Life Science Compliance Update

April 19, 2016

Public Citizen Study Shows Significant Reduction in Pharmaceutical Settlements 2014 - 2015

Public Citizen updated that report, and issued a new report, which included settlements for all years, starting in 1991, through 2015. This new report found that there was a nearly eighty percent drop in settlements between companies and state governments in 2014-2015 from 2012-2013. Federal financial penalties also dropped in that same time period: in 2012 to 2013, $8.7 billion was collected, compared to $2.4 billion in financial penalties in 2014 to 2015.

As some of our readers may recall, in late 2012, Public Citizen published a study of all major financial settlements and court judgments between pharmaceutical manufacturers and the federal and state governments from 1991 through July 18, 2012. At the time of that report's publication, over $30 billion was paid by the pharmaceutical industry to settle allegations of numerous violations, including alleged off-label marketing and defrauding of Medicare and Medicaid.

The 2016 study also indicated that over the course of the twenty-five years that were examined, the companies that had the most expensive learning lessons were GlaxoSmithKline ($7.9 billion in financial penalties) and Pfizer ($3.9 billion in penalties). Pfizer had the most settlements over that time period, followed by Merck in second place, and tied for third place were GSK, Novartis, and Bristol-Myers Squibb.

While the report does mention that eighty-eight percent of the settlements referenced were civil, not criminal, it fails to mention - or even entertain the idea that - civil settlements often do not resolve the issue of guilt and payment of a civil settlement is not the same as admitting guilt to the alleged wrongdoing.

Of the settlements found in the report, the most common violation by companies was overcharging of government health insurance programs. The violation that resulted in the largest financial penalties was the unlawful promotion of drugs.


Public Citizen is claiming that the aforementioned decrease in amount of money pharmaceutical companies have paid to settle charges for violating federal healthcare laws means there needs to be an increase in enforcement efforts.

However, our interpretation is that the decrease in settlements is actually due to an increase in awareness of corporate compliance. As we have seen, and have documented in our sister publication, corporate compliance has received a renewed focus by many companies, including large compliance departments at many United States corporations. PhRMA agrees with that assessment, stating, "the report makes scant mention of the tens of millions of dollars companies spend annually to develop and maintain state-of-the-art legal compliance programs."

PhRMA continued their statement, "among its many methodological flaws, the report aggregates all settlements involving the pharmaceutical industry, with little regard as to whether the companies actually broke the law. Civil settlements rarely resolve the question of guilt. Yet the report glosses over its own finding that 88 percent of the settlements reported were civil, not criminal."

Another reason for the decline in settlements may be that the courts are becoming more demanding when it comes to whistleblowers being able to successfully prove a False Claims Act case, or possibly that the Department of Justice (DOJ) and the Food and Drug Administration (FDA) are starting to back off off-label marketing claims as free speech defenses have begun to collect successful momentum.

PhRMA continues to advocate for conversations on how to direct healthcare enforcement to "promote ethical corporate conduct, patient safety, innovation, and security of the public [treasury]," believing (as do we) that such conversations are "important and necessary." However, effective conversations on those topics are more difficult to have when reports are published with conclusions based on faulty reasoning, like the reasoning shown in this report.

Our interpretation of this study, and the decrease in settlements, is that compliance officers are worth their weight in gold. Each pharmaceutical company and device company should have at least one compliance officer who is kept abreast of all actions taken by the company, to help continue this downward trend of settlements.

A Basic Geometry Lesson - FDA’s Off-label Losses

Lon - FDA's Off-label

The new decision in United States v. Vascular Solutions, Inc., provides the third point in a curve of the FDA's regulation of off-label promotion. This article provides a detailed explanation of the case, including the relevant jury instruction, an overview of the 2014 FDA Guidance document on scientific and medical publications, and possibilities for next steps for compliance officers

It is a fundamental tenet of geometry that three points are needed to determine a curve. Concerning the Food and Drug Administration ("FDA") and its regulation of off-label promotion versus the First Amendment, with United States v. Vascular Solutions, we now have our third point in the curve.

In Vascular Solutions, the government charged both Vascular Solutions and its president, Howard Root, with selling medical devices without FDA approval and with conspiring to defraud the United States by concealing the allegedly illegal activity.40 The government alleged that Vascular Solutions and Root engaged in a campaign to promote the Vari-Lase devices for ablation of perforator veins when the devices were only approved for use in superficial veins.


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March 29, 2016

More Legal Trouble Ahead for Horizon Pharma

Horizon Pharma has been in the spotlight for questionable ties to specialty pharmacies and its patient assistance programs. Recently, however, they were hit with an expected class action securities lawsuit over related allegations.

A suit has been filed on behalf of injured investors in the United States District Court for the Southern District of New York on behalf of investors who purchased Horizon stock between March 13, 2014 and February 26, 2016. In the pleadings, claims were made that Horizon "made materially false and misleading statements to investors" and hid unsavory information about its patient assistance programs.

According to the suit, Horizon set up its Prescriptions Made Easy (PME) plan, also known as HorizonCares, to "artificially inflate" prices for similar drugs, and that sales revenues from drugs sold through the PME program could not be sustained at those inflated levels. As a result, Horizon released financial statements that were "materially false and misleading at all relevant times," which opened Horizon up to more regulatory pushback.

According to the complaint, the PME program utilized specialty pharmacies to fill prescriptions for more common drugs, such as prescriptions for acne or arthritis pain. The prices were considered "artificially inflated" because typically when a prescription is sent to a specialty pharmacy, the likelihood that an insurer or pharmacist will try to switch the product from a Horizon product to a less-expensive generic is slim. It is interesting that Horizon is one of the only companies who work in the pain therapeutic area but does not have an opioid.

Materially False and Misleading Statements

The suit alleges that Horizon made materially false and misleading statements, and "failed to disclose material adverse facts about the Company's business, operations, prospects and performance. Specifically, Horizon allegedly made false or misleading statements about the following:

  • Horizon's PME program was designed to artificially inflate the prices of minor differentiation standard retail drugs;
  • Sales revenues from drugs sold through the PME were unsustainable at the inflated price levels;
  • Horizon's use of the PME program left the Company subject to increased regulatory risks;
  • Horizon received a subpoena from the U.S. Attorney for the Southern District of New York in November 2015; and
  • As a result of the foregoing, Horizon's statements about its business, operations, and prospects were false and misleading and/or lacked a reasonable basis.

Questions and Concerns Listed in Complaint

In every class action suit, the lead plaintiff, in his or her complaint, must list common questions of law and fact that exist to all members of the Class and are more relevant and important than any questions that solely affect individual class members. This complaint lists the following questions of law and fact:

  • Whether the federal securities laws were violated by defendants' acts as alleged herein;
  • Whether statements made by defendants to the investing public during the Class Period misrepresented material facts about the business, operations and management of Horizon;
  • Whether the Individual Defendants caused Horizon to issue false and misleading financial statements during the Class Period;
  • Whether defendants acted knowingly or recklessly in issuing false and misleading financial statements;
  • Whether the prices of Horizon securities during the Class Period were artificially inflated because of the defendants' conduct complained of herein; and
  • Whether the members of the Class have sustained damages and, if so, what is the proper measure of damages.

The suit alleges that Horizon's actions took a toll on investors, as once the true details entered the market about the patient assistance programs, the price of the stock sharply dropped, leaving investors with monetary damages.

The case does not yet have a lead plaintiff, and multiple national law firms can be found requesting lead plaintiffs contact them, all hoping for a piece of a presumably large settlement pie.


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