Japanese pharmaceutical company, Daiichi Sankyo Inc., with U.S. headquarters in New Jersey, has agreed to pay $39 million to resolve allegations that it violated the False Claims Act. The complaint alleges that Daiichi marketed a number of its hypertension and diabetes drugs off-label, and paid kickbacks to induce physicians to prescribe them. A former Daiichi sales representative initially brought the complaint, and will get $6.1 million from the settlement.
The DOJ issued the following statement in its press release, honing in on the alleged kickbacks: “Drug companies are prohibited from using lavish entertainment and padded speaker program payments to induce physicians to prescribe their drugs for beneficiaries of federal health care programs,” said U.S. Attorney Carmen Ortiz for the District of Massachusetts, where the case was filed. “Settlements like this one show that the government will continue to pursue health care companies that use kickbacks to promote their products.”
As part of the settlement, Daiichi has agreed to enter into a Corporate Integrity Agreement with the Department of Health and Human Services-Office of Inspector General (HHS-OIG), which obligates the company to undertake substantial internal compliance reforms for the next five years.
Off-Label Allegations: “Class Effect”
Central to the plaintiffs' case was their theory that Daiichi Sankyo took advantage of a “class effect.” The complaint hones in on olmestartan, the principal active ingredient in the company’s drugs Benicar and Benicar HCT, both FDA-approved for hypertension. These drugs are part of a small class of marketed hypertension drugs known as Angiotensin-II Receptor Blockers (ARB’s).
According to the plaintiffs, Daiichi misrepresented to physicians that Benicar had all of the beneficial product label indications of other ARB’s, including protection against heart failure, left ventricular dysfunction, and diabetic kidney diseases, in addition to blood pressure control. The complaint argues that, in fact, Benicar had an “unambiguously narrow FDA-label,” which only recognized blood pressure control as an approved indication.
Due to what the plaintiffs deem “very successful illegal marketing,” Daiichi Sankyo persuaded physicians to believe that all ARB’s, including Benicar provided the same wide range of clinical benefits. “By focusing on the other members of the class FDA-approvals, rather than the Defendant’s indications that were FDA-approved, Defendants intended to overcome the subject drugs’ lack of FDA-approved indications for certain indications.”
Sales reps were allegedly trained to use various reprints to promote off-label, and used kickbacks to encourage doctors to prescribe Daiichi’s products.
The Anti-Kickback Statute generally prohibits anyone from offering, paying, soliciting, or receiving remuneration to induce referrals of items or services covered by federal health care programs, including Medicare and Medicaid.
Here, the government alleged that Daiichi paid physicians improper kickbacks in the form of speaker fees as part of Daiichi Sankyo’s Physician Organization and Discussion programs, known as “PODs,” from Jan. 1, 2005, through March 31, 2011, as well as other speaker programs from Jan. 1, 2004, through Feb. 4, 2011.
The company allegedly made payments to physicians “when physician participants in PODs took turns ‘speaking’ on duplicative topics over Daiichi-paid dinners, the recipient spoke only to members of his or her own staff in his or her own office, or the associated dinner was so lavish that its cost exceeded Daiichi’s own internal cost limitation of $140 per person,” according to DOJ.
The complaint alleges that "[a]bsent Defendant’s unapproved, illegal off-label marketing, which included false representations, and its gifts to physicians, the subject drugs would not have been prescribed by physicians for off-label indications.”
Importantly, Daiichi did not admit to the allegations. They settled for $39 million, and in the process avoided the risk of going to trial and losing—resulting in the "death sentence" of exclusion from Medicare, Medicaid, and other federal healthcare programs.
Warning Letter For Benicar
In 2006, the Food and Drug Administration sent a Warning Letter to Sankyo (before the merger with Daiichi Pharmaceutical) due to the company’s promotion of Benicar. FDA found that Sankyo had made unsubstantiated superiority claims over other angiotension II receptor antagonists. “The studies did not generate valid data to support the product comparisons because, among other factors, the studies either (1) were open-label, uncontrolled trials; (2) were meta-analyses; (3) were titration-to-effect comparisons; or (4) did not compare drugs administered at their maximum approved dosage,” stated the Letter.
Corporate Integrity Agreement
As noted above, Daiichi agreed to enter into a Corporate Integrity Agreement with HHS-OIG, which obligates the company to undertake compliance reforms for the next five years.
This CIA is not much different than other recent settlement agreements. 2014 was actually a fairly slow year for new CIAs—potentially due to the fact that many pharmaceutical companies are already under CIA. Endo Pharmaceuticals and Shire Pharmaceuticals are the two agreements that stand out from last year, and the government hasn’t much changed their model since we last wrote an in-depth analysis about Shire’s CIA . Essentially, Daiichi's CIA requires that the company institute and enforce policies to address appropriate ways for sales reps and medical affairs to comply with the Anti-Kickback statute, False Claims Act, and FDA requirements.
Daiichi did not agree to sever the financial incentive structure for its sales representatives. The CIA states:
[C]ompensation (including through salaries, bonuses, or other means) for Relevant Covered Persons who are sales representatives and their field based managers. These Policies and Procedures shall: (i) be designed to ensure that financial incentives do not inappropriately motivate such individuals to engage in improper promotion, sales, and marketing of Daiichi’s Government Reimbursed Products; and (ii) include mechanisms, where appropriate, to exclude from incentive compensation sales that may indicate improper promotion of Government Reimbursed Products.
One interesting aspect of the CIA is a recently instituted policy seen in Endo Pharmaceuticals’ 2014 settlement terms involving social media. Daiichi must develop specific policies for “materials and information that may be distributed or made available by Daiichi through social media and/or direct-to-consumer advertising.” The CIA states: “[t]hese Policies and Procedures shall be designed to ensure that Daiichi’s activities in this area and the information distributed or made available comply with all applicable Federal health care program and FDA requirements, and have been reviewed and approved by the applicable Daiichi personnel before they are posted or disseminated.”
Daiichi also must make disclosures consistent with the Federal Sunshine Act available on its website and make extensive grant disclosure as well.