Tuesday, March 5, 2013--New Jersey-based Par Pharmaceutical Companies Inc. 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, N.J., federal court. Judge Arleo fined Par $18 million and ordered $4.5 million in criminal forfeiture. Par also agreed to pay $22.5 million to resolve its civil liability.
"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.
"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," said Paul J. Fishman, U.S. Attorney for the District of New Jersey. "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."
"Individual accountability of Par's board and executives is required under the comprehensive five-year integrity agreement the Office of the Inspector General 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 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 its new drug 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 corporate integrity agreement include provisions that require Par to implement changes to the way it does business. The plea agreement and agreement prohibit Par from providing compensation to sales representatives or their managers based on the volume of sale of Megace ES, and in the corporate integrity agreement, based on the volume of Megace ES and any branded successor megestrol acetate drug. Under the agreement, 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 Pharma ceutical, et al., U.S. ex rel. Thompson v. Par Pha rmac eutical, et al., and U.S. ex rel. Elliott & Lundstrom v. Bristol-M yers Squibb, Par Pharma ceutical, 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.