Life Science Compliance Update

August 31, 2017

The EpiPen Whistleblower Saga Comes to a Close

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Last week, Mylan Inc. and Mylan Specialty L.P. (hereinafter “Mylan”) reached an agreement with the United States Department of Justice (“DOJ”) to pay $465 million to resolve claims that they violated the False Claims Act (“FCA”). Mylan knowingly misclassified EpiPen as a generic drug, attempting to avoid paying rebates that were owed to Medicaid.

The settlement resolves the government’s allegations that Mylan, by erroneously reporting EpiPen as a generic drug to Medicaid despite the absence of any therapeutically equivalent drugs, was able to demand massive price increases in the private market while avoiding its corresponding rebate obligations to Medicaid. Between 2010 and 2016, Mylan increased the price of EpiPen by approximately 400 percent yet paid only a fixed 13 percent rebate to Medicaid during the same period. The government further alleged that although Mylan was well-aware that its drug was not a generic, it nevertheless claimed generic status for EpiPen in the Medicaid program to avoid paying a higher rebate.

The allegations were brought in a lawsuit filed under the whistleblower provisions of the False Claims Act, which permits private parties to sue on behalf of the government for false claims for government funds and to receive a share of any recovery. The whistleblower in this case was the pharmaceutical manufacturer, Sanofi-Aventis US LLC. It will receive approximately $38.7 million as its share of the federal recovery.

Mylan has also entered into a corporate integrity agreement with the Department of Health and Human Services Office of Inspector General (HHS-OIG) that requires, among other things, an independent review organization to annually review multiple aspects of Mylan’s practices relating to the Medicaid drug rebate program.

“Our five-year corporate integrity agreement requires intensive outside scrutiny to assess whether Mylan is complying with the rules of the Medicaid drug rebate program,” said Gregory E. Demske, Chief Counsel to the Inspector General for the U.S. Department of Health and Human Services. “In addition, the CIA requires individual accountability by Mylan board members and executives.”

“This settlement demonstrates the Department of Justice’s unwavering commitment to hold pharmaceutical companies accountable for schemes to overbill Medicaid, a taxpayer-funded program whose purpose is to help the poor and disabled,” said Acting Assistant Attorney General Chad A. Readler of the Department of Justice’s Civil Division. “Drug manufacturers must abide by their legal obligations to pay appropriate rebates to state Medicaid programs.”

“Mylan misclassified its brand name drug, EpiPen, to profit at the expense of the Medicaid program,” said Acting United States Attorney William D. Weinreb. “Taxpayers rightly expect companies like Mylan that receive payments from taxpayer-funded programs to scrupulously follow the rules. We will continue to protect the integrity of Medicaid and ensure a level playing field for pharmaceutical companies.”

August 03, 2017

Celgene Settles Cancer Drug Whistleblower Suit

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Celgene Corporation has settled a whistleblower lawsuit for $280 million, alleging that the pharmaceutical company committed fraud promoting Thalomid, a cancer drug allegedly promoted for uses not approved by the United States Food and Drug Administration (FDA). The settlement will be broken up between the United States and twenty-eight states and Washington, D.C. California will receive the largest state sum, $4.7 million.

The payment is equivalent to about two weeks’ worth of sales of Revlimid, which generated $6.97 billion in revenue for Celgene last year, according to data compiled by Bloomberg.

The settlement, initiated by a suit filed by a sales manager with Celgene, Beverly Brown, resolved allegations that Celgene promoted Thalomid and Revlimid – both cancer drugs – for uses that were not approved by the FDA and were not covered by federal healthcare programs.

According to the lawsuit, Brown was officially an "immunology specialist," trained by Celgene to promote Thalomid and Revlimid drugs for cancer treatments that had not been approved by the U.S. Food and Drug Administration.

Brown, who worked at Celgene for a decade, alleged the company paid doctors and hired ghostwriters to tout uses for Thalomid beyond the product’s approval, including treating blood cancer, years before it was authorized by regulators. Brown said the company used similar tactics to promote Thalomid’s successor, Revlimid.

Thalomid, a drug prescribed for morning sickness in the 1950s and 1960s that caused severe birth defects, was approved by the agency in 1998 for treating leprosy.

The lawsuit noted that the FDA contacted Celgene and sent letters warning about its promotional efforts and for failing to warn about potential fatal risks from the toxic drugs. Because Thalomid would only be useful to a fraction of the few hundred leprosy cases diagnosed in the U.S. each year, the company developed a plan to promote the drug for cancer, the lawsuit said.

Included in the allegations were that "false and misleading statements" were used to promote the drugs, and kickbacks were paid to physicians to compel them to prescribe the drugs. The lawsuit also claimed Celgene violated the laws of 28 states and the District of Columbia by submitting fraudulent claims to state healthcare programs, including California's Medi-Cal program.

A judge threw out the kickbacks allegation last year, but allowed the lawsuit to proceed. Under the False Claims Act, Brown can receive 25 percent to 30 percent of the settlement. She would have been eligible for a smaller share if the government had intervened to take over the case.

Celgene denied wrongdoing and settled to avoid uncertainty, distraction and expensive litigation, the company said in a statement. Celgene does not have to enter into a corporate integrity agreement as part of the settlement.

July 26, 2017

LSCU SPECIAL FEATURE: Into the Nexus - Anti-Kickback Statute ("AKS") versus Value-Driven Health Care

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Part 2: The Tension Increases - Online Auctions Violate the AKS

We have noted in previous articles that there is an increasing tension between efforts to reduce healthcare costs and assuring those efforts are not improper inducements under the Anti-Kickback Statute’s (“AKS”). In a recent opinion by the Federal District Court in Connecticut, that tension ratcheted up several notches with the Court’s novel application of the AKS to certain e-commerce arrangements.


The decision in Medpricer.com, Inc. v. Becton, Dickinson & Co was originally decided in March 2017 and reaffirmed in April. Judge Michael Shea’s decision resolved a contract dispute between MedPricer, a company that provides an online portal for the auctioning of medical supplies and equipment, and Becton, Dickinson & Company (“BD”), a medical products provider.

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