Life Science Compliance Update

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.

March 28, 2016

Respironics Settlement and Corporate Integrity Agreement

One more False Claims Act case has been settled; this time Respironics, Inc., who allegedly violated the False Claims Act by paying kickbacks to durable medical equipment suppliers that bought its services. Respironics, who makes breathing masks for people who suffer from sleep apnea, allegedly provided free customer support through its medSage call center to suppliers whose customers used Respironics masks. Medical product suppliers that sold masks made by Respironics' competitors had to pay for the call center services based on the number of patients who used masks manufactured by other companies. Such a setup essentially forced suppliers into using Respironics masks. It is a violation of the law to induce medical suppliers to use a particular company's product for any government-covered medical service. Since the masks could be covered by Medicaid, Medicare, or Tricare programs, doing so came under the purview of the Anti-Kickback Statute.

This settlement also resolves a qui tam lawsuit that was originally brought by Dr. Gibran Ameer, who has worked for different medical equipment companies and who was once presented with the concept from Respironics, immediately realizing the arrangement resembled illegal kickbacks. Dr. Ameer will receive $5.38 million out of the federal share of the recovery.

According to Special Agent in Charge Derrick L. Jackson of the Department of Health and Human Services, "Medical equipment manufacturers that boost profits by providing kickbacks to suppliers will be held accountable for their improper conduct. We will continue to investigate such business arrangements, which threaten the integrity of federal health care programs."

Alicia Cafardi, spokeswoman for Respironics stated that the company had a "good-faith believe" that it wasn't doing anything wrong when it "bundled" the call center service in the price of its sleep apnea masks. She also stated that Respironics has snce "made a business decision" to restructure the call center pricing. Medical supply companies who use the call center service now pay a flat monthly price for each patient, regardless of whether the patient uses a Respironics mask.

The settlement comes to approximately $34.8 million, including $34.14 million in payments to the federal government and approximately $660,000 to various state governments (including Washington, D.C. and twenty-nine states that joined the lawsuit) based on their Medicaid participation.

According to Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Department of Justice's Civil Division stated, "the payment of illegal remuneration in any form to induce patient referrals threatens public confidence in the health care system. Americans deserve to know that when they are prescribed a device to treat a serious health care problem, the supplier's judgment has not been compromised by illegal payments from equipment manufacturers."

As part of the settlement Respironics entered into a five year Corporate Integrity Agreement. As part of the agreement Respironics will establish a compliance department including hiring a compliance officer, compliance training for the boards of directors, management and all staff, and review of procedures to ensure compliance with federal law.

Respironics Complaint

Respironics Corporate Integrity Agreement

March 09, 2016

Endo New York Settlement Announcement

New York Attorney General Eric T. Schneiderman announced an agreement with Endo Health Solutions, Inc. and Endo Pharmaceuticals, Inc. (collectively, "Endo"), which make and sell Opana ER, a long-acting opioid.

Opana, one of Endo's prescription drugs, was long abused in New York State. In May 2011, for example, after a spike in opioid prescribing and abuse, Nassau County issued a Public Health Alert on the increasing use and abuse of Opana ER, warning both the public and law enforcement of the dangers associated with the prescription drug. In July 2012, USA Today reported that Opana ER was actually the drug of choice for people seeking narcotics, and that in Nassau County, hundreds of people each month were seeking treatment for addiction to Opana ER.

As a result of concerns regarding both Opana ER's role in the larger opioid abuse epidemic and Endo's marketing practices, the Office of the Attorney General opened an investigation into Endo, focusing on Opana ER. The Attorney General found that Endo improperly marketed Opana ER as designed to be crush resistant, when Endo's own studies actually showed that the pill could be crushed and ground up. While this may have bolstered Opana ER sales, it also may have provided a false sense of security to healthcare providers and their patients. The Attorney General also found that Endo improperly instructed its sales representatives to diminish and distort risks associated with Opana ER, including serious dangers involving addiction.

Endo also claimed that Opana ER was distinguishable from its main competitor, OxyContin, because patients who take Opana ER need less rescue medication than those who take OxyContin. This claim, made by sales representatives in sales calls, was not supported by any clinical evidence or study.

The Attorney General's investigation found that Endo had no meaningful program in place to ensure that its sales representatives were not encouraging healthcare providers who are engaged in abuse and diversion to write more prescriptions for Opana ER. This was of particular concern because multiple New York healthcare providers who were heavily "detailed" by Endo were subsequently convicted of illegally prescribing prescription opioids (see p. 10-12 of Settlement).

According to Attorney General Schneiderman, "The public health crisis created by improper opioid prescribing in New York remains pervasive and extremely dangerous. My office is committed to ensuring that prescription drugs are marketed and prescribed responsibly – and that consumers get the information they need about the serious risks associated with painkillers, such as addiction."

The Office of the Attorney General has compelled Endo to change its practices in light of their "deceptive and unlawful conduct."

Endo must implement the following corrective measures:

  • Provide truthful and complete information regarding addiction risks associated with Opana ER;
  • Stop improperly marketing Opana ER as crush resistant;
  • Create an Abuse and Diversion Detection Program that requires Endo's sales representatives to report to the company any healthcare providers they suspect of engaging in abuse and illegal diversion of opioids;
  • Post results of clinical studies on Endo's website; and
  • Provide healthcare providers with information about addiction treatment resources for their patients.
  • Inform NY providers both in writing and orally to participate in the FDA ER-LA REMS Prescriber Education each year

Attorney General Schneiderman also imposed a $200,000 penalty on Endo for its unlawful conduct.

Settlement Specifics

In addition to the aforementioned items, the Settlement went through the findings that Attorney General Schneiderman found, including that in addition to an annual salary, Endo's sales representatives were eligible for a bonus based partly on the number of Opana ER prescriptions written by healthcare providers they were permitted to call upon. Attorney General Schneiderman felt as though such a bonus scheme may create an incentive to encourage more Opana ER prescribing.

The Settlement also mentions that Endo neither admitted nor denied Attorney General Schneiderman's findings in the Settlement and that Endo did cooperate with the Attorney General investigation.

The Settlement also laid out specific plans and requirements for the aforementioned Abuse and Diversion Detection Program, including the filing of a written report with Endo's Legal Department when sales representatives or medical liaisons observe or learn of situations that may suggest that a healthcare provider whom they contact for the purpose of promoting Opioid Medications may be involved in the abuse or diversion of opioids.

This settlement is not the light at the end of the tunnel for Endo. Earlier this month, they said they are still facing other regulatory probes and lawsuits related to its opioid sales and marketing practices.

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