Life Science Compliance Update

May 16, 2016

Aegerion Pharmaceuticals Reaches Settlement Agreements in Principle with the Department of Justice

Aegerion Pharmaceuticals has reached agreements in principle with the Department of Justice ("DOJ") and the Securities and Exchange Commission ("SEC"), relating to the ongoing investigations by both agencies into the Company's sales activities and disclosures related to JUXTAPID® capsules.

The inquiries into the company started last year, following an investigation done by Brazilian authorities to determine whether or not Aegerion's commercial activities violated local anti-corruption laws.

The agreement in principal comes after former Aegerion Chief Executive Marc Beer resigned after saying on CNBC's Fast Money that "patients are going to die of a cardiac event, either a stroke or a heart attack, if we don't have them on therapy." Those remarks set off the U.S. Food and Drug Administration ("FDA"), who claimed that those comments "misleadingly" suggested that the drug could reduce cardiovascular events and prolong life, when the FDA approval was based on data that showed that the pill lowered cholesterol in people with homozygous familial hypercholesterolemia.

The agreement in principle has Aegerion paying a fine of $40 million, payable over five years with outstanding amounts accruing interest at 1.75% per annum. The breakdown of payment will likely proceed as follows: approximately $3 million upon the finalization of the settlement with the DOJ and the SEC, approximately $3.7 million per year (payable quarterly) during the first three years of the five-year payout, and approximately $13 million per year (also payable quarterly) in years four and five.

The settlement payments are subject to acceleration in the event of certain change of control transactions or the sale of JUZTAPID or MYALEPT® assets.

The company will also plead guilty to two misdemeanor misbranding violations of the Food, Drug and Cosmetic Act ("FDCA"): one count pertaining to the marketing of JUXTAPID with inadequate directions for use and the other for the failure to comply with the Risk Evaluation and Mitigation Strategies ("REMS") for the drug.

Aegerion will also enter into a five-year deferred prosecution agreement in connection to charges that it violated the Health Insurance Portability and Accountability Act ("HIPAA") and engaged in obstruction of justice relating to the REMS program. The deal with the DOJ requires Aegerion to enter into a civil settlement agreement to resolve alleged violations of the False Claims Act. The specific nature of the violations was not disclosed.

Lastly, Aegerion will enter into a non-monetary consent decree with the FDA prohibiting future violations of the law. It remains uncertain whether or not Aegerion will be subject to a corporate integrity agreement with the Department of Health and Human Services.

The SEC's Division of Enforcement will recommend that the SEC accept a settlement offer from Aegeroin on a neither-admit-nor-deny basis that contains alleged negligent violations of the Securities Act of 1933, related to certain statements made by the Company in 2013 regarding the conversion rate of patients receiving JUXTAPID prescriptions, with remedies that include censure.

Aegerion Chief Executive Officer Mary Szela is hopeful about the company moving forward following these agreements in principle, stating:

These preliminary agreements in principle with the DOJ and the SEC represent an important step forward towards addressing the immediate issues facing Aegerion and positioning the Company for near-term value creation and growth. As a company, we are deeply committed to legal and regulatory compliance, and we have made significant investments to ensure that these values resonate throughout our organization. We look forward to putting these matters behind us and to continuing our focused efforts on developing and commercializing innovative therapies for patients with debilitating rare diseases.

The terms as outline above are subject to change following further negotiations, and other terms of the final settlement remain subject to further negotiation. This preliminary agreement is also subject to approval of supervisory personnel within both the DOJ and the SEC. The agreements in principle do not cover the DOJ or SEC's inquiries into Aegerion's Brazilian operations.

May 03, 2016

Pfizer/Wyeth Settlement Finalized and Signed: States Net Millions

The Department of Justice ("DOJ") recently entered into a settlement of a quit tam lawsuit against Pfizer, Inc. and Wyeth, LLC. We previously wrote about this settlement back in February, when an "agreement in principle" was reached between Pfizer and the United States government.

As a refresher, allegations were made by Lauren Kieff, a former hospital sales representative for AstraZeneca Pharmaceuticals, LP, and William St. John LaCorte, a physician, that Wyeth engaged in healthcare fraud from 2001 to 2006. These allegations covered two medications, both commonly used to treat acid reflux disease, Protonix Oral and Protonix I.V. Shortly after bringing Protonix I.V. to market, Wyeth found that it was not selling well and began to offer bundle sales on both of their PPI drugs if they were purchased together.

Allegedly, Wyeth thought that if patients were discharged from the hospital on Protonix Oral, they were likely to stay on the drug for long periods of time, rather than switch to competing Proton Pump Inhibitors (PPIs) of which there are many. While the patients remained on the drug after discharge, they, including Medicaid, would pay nearly full price for the drug.

The actions taken by Wyeth, prior to the Pfizer merger, allegedly included failing to inform Medicaid about the discounts that it was offering to its private purchasers, such as hospitals. Wyeth's failure to inform Medicaid about the bundled discounts it was offering and providing to its hospital customers, was a violation of the False Claims Act ("FCA"). Pharmaceutical companies are supposed to pay rebates to state Medicaid programs so that they receive the same discounts given to private customers.

Settlement Terms

The settlement requires Wyeth and Pfizer to pay $784.6 million, split between a Federal Settlement Amount ($413, 248,820) and a Medicaid State Settlement Amount ($371,351,180). The state settlements were negotiated by attorneys general in Indiana, Massachusetts, New York, and North Carolina, working with the United States Attorney's Office for the District of Massachusetts, the U.S. Department of Health and Human Services Office of Inspector General, and the United States DOJ.

As is typical in these types of settlements, the settlement does not include an admission of liability by Wyeth.

This settlement once again reinforces the emphasis the government has placed on combating healthcare fraud. The partnership between the DOJ and Health and Human Services has resulted in recoveries totaling more than $29 billion through False Claims Act cases, with more than $17.5 billion of that amount recovered in cases involving fraud against federal healthcare programs.

Another Payday for LaCorte

As we wrote in our previous article, Dr. LaCorte is notorious for bringing qui tam suits against pharmaceutical companies. He has brought at least twelve whistleblower cases, with 6 winning settlements, and one still pending. He, however, insists that he doesn't do it for the money and that the cases just fall into his lap.

This settlement will result in $98,058,190 being split between both relators, paid from the proceeds of the federal and state settlements. According to the settlement documents, Relator LaCorte will receive $64 million, as well as reasonable attorneys' fees and costs.

April 15, 2016

Toussaint Found Guilty: Faces 70 Years in Prison and Millions in Fines

Richard Toussaint, best known as a Dallas, Texas anesthesiologist and the co-founder of the recently-bankrupt hospital chain Forest Park Medical Center, was recently found guilty of seven counts of healthcare fraud and faces up to seventy years in prison.

Last May, Toussaint was indicted after investigators found that $10 million of false claims had been filed to many insurance companies, including, Blue Cross Blue Shield of Texas, UnitedHealthcare, and the Federal Employees Health Benefits Program. The scheme took place from 2009 to 2010, over an eighteen month period. The trial for Toussaint took just four days, and the federal jury spent only three hours deliberating before returning its verdict.

Toussaint was found to have billed for numerous procedures that he should not have billed for, as he was in another state or hospital, or even "undergoing surgery himself." In order to fraudulently bill, he created fake medial records as if he had participated in face-to-face medical procedures and was physically present during the "most demanding and risky aspects of the anesthesia plan," when in actuality, he was not. Court documents allege that not only would he sign his initials next to the claims, but if he wasn't able to, he would direct others to do the same. Going a step further, Toussaint would also pre-sign patients' medical records, representing that the services were provided and completed before the procedures even took place.

One of the red flags that caught Toussaint in this web was that his claims would sometimes overlap. One time, he billed for being present and medically directing six patients at two different hospitals. Also, as previously referenced, when he was under anesthesia himself, he filed claims for medically directing two patients.

The report also stated that when Toussaint was in the operating room, he would increase the amount of time it took to perform the procedures, and encourage/direct others to do the same.

While a sentencing date has not been set, Toussaint faces up to seventy years in prison (ten years for each of the seven counts) and a $1,750,000 ($250,000 for each of the seven counts) fine. Toussaint may also be forced to turn over several assets that were purchased using money from the fraud scheme – including eight luxury cars and any private aircrafts in his name.

His hospital chain, Forest Park Medical Center, has not been doing well, either. Just last month, the system filed for bankruptcy. The bankruptcy filing follows several physician kickback suit settlements over the past several years.

This indictment and subsequent guilty verdict are the most recent in a months-long string of similar cases. We bring these "horror stories" to our readers every now and then to serve as a reminder how important a thriving and successful compliance program is at every level in a company. This particular instance could have been avoided if the medical centers at which Toussaint practiced had strong compliance departments who could have noticed, for one, that Toussaint was billing for completing procedures when he was not present, or that he was billing for being present in overlapping procedures.

To keep your compliance officers "in the know," we encourage your company to sign up for a subscription to our sister publication, Life Science Compliance Update. Life Science Compliance Update covers important news and analysis, and includes monthly input from top compliance officers and attorneys across the industry.

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