Xyrem was approved for only two medical indications. The first, approved in July 2002, was for the treatment of cataplexy, a condition characterized by weak or paralyzed muscles associated with narcolepsy. The second use, approved in November 2005, was for the treatment of excessive daytime sleepiness (EDS) in narcolepsy patients.
The drug’s black-box warning label, the most serious warning placed in the labeling of a prescription medication, stated that Xyrem is capable of inducing sleep very quickly and causing serious side effects, including difficulty breathing while asleep, confusion, abnormal thinking, depression, nausea, vomiting, and sleepwalking.
Abuse of the drug could cause dependence and craving as well as seizures, coma, and even death. The warning label also indicated that the drug’s safety and efficacy were not established in children and that there was only limited experience with the drug in elderly patients.
The government alleged that, through sales representatives and at least one medical professional, Orphan engaged in a scheme to expand the market for Xyrem by promoting the drug to physicians for off-label medical uses including fatigue, insomnia, chronic pain, EDS (before EDS became an approved indication), weight loss, depression, bipolar disorder, and movement disorders such as Parkinson’s disease.
Specifically, Orphan sales representatives in the Eastern District of New York and across the United States, with the knowledge and approval of Orphan sales managers throughout the country, frequently made sales calls on physicians who did not specialize in narcolepsy in order to promote Xyrem for the treatment of conditions not related to the approved use. They also distributed written materials concerning off-label uses that did not adhere to FDA guidance designed to prevent their improper use by drug manufacturers in promoting their products.
The government also alleged that Orphan relied on a psychiatrist to give talks around the country promoting Xyrem to physicians for off-label uses and paid him tens of thousands of dollars for these engagements.
With the approval of Orphan sales personnel, the psychiatrist allegedly made misleading statements about Xyrem in the course of promoting the drug for off-label use, including minimizing the dangers of a Xyrem overdose and suggesting that the drug was customary and safe to use on children and the elderly. He also suggested that the drug’s active ingredient, GHB, was not really a date-rape drug.
Also, the psychiatrist, again with the approval of Orphan sales personnel, allegedly advised physicians how to conceal off-label Xyrem prescriptions in order to obtain reimbursement from insurers for unapproved uses that were not medically accepted and generally not reimbursed. As a result of its guilty plea, Orphan was excluded from federal healthcare reimbursement by the Office of Inspector General for HHS.
In order to resolve the case, Jazz entered into a nonprosecution agreement with the government. Jazz has agreed to guarantee Orphan’s obligation to pay criminal restitution to public and private insurers of approximately $12.2 million and a criminal fine of $5 million. Jazz will provide ongoing cooperation to the government in connection with its investigation and prosecution of the underlying illegal marketing scheme. Pursuant to the civil settlement agreement, Jazz and Orphan agreed to pay $3.75 million, plus interest.
Jazz also agreed to implement the terms of a corporate integrity agreement required by the Office of Inspector General for HHS and take other proactive and remedial measures, including the implementation of a code-of-conduct prohibiting promotion for unapproved or off-label use and requiring compliance training for promotional speakers and sales representatives.
Jazz also agreed to replace the former Orphan regional sales managers who were responsible for overseeing the conduct of sales representatives in their respective territories.
In October 2005, the DOJ announced that Serono must pay $704 million to settle criminal charges and civil allegations related to the company’s marketing practices for its AIDS wasting drug, Serostim.
This represents the largest settlement to date concerning allegations of illegal off-label promotion and is among the largest concerning healthcare fraud. Serono pleaded guilty to two felony counts of conspiracy: conspiracy to distribute an unapproved and adulterated medical device and conspiracy to pay illegal remuneration to healthcare providers to induce referrals to pharmacies for Serostim, payment for which was made by Medicaid.
The Serono case arose from three qui tam actions filed by former sales representatives against the company for false Medicaid claims. The complaints alleged that Serono sales representatives used a bioelectrical impedance analysis (BIA) test to measure patients’ body mass wasting and manipulated the BIA readings to suggest that patients without AIDS wasting be prescribed Serostim.
The whistleblowers also alleged that Serono offered prescribers trips to Cannes, France, in exchange for writing a certain number of prescriptions for Serostim within a set period of time.
The first count charged that, through the use of unapproved diagnostic software, Serono launched a campaign to convince prescribers that body-cell mass rather than weight loss, which the company had used as the clinical endpoint in its investigations was the true measure of AIDS wasting.
Around the time of Serostim’s approval, protease inhibitors were also approved by the FDA. These drugs dramatically reduced the number of patients suffering from AIDS wasting, thus, the demand for Serostim. By redefining AIDS wasting, the government asserted that the company aimed to artificially expand the Serostim market.
Count two asserted that, to further boost lagging sales, the company initiated what it called a “6m-6 Day Plan” through which representatives were instructed to offer financial incentives to high prescribers to meet a targeted sales increase of $6 million within six days. Physicians were offered all-expense-paid trips to the “International Conference on Nutrition and HIV Infection” in Cannes in exchange for increased prescribing of Serostim. Serono’s criminal penalties for these violations totaled $137 million.
Under a civil settlement agreement to resolve False Claims Act allegations, Serono will pay more than $560 million to settle liabilities relating to payments made by state Medicaid and federal healthcare programs for Serostim during the time of the illegal conduct. The government agreed to allow Serono-owned companies other than Serono Labs to continue receiving reimbursement under federal healthcare programs. The government released Serono from civil claims related to the Serostim promotional conduct.
Serono entered a corporate integrity agreement (CIA) obligating the company to establish a comprehensive compliance program and develop policies and procedures spanning a variety of topics. The Serono CIA is similar to one in place between the government and Pfizer as a result of the Neurontin case, but there are some notable differences.
First, the Serono CIA has a heightened focus on the funding and conduct of medical-education programs. Second, Serono is obligated to implement policies relating to compensation to ensure that financial incentives do not encourage improper promotional, sales, and marketing practices. Finally, the Serono CIA prohibits medical information staff from responding to requests for off-label information unless the request is made in writing.