "ISTA agreed that this conduct represented an intent to defraud under the law."

ISTA also pled guilty to a conspiracy charge stemming from physician kickbacks. For the two criminal charges, ISTA agreed to pay $16.6 million in criminal fines and to forfeit $1.85 million in assets. Civil penalties amounted to $15 million, and Bausch + Lomb agreed to set up a compliance and ethics program to put a damper on marketing shenanigans in the future.

And then there's the additional penalty of exclusion from federal healthcare programs. ISTA will be barred from doing business with Medicare, Medicaid, et al, for 15 years. Luckily for Bausch + Lomb, however, it bought ISTA in June 2012,  late enough in the game to actually escape the ramifications of exclusion. The exclusion won't begin until 6 months after the settlement date, giving Bausch + Lomb time to transfer ISTA's products out of that subsidiary and shift the drugs over to the Bausch + Lomb label.

As marketing settlements mount, the FDA and the Justice Department have been talking about excluding companies and individual executives who run afoul of marketing regulations. So far, few actual exclusions have taken place, with the most visible example being the Purdue Pharma execs barred from doing business with the federal government. An attempt to exclude Forest Laboratories ($FRX) CEO Howard Solomon went down in flames.

- read the Justice Department release
- get more from Reuters

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