Life Science Compliance Update

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June 07, 2016

DOJ Announces Genentech and OSI Pharmaceuticals, LLC Settlement

The Department of Justice (DOJ) has announced that pharmaceutical companies Genentech and OSI Pharmaceuticals, LLC, will pay $67 million to resolve allegations that they made misleading statements about the effectiveness of the drug Tarceva to treat lung cancer.

This settlement resolves allegations "that between January 2006 and December 2011, Genentech OSI Pharmaceuticals made misleading representations to physicians and other health care providers about the effectiveness of Tarceva to treat certain patients with non-small cell lung cancer, when there was little evidence to show that Tarceva was effective to treat those patients unless they also had never smoked or had a mutation in their epidermal growth factor receptor."

Tarceva was initially approved by the U.S. Food and Drug Administration (FDA) as a second-line, or back up, treatment, but the inflated data prompted some doctors to use Tarceva as a first choice. Therefore, it can be said that while the pharmaceutical manufacturer is not engaging in off-label marketing per se, their false promotions can cause the submission of off-label claims, nonetheless.

It is argued that as a result of that, Genentech and OSI Pharmaceuticals, LLC, knowingly caused false or fraudulent claims for Tarceva to be submitted to, or caused purchases by, Federal Health Care Programs for Tarceva to treat non-small cell lung cancer as a first line of therapy, in current or former smokers classified as a healthy patient on the Eastern Cooperative Oncology Group performance status scale who did not have a known EGFR mutation, when such first-line use was not approved by the FDA, was not a medically accepted indication as defined by applicable law, nor was it covered by the United States federal and state Medicaid programs.

Tarceva was developed by Genentech, but was jointly marketed at the time period in question by OSI Pharmaceuticals. However, OSI was purchased by Astellas in 2011, around the same time the improper marketing seems to have ended.

The companies will pay a combined $62,640,000 plus accrued interest to the federal government, and $4,355,000 plus accrued interest to the states as a result of a Medicaid State settlement. The relator, Brian Shields, a former Genentech product manager, will received approximately 17%, or just over $11 million.

According to Principal Deputy Assistant Attorney General Benjamin C. Mizer, the head of the Department of Justice Civil Division, "[p]harmaceutical companies have a responsibility to provide accurate information to patients and health care providers about their prescription drugs. The Department of Justice will hold those companies accountable that mislead the public about the efficacy of their products."

A Genentech spokeswoman noted that "we believe our Tarceva promotional communications and practices were and are entirely proper and in compliance with the law. This settlement, however, allows the company to avoid the burden, disruption, cost, and distraction or protracted civil litigation and to focus instead on our business of developing medicines that extend and improve human lives."


This is the first False Claims Act recovery involving allegations of a drug manufacturer making misleading representations about its drug's survival data. When choosing which cancer drug to prescribe, physicians and other prescribers tend to look at the drug's survival data.

According to the whistle blowers attorney Joseph E.B. White at NOLAN AUERBACH & WHITE "Previous pharmaceutical qui tam cases focused on off-label marketing and manufacturers that marketed their drugs for unapproved uses. However, in this case, the manufacturers are settling allegations that they marketed their lung cancer drug with knowingly inflated survival data.: As alleged in the qui tam complaint, the end result of such inflation was a substantial boost in sales for both the on- and off-label patient populations.   

This case and the focus of it could be the first in a onslaught, as we know the DOJ and FDA have started to turn their attention away from off-label promotion cases. Depending on cases currently in the pipeline, the agencies may start to focus more on claims similar to this, as opposed to off-label promotion claims that had garnered most of the attention for the past several years. The DOJ has recently stressed, in a Statement of Interest, that "the FCA does not prohibit off-label promotion of prescription drugs; rather, the FCA prohibits conduct that causes the submission of false claims to the Government for payment."

The DOJ does remain "committed to combating health care fraud" and the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative is still in full force, recovering more than $29.8 billion through False Claims Act cases since January 2009, with more than $18.2 billion of that recovered in cases involving fraud against federal health care programs.

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