BOSTON-Elan Pharmaceuticals, Inc. (EPI), a subsidiary of the Irish pharmaceutical manufacturer Elan Corporation, PLC (Elan), pleaded guilty today to a misdemeanor violation of the Food Drug and Cosmetic Act for the illegal promotion of the epilepsy drug Zonegran. Elan was also sentenced to pay a criminal fine of $97 million and forfeit $3.6 million in substituted assets.
In addition to the criminal plea, Elan has agreed to pay $102 million to resolve civil allegations under the False Claims Act. Those allegations stem from the company's illegal promotion of Zonegran for a variety of uses that were not medically accepted and therefore not covered by the government health care programs that received the claims. The federal share of the civil settlement is $59 million; the state Medicaid share of the civil settlement is $43 million. The total global resolution is $203.5 million.
Had this case gone to trial, the government's evidence would have proven that in April 2000, the Food and Drug Administration approved Zonegran only as an adjunctive therapy for the treatment of partial seizures in epilepsy for adults over the age of 16, and not for any other uses. From 1999 and continuing at least through the date of launch in May of 2000, EPI closely examined the potential markets for all potential uses of anti-epileptic drugs (AEDs) and the actual sales related to these uses. EPI was aware that over 50 percent of the AED prescriptions written were for uses beyond epilepsy. As a result, both prior to and after launch, EPI employees analyzed the potential for sales for uses of Zonegran that were beyond the use applied for in the Zonegran New Drug Application. Promotions for uses unapproved by the FDA are characterized as "off-label."
Both prior to and after the launch of Zonegran, EPI marketing employees and data analysts conducted extensive evaluations of the AED market. The AED market was divided into older and newer AEDs. Zonegran was included in the newer AED class of drugs. Zonegran was the last of three new AEDs to be introduced to the market in 2000, and the last of seven AEDs on the market at that time. The other AEDs had broader approvals from the FDA than did Zonegran. Zonegran's placement as the last AED to enter the market in 2000 immediately and adversely impacted sales of Zonegran.
In 2000, EPI's first marketing campaign and sales aid for Zonegran was called A Track Record of Success, and conformed generally to the approved use of the drug. It focused on the safety and efficacy of the drug and included fair balance regarding any adverse effects. The Track Record of Success sales aid did not contain any graphic illustration or diagram highlighting the drug's "mechanism of action," as did subsequent campaigns. This sales aid was required to be reviewed by the FDA as part of the approval process prior to the launch of the drug. When using this sales aid during its first year of sales, Zonegran's market share ranged between 0.22 percent and 1.0 percent.
In 2002, EPI came under significant financial pressure as a result of, among other factors, an investigation into its financial practices by the Securities and Exchange Commission, during which EPI's stock prices dropped from a high of $65 per share to $2 per share in six months. As a result, EPI evaluated various means to raise cash, including which drugs to divest and which to retain because of potential profit. As part of that evaluation, EPI conducted market research and decided to retain Zonegran because of its large potential for growth, particularly in the area of uses unapproved by the FDA. With these areas of growth in mind, EPI developed marketing and sales strategies to capture these off-label markets. In response to its financial difficulties, EPI developed a series of promotional sales campaigns to obtain additional revenues through sales of Zonegran for unapproved uses. These sales and marketing campaigns became increasingly and deftly directed to off-label uses.
In April 2002, EPI launched a promotional campaign for Zonegran entitled Expect More, Expect Zonegran, which included direction to the sales force to sell "mechanisms of action" that would "allow physician to think beyond just partial seizures" and would "[o]pen doors for psychiatry, pain, headache, etc." The sales aid for the campaign included a diagram that highlighted Zonegran's "Multiple Mechanisms of Action" which related primarily to unapproved uses for Zonegran in psychiatric disorders, movement disorders, obesity or weight loss, pain management and headaches. The sales force was trained to use these sales aids in a manner that would generate off-label sales of Zonegran.
In December 2002, EPI introduced the Demand More promotional campaign, which included a sales aid that highlighted Zonegran's "multiple and complementary mechanisms of action." This sales aid included, among other claims, misleading information such as (1) a comparison chart of the potential mechanisms of action of Zonegran with that of its competitor drugs, noting that only Zonegran covered each of the highlighted characteristics, a chart which was not based upon any head-to-head clinical trials; and (2) the misleading claim that "Zonegran has the longest half-life of the newer AEDs," a claim not based on any head-to-head clinical trials, and which was true only when Zonegran was used alone, or as monotherapy, an unapproved use.
In early 2003, EPI created a Zonegran-Drug T Comparison Flashcard to go "head-to-head" with another AED, Drug T, that had a broader indication and was well-known to be used for chronic and migraine headaches for which Drug T eventually received approval through an supplemental NDA (sNDA). The training guide for the sales force explained that: "[t]his hard hitting tool is going to help you take share from Drug T and this primer is going to show you how!" The flashcard contained misleading information regarding the number of patients who had been treated by each drug; misleading claims relating to the similarity in efficacy of the drugs, unsupported claims regarding Zonegran's multiple mechanisms of action, improper claims of differentiation between the drugs and unsupported claims of the superiority of Zonegran. The sales force was told by EPI "never" to leave the flashcard behind, and to "use it until they [the FDA] pull it."
Finally, in early 2003, EPI targeted Drug T as Zonegran's number one competitor and used a double entendre to get the implied message of superiority across to the physicians. The sales aid contained an even more detailed graphic diagram that emphasized the "Multiple Mechanisms of Action" and highlighted qualities of Zonegran that were unrelated for use in treating epilepsy. The training materials for the sales force made representations that sent a clear message and were important to physicians who use AEDs for other purposes beyond epilepsy.
Elan promoted the sale of Zonegran for a wide variety of improper off-label uses including psychiatric disorders including mood stabilization for mania and bipolar disorder; migraine headaches; chronic daily headaches; eating disorders; obesity/weight loss; movement disorders (i.e. Parkinson's Disease); monotherapy (not using it in combination therapy but alone); and for a variety of seizures in children under the age of 16. Elan's off-label marketing efforts targeted non-epilepsy prescribers and the company paid illegal kickbacks to physicians in an effort to persuade them to prescribe Zonegran for these off-label uses.
The civil settlement resolves a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act that is pending in Massachusetts: United States ex rel. Chartock, et al. v. Elan Corporation, PLC, et al. As part of today's resolution, the whistleblower will receive payments totaling more than $10 million from the federal share of the civil recovery.
Also as part of the settlement, Elan has agreed to enter into a corporate integrity agreement with the Office of Inspector General of the Department of Health and Human Services that provides for procedures and reviews to be put in place, in order to avoid and promptly detect conduct similar to that which gave rise to this matter.
"Elan deliberately chose to prioritize profit over its obligation to the FDA and consumers," said United States Attorney Carmen M. Ortiz. " Today's plea and sentencing should serve as a reminder to any company engaging in off-label marketing schemes, that the government is continuing to aggressively investigate and prosecute companies who intentionally put patient safety at risk in order to turn a profit."
"Off-label promotion of pharmaceutical products undermines the FDA's important role in protecting the American public by determining whether a drug is safe and effective for a particular use before it is marketed," said Tony West, Assistant Attorney General of the Civil Division of the Department of Justice. "Conduct like that in which Elan engaged here also costs the government billions of dollars, and the court's strong sentence demonstrates that such conduct will not be tolerated."
"The sentence levied today demonstrates the government's continued commitment to hold pharmaceutical companies accountable when they disregard the public health in order to make a profit by engaging in illegal promotional activity" said Acting Special Agent in Charge Antoinette Henry of FDA's Office of Criminal Investigations. "We will continue to seek this kind of criminal resolution when pharmaceutical companies undermine the drug approval process by promoting drugs for uses not approved by the FDA as safe and effective."
"This important settlement emphasizes the government's continued efforts to assure accountability and transparency in the health care industry. Our priority is to protect taxpayer-funded government health care programs and beneficiaries," said Susan J. Waddell Special Agent in Charge Office of the Office of the Inspector General, U.S. Department of Health and Human Services.
Richard DesLauriers, Special Agent in Charge of the Federal Bureau of Investigation "Today's sentencing reflects the emphasis the United States Attorney's Office, the FBI, and our federal partners have placed on thwarting the continuing problem of paying illegal kickbacks to physicians as part of a scheme to persuade them to prescribe pharmaceuticals for off label uses. Moving forward, collectively, we will continue to investigate those responsible for unlawful acts done on a company's behalf which defraud the government and jeopardize patient safety. When companies and their employees are identified, they will be held accountable for their illegal activity."
This settlement is part of the government's emphasis on combating health care fraud. In addition to criminal prosecution, one of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover approximately $6.8 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 $5.4 billion. The Department has secured more than $3 billion in fines, forfeitures, restitution, and disgorgement under the Food, Drug, and Cosmetic Act (FDCA), in that time. The District of Massachusetts has recovered over $4 billion in civil and criminal penalties in the last two years alone.
The criminal case was prosecuted by the U.S. Attorney's Office for the District of Massachusetts and the Justice Department's Office of Consumer Litigation. The civil settlements were reached by the U.S. Attorney's Office and the Commercial Litigation Branch of the Justice Department's Civil Division. The Corporate Integrity Agreement was negotiated by the Office of Inspector General of the Department of Health and Human Services. Assistance was provided by the National Association of Medicaid Fraud Control Units and the offices of various state attorneys general.
The investigation was led by Assistant U.S. Attorneys Mary Elizabeth Carmody of Ortiz's Health Care Fraud Unit; Anton P. Giedt of Ortiz's Civil Division; Trial Attorney Brian McCabe from the Frauds Section of the Justice Department's Civil Division, with assistance from Patrick H. Hearn, Department of Justice Trial Attorney, Office of Consumer Litigation; and Steven J. Tave, Associate Chief Counsel for Enforcement, U.S. Food & Drug Administration, Food & Drug Division, Office of General Counsel. Attorneys Mary Riordan and Geeta Kaveti of the Office of Counsel to the Inspector General, Office of Inspector General, Office of General Counsel, United States Department of Health and Human Services, provided assistance in the resolution of both cases.
The cases against Elan and Eisai were investigated by the U.S. Food & Drug Administration, Office of Criminal Investigations; the U.S. Department of Health and Human Services, Office of Inspector General; the Federal Bureau of Investigation; and the Department of Veterans Affairs, Office of Inspector General.