Par Pharmaceutical Companies Inc. pled guilty in federal court in Newark, N.J., and will pay $45 million to resolve its criminal and civil liability in the company’s promotion of its prescription drug Megace ES for uses not approved as safe and effective by the Food and Drug Administration and not covered by federal health care programs. Par, based in Woodcliff Lake, N.J., was purchased in September by private equity firm TPG Capital LP for $1.9 billion. Chief Executive Officer Paul V. Campanelli pled guilty on behalf of Par before U.S. Magistrate Judge Madeline Cox Arleo in Newark federal court. Judge Arleo fined Par $18 million and ordered $4.5 million in criminal forfeiture. In addition, Par will pay $22.5 million to settle its civil liability. U.S. Attorney Paul J. Fishman had this to say about Par’s wrongdoing:
The FDA requires drug makers to go through a stringent approval process before new drugs – or new uses for existing drugs – are made available to doctors and their patients. Today, Par admitted that it chose to ignore that process in pursuit of more sales and greater profits. It is paying the price for its choice.
Daniel R. Levinson, Inspector General of the U.S. Department of Health and Human Services, had this to say about how Par executives are affected:
Individual accountability of Par’s board and executives is required under the comprehensive five-year integrity agreement OIG has with the company. For example, company executives may have to forfeit annual bonuses if they or their subordinates engage in significant misconduct, and sales representatives may not be paid incentive compensation for the drug involved in the case, or successor branded versions of that drug.
Par was charged with misbranding Megace® ES in violation of the Federal Food, Drug, and Cosmetic Act (FDCA). Megace ES, a megestrol acetate drug product, was approved by the FDA to treat anorexia, cachexia, or other significant weight loss suffered by patients with AIDS. The Megace ES, distributed nationwide by Par, was criminally misbranded because its FDA-approved labeling lacked adequate directions for use in the treatment of non-AIDS-related geriatric wasting. This was a use that was intended by Par, but one that was never approved by the FDA. The FDCA requires companies such as Par to specify the intended uses of a product in an application to the FDA. Once approved, a drug may not be distributed in interstate commerce for unapproved or “off-label” uses until the company receives FDA approval for the new intended uses.
In addition to the criminal fine and forfeiture, the plea agreement mandates that Par implement several compliance measures and annually provide the U.S. Attorney’s Office with a sworn certification from its chief executive officer that the company has not unlawfully marketed any of its pharmaceutical products. The civil settlement agreement requires Par to pay $22.5 million to the federal government and various states to resolve claims arising from its off-label marketing. The civil settlement resolves allegations that Par, by promoting the sale and use of Megace ES for uses that were not FDA-approved and not covered by federal health care programs, caused false claims to be submitted to these programs.
Federal officials alleged that Par deliberately and improperly targeted sales to elderly nursing home residents with weight loss, whether or not these patients suffered from AIDS, and launched a long-term care sales force to market to this population. During this marketing campaign, Par was aware of adverse side effects associated with the use of megestrol acetate in elderly patients, including an increased risk of deep vein thrombosis, toxic reactions in elderly patients with impaired renal function, and mortality. According to the Justice Department, Par made unsubstantiated and misleading representations about the superiority of Megace ES over generic megestrol acetate for elderly patients to encourage providers to switch patients from generic megestrol acetate to Megace ES, despite having conducted no well-controlled studies to support a claim of greater efficacy for Megace ES.
The plea agreement and Corporate Integrity Agreement (CIA) include provisions that require Par to implement changes to the way it does business. The plea agreement and CIA prohibit Par from providing compensation to sales representatives or their managers based on the volume of sales of Megace ES, and in the CIA, based on the volume of Megace ES and any branded successor megestrol acetate drug. Under the CIA, Par is also required to change its executive compensation program to permit the company to recoup annual bonuses from covered executives if they, or their subordinates, engage in significant misconduct.
Hopefully, the bosses at Par will make sure that the corporate culture does in fact change within the company. But Big Pharma has a history of committing fraud, cheating the government, paying fines and never really changing the way the companies do business. As stated above, the settlement resolves three lawsuits filed under the whistleblower provisions of the False Claims Act. As part of the settlement, the relators will receive $4.4 million. Timothy McInnis, who is with McInnis Law, a firm in New York City, represented the whistleblowers. He did a very good job in this case, which is just another example of why the False Claims Act is so important in fighting corporate corruption.
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