UPDATED: Texas AG: AstraZeneca paid $465K in kickbacks, committed fraud in Seroquel marketing

AstraZeneca's ($AZN) battle over Seroquel marketing missteps drags on. Texas Attorney General Greg Abbott has sued the company for fraud, saying that AstraZeneca sales reps misled doctors and state Medicaid officials about Seroquel's side effects, paid kickbacks to two influential state decision-makers, and promoted the powerful antipsychotic for off-label uses.

AstraZeneca targeted Texas Medicaid for Seroquel sales, the suit claims, deeming the program "low hanging fruit" and "an ABSOLUTE MUST WIN" for the drug's brand team. Off-label promotion was "encouraged and rewarded," the suit says. The Medicaid program was so essential to Seroquel marketing, the AG's suit claims, that the company shelled out $465,000 to two top mental health officials to help boost scripts.

The company says it's aware of the AG's lawsuit, and believes that its marketing in the state has been on the up-and-up. "We are in the process of reviewing the allegations and considering appropriate next steps," the company said in an emailed statement. "However, we believe that the company's actions in Texas have been lawful and ethical."

Among the allegations in the suit: AZ forged ties with two state officials with influence over formulary decisions in the state hospital system. The $465,000 in payments was "ostensibly ... for promotional speaking engagements," the lawsuit states, but internal emails and other documents show that the financial relationship was designed to persuade the two officials to push Seroquel to a state formulary committee and to other Texas healthcare providers.

And it worked, the lawsuit claims. The company used the two officials to target low prescribers of Seroquel, and reps often saw scripts spike after one of them visited with other mental health officials, the lawsuit says.

And then there are the off-label allegations. Despite the fact that neither formulation of Seroquel was approved for use in kids and teens before 2013, reps were told to call on "a significant number" of child and adolescent psychiatrists, the suit says. And when it came to quotas and bonuses, off-label scripts counted equally with on-label scripts.

Even after the feds zeroed in on off-label Seroquel marketing, the company kept pushing the drug to pediatric psychiatrists, the AG claims. In fact, a marketing team ran the numbers on dropping those doctors from their call list and decided that it was "a substantial amount of business to have no promotional efforts," the suit notes, quoting an internal email. The sales AZ calculated it could lose? More than $113 million.

Were the doctors dropped from the call list? No, the AG's suit claims. And though these docs only made up 15% of the physician list AZ marketed to, they accounted for about 70% of prescriptions in some territories. That segment of psychatrists was "dominating and driving" the book of business in Dallas, internal communications show.

Internal emails like this one show AstraZeneca's "high-level intent" to expand Seroquel use in kids and teens, despite the lack of FDA approval for those uses, the AG contends. And all this went on, the suit claims, while AZ was negotiating to settle the Justice Department probe.

Meanwhile, the company was using similar tactics to build sales for Seroquel in patients with depression and anxiety, both off-label uses. The idea was to prime the pump with doctors before a depression indication was approved by the FDA, the suit states. But the drug didn't win an approval in major depression. Reps' quotas for 2009, which were set when the company anticipated an FDA nod, weren't changed after the agency denied it, the suit alleges.

That's because the company still planned to position the XR formula "as an effective monotherapy antidepressant" and to tout it as effective against particular depression symptoms, the suit says. And it cites a sales rep's recording of a sales meeting, where this sort of off-label promo was discussed. The company ended up dismissing some of the offending managers in Texas, the suit says, but the brand team kept sending out "improper messaging" for reps to use in the region, the AG claims.

It's a different approach from the state's previous Seroquel complaints, pursued in partnership with the Department of Justice and federal False Claims Act whistleblowers. This time, the AG cites the Texas Medicaid Fraud Prevention Act--and AstraZeneca's "sworn certifications" of compliance with Texas Medicaid rules.

The suit demands damages, plus disgorgement of Seroquel sales. It's asking to be repaid for those sales twice over, and for civil penalties of up to $11,000 for each of the company's misrepresentations--which, given the judgments in other state fraud cases, can amount to hundreds of millions, or even billions, of dollars.

In 2010, AstraZeneca agreed to pay $520 million to wrap up a Justice Department investigation into off-label Seroquel marketing. It inked a separate deal with 37 states, paying $68.5 million to settle allegations of off-label infractions. It's worth noting that the Texas suit's allegations go back to at least 2006, though some of the alleged shenanigans are said to be more recent.

- check out the summary at Seeking Alpha
- read the Law360 brief (reg. req.)

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Editor's note: This story was updated with comments from AstraZeneca.