Correction: Due to an error in court records, an earlier version of this article misidentified attorney Brian P. Kenney, the lawyer for lead whistleblower Lucia Paccione. Kenney is a partner with Kenney Egan McCafferty & Young in Plymouth Meeting, Pa.
To resolve a spate of whistleblower lawsuits, drug manufacturer Cephalon Inc. of Frazer, Pa., has agreed to pay $431 million in civil and criminal fines for illegally promoting “off-label” uses for three of its drugs, federal prosecutors said.
In a global settlement with the U.S. Justice Department, Cephalon agreed to pay $375 million to settle False Claims Act claims by the Medicaid and Medicare trust funds and to plead guilty to a single misdemeanor criminal charge of distribution of misbranded drugs and pay $50 million in fines and forfeiture.
Cephalon also announced that it has agreed to pay $6.15 million to Connecticut and $700,000 to Massachusetts to settle related investigations by the attorneys general of those states.
The four whistleblowers will share a reward of more than $46.4 million, according to court records. Prosecutors said three of the whistleblower cases were filed by former Cephalon sales representatives who were disturbed by the company’s off-label marketing practices.
As part of the Justice Department settlement, Cephalon agreed to enter into a five-year “corporate integrity agreement” that requires the company to send doctors a letter about the settlement and give them a means to report questionable conduct of sales representatives.
The whistleblower suits accused Cephalon of promoting three of its drugs — Actiq, Gabitril and Provigil — for uses other than what the U.S. Food & Drug Administration had approved. (Whistleblower suits, also called qui tam actions, are automatically filed under seal in court and referred to the U.S. Attorney’s Office for possible prosecution by the government.)
Actiq is a painkiller manufactured in the form of a lollipop containing fentanyl and was approved only for use in cancer patients who had developed a tolerance to morphine-based painkillers.
But prosecutors allege that from 2001 to 2006, Cephalon promoted Actiq for non-cancer patients to use for such maladies as migraines, sickle-cell pain crises, injuries and in anticipation of changing wound dressings or radiation therapy.
Cephalon also promoted Actiq for use in patients who had not yet developed tolerances to opiates and for whom Actiq “could have life-threatening results,” prosecutors said.
Provigil was approved by the FDA to treat excessive daytime sleepiness associated with narcolepsy, and the agency later expanded the drug’s label to include treatment of excessive sleepiness associated with sleep apnea and shift work sleep disorder.
But prosecutors said Cephalon went beyond the approved uses in marketing the drug, promoting it as a non-stimulant drug for the treatment of sleepiness, tiredness, decreased activity, lack of energy and fatigue.
In 2002, the FDA sent Cephalon a letter instructing the company not to continue to promote Provigil off-label, but the company “ignored the FDA’s letter,” prosecutors said.
Prosecutors said in court papers that Cephalon trained its sales force to disregard the restrictions of the FDA-approved label and to promote the drugs for off-label uses.
In the case of Gabitril, which had been approved only for use for epilepsy, prosecutors said, Cephalon told its sales force to visit not just neurologists, but also psychiatrists, and to promote the drug for anxiety and other psychiatric indications.
Cephalon also structured its sales quota and bonuses in such a way that sales representatives could reach their sales goals only if they promoted and sold the drugs for off-label uses, prosecutors said.
Acting U.S. Attorney Laurie Magid said Cephalon “subverted the very process put in place to protect the public from harm, and put patients’ health at risk for nothing more than boosting its bottom line.”
In a statement, Cephalon’s general counsel, Jerry Pappert, a former attorney general of Pennsylvania, said: “We are pleased to have these long-standing matters behind us, while preserving our ability to participate in all federal and state health care programs, thereby maintaining the access of patients in those programs to our medications.”
Under the terms of its guilty plea, Cephalon will pay a $40 million fine and $10 million as substitute assets to satisfy a forfeiture obligation.
The civil settlement calls for Cephalon to pay $375 million, plus interest, to resolve False Claims Act allegations arising from claims to Medicaid, Medicare and other federal programs, including TRICARE, the Federal Employees Health Benefits Program, the Postal Workers Compensation Program, the Federal Employees Compensation Act Program, the Every Employees Occupational Illness Compensation Program, Department of Veterans Affairs, Defense Logistics Agency, Bureau of Prisons and the Public Health Service entities.
The state Medicaid programs of California, Delaware, Florida, Hawaii, Illinois, Louisiana, Massachusetts, Nevada, New Hampshire, New Mexico, Texas, Tennessee, Virginia and the District of Columbia will share $116 million of the civil settlement.
The federal investigation of Cephalon stemmed from four whistleblower suits filed in federal court in Philadelphia.
The first suit was filed in November 2003 by Lucia Paccione, a former Cephalon sales representative responsible for the Philadelphia and New Jersey markets who claimed she was fired “in retaliation for disclosing her concerns and objections to her immediate supervisor about the use of the illegal ‘off label’ marketing” of drugs.
The suit, filed by attorney Brian Kenney of Kenney Egan McCafferty & Young in Plymouth Meeting, Pa., said that Paccione was one of only 27 sales reps when she started with Cephalon in 1994 and had watched the sales force grow to more than 250 during her eight years with the company.
“In order to expand market penetration of [its] drugs,” the suit alleged, “Cephalon has engaged in a pattern of marketing each of these medications for ‘off-label’ uses not approved by the FDA.”
Paccione claimed in the suit that she was instructed to write her field notes “in such a way as to ‘disguise’ the off-label marketing.”
In thanks for her whistleblowing, Paccione will receive the largest share of the $46.4 million reward.
According to court papers, the Justice Department has agreed to pay $46,469,978 to Paccione who, in turn, has struck a separate agreement to share the funds with three other whisteblowers — Joseph Piacentile, Bruce Boise and Michael Makalusky.