Retta M Riordan examines manufacturers’ settlements with the government and provides advice on how to avoid prosecution.

“Pfizer to pay record $2.3 billion over off-label drug promotions”

“Justice Department Announces Largest Health Care Fraud Settlement in Its History: Pfizer to Pay $2.3 Billion for Fraudulent Marketing”

“Pfizer Sets $2.3 Billion Settlement Agreement with U.S. Tied to Alleged Off-Label Marketing of Painkiller Bextra”

We all saw the headlines and were perhaps stunned, not only by the dollar amount of the settlement, but also by the extent of the corrective actions mandated in the agreement. While the Pfizer settlement is the largest settlement to date, it is but the latest in a string of other settlements with manufacturers in the US involving off-label promotion.

Evidenced by these settlements, the government is signalling that it intends to continue enforcing the laws governing the activities of:

• large pharmaceutical companies – “Eli Lilly in $1.4B Zyprexa settlement: Pharmaceutical company agrees to settle suits over questionable marketing of drug for off-label uses”;
• small companies – “Jazz Pharma to pay $20M to settle Orphan Medical misbranding charge”; and
• medical device companies – “Endoscopic Technologies to Pay U.S. $1.4 Million to Resolve Allegations of Medicare Fraud”.

But it’s not just the companies the government is going after. Of late, we have seen individuals held liable for illegal activities: “Synthes exec pleads guilty in bone-cement case”; and “Biotech Co.’s Ex-CEO Charged with Fraud”.

In light of $7 billion in manufacturer settlements for off-label violations, it is prudent to review steps you can and should be undertaking to protect your company and employees. The best way a company can protect itself against off-label promotion allegations is through an effective compliance programme that: establishes clear rules prohibiting off-label promotion; provides training to ensure employees understand the rules and what is expected of them; monitors promotional activities to catch any questionable activities and fix potentially troublesome practices; and investigates when such violations are suspected.

This article provides a brief review of US laws governing off-label promotion, summarises the major off-label cases, including the recent Pfizer settlement, and suggests steps that you should take to protect your company. In addition, it offers suggestions what to do if a problem is detected. [There are numerous other aspects of off-label promotion that are current hot topics that will not be addressed in this article due to space limitations.]

Underlying laws: back to basics

There are three major laws in the US governing off-label promotion: the Federal Food, Drug, & Cosmetic Act (FDCA), the Federal False Claims Act (FCA) and the Antikickback Statute (AKBS).

Although the specific approval mechanisms to market a product under the provisions of the FDCA are different for drugs and devices, the concept for gaining approvals for drugs and devices is the same: prior to selling a drug or device in the US, manufacturers must first obtain approval from the FDA. In its application, the company must specify the intended uses of the product. Once approved, the drug or device may not be marketed or promoted for so-called “off-label” uses, ie any use not specified in the application and approved by the FDA. The product may be marketed only within the confines of the approved label. If the company markets a product off-label, it is deemed “misbranded” under the FDCA. The FDA’s remedies for violating the FDCA are broad, ranging from issuance of regulatory letters (notices of violation or untitled letters) and warning letters, to a requirement to issue “Dear Doctor” letters and institute corrective advertising, to various enforcement powers, such as injunctions, fines and criminal prosecution.

The FCA prohibits a person from knowingly submitting, or causing to be submitted, false claims or making false statements to secure payment by the federal government. The government has taken the position that off-label promotion causes false claims to be submitted by providers, in violation of the FCA. No specific intent is required. The penalties for violating the FCA are stiff: civil penalties of up to $10,000, plus three times the amount of damages sustained.

Under the AKBS, people and entities are prohibited from knowingly offering/receiving or paying/soliciting remuneration (including kickback, rebate, bribe), in cash or in kind, directly or indirectly, to induce someone to refer a patient or to purchase, lease or order or recommend any goods or services that are reimbursable under federal healthcare programmes, eg Medicare and Medicaid. Penalties are steep: fines of up to $250,000 for individuals and $500,000 for companies; criminal prosecution of corporations and individuals (up to five years’ imprisonment); or both. In addition, the government may exercise its civil penalty authority by excluding individuals or entities from participation in federal healthcare programmes and assessing civil monetary penalties of $50,000 for each act plus three times the amount of illegal remuneration.

The government may proceed criminally, civilly or in both ways against companies. For example, in the recent Pfizer case, the government proceeded both criminally and civilly. On the criminal side, Pfizer entered into a settlement agreement with the US Department of Justice¹. On the civil side, the company entered into a corporate integrity agreement (CIA) with the Department of Health and Human Services’ Office of Inspector General². [All OIG compliance documents can be obtained at http://oig.hhs.gov/fraud.asp.]

Government actions

Over the past several years, the DOJ and the OIG have undertaken unprecedented actions against manufacturers – large and small, pharmaceutical and medical device firms – and, increasingly, against individuals as well.

Table 1 offers a bird’s-eye view of where the government’s off-label focus has been in recent years.

There are several reasons the government has been pursuing off-label cases with such vigour. First, the government is concerned with patient safety – the use of a drug or device for a non-approved indication may be unsafe for patients. The government is also concerned with protecting the federal treasury – the government shouldn’t be paying for items not proven to be safe and effective. Some other reasons are more pragmatic. There are, by various accounts, over 100 whistleblower actions pending in various US attorneys offices around the country alleging off-label promotion, in which the government must decide whether to intervene. As these cases are already before the prosecutors, they do not need to expend valuable resources investigating new ones. Additionally, these cases are lucrative for the government, as the table above demonstrates.

Summary of specific cases

To effectively institute best practices to protect your company, it is instructive to review the government’s focus in recent years. Over the years, novel and more onerous provisions have been added incrementally to settlements. A review of these settlements and their progression is helpful in determining what the government deems to be offending behaviour. These provisions provide a playbook for the off-label components of your compliance programme, as well as suggestions for good business practices and what preventative and corrective actions should be taken.

Orthofix: In this early off-label case, brought under the FCA in response to a whistleblower suit, the government alleged that the company promoted Physio-Stim off-label for use on the cervical spine, whereas it had been approved only for healing of fractures of the long bones, such as arms or legs.

Pfizer II (2004): The government alleged that the company had engaged in a concerted effort to promote its off-label epilepsy and postherpetic neuralgia drug, Neurontin (gabapentin), off-label. It allegedly marketed the drug for various unapproved uses, including pain and psychiatric illnesses. The company had deliberately decided not to seek FDA approval for the additional indications.

Intermune: The government alleged that the company illegally promoted and marketed Actimmune (interferon gamma 1b), which is indicated for chronic granulomatous disease and severe, malignant osteoporosis. In 2008, the former chief executive was indicted on various charges, including having created and disseminated false and misleading information about the efficacy of Actimmune as a treatment for idiopathic pulmonary fibrosis for which the drug had not been approved. As of this date, the chief executive’s trial is under way.

Pfizer III (2007): Pfizer’s third settlement with the government involved allegations of off-label promotion of a human growth hormone, Genotropin (somatropin). The company paid $35 million to settle the case.

Bristol-Myers Squibb: The settlement involved the alleged off-label promotion of Abilify (aripiprazole) to treat children and dementia-related psychosis, both of which were off-label uses. The product, which is indicated for the treatment of depression, bipolar I disorder and schizophrenia, contained a black box warning for dementia-related psychoses. The company created a sales force specifically to target sales to nursing homes for dementia-related psychosis patients and directed the sales force to call on other inappropriate specialists. Otsuka, BMS’s co-promotion partner, also entered into a settlement agreement with the government for its part in the off-label promotion of Abilify.

Purdue: The government alleged that Purdue introduced the painkiller OxyContin (oxycodone) into interstate commerce as a misbranded drug by having sales reps downplay the risks of OxyContin as being addictive and subject to abuse and diversion. The FDA had already issued warning letters to Purdue for such practices in 2000 and 2003. The chief executive, general counsel and executive vice president of Worldwide Research & Development were found guilty of engaging in misbranding, a misdemeanour, and collectively assessed a fine of $35 million.

Jazz: Although falling in the small company category, the settlement flagged issues that are of concern to companies of all sizes. This settlement focused on the illegal promotion of Xyrem (sodium oxybate, GHB), a narcolepsy drug, for unapproved uses. It is important to note that GHB is subject to abuse as a recreational and “date rape” drug. In 2000, HHS classified GHB, for these and other nonmedical purposes, as a Schedule I controlled substance (the same class as heroin), following a number of highly publicised cases of women dying or being raped after unknowingly ingesting GHB. Xyrem contained a black box warning and the company had in place an extensive risk management programme. Prosecutors focused on Jazz’s sales calls to physicians who do not specialise in narcolepsy.

In a widely publicised instance, one physician whom Jazz used extensively as a speaker was arrested. The physician, who received over $100,000 from Jazz as a speaker, made statements that Xyrem was “as safe as table salt” and provided reimbursement advice on off-label uses. In 2008, the physician pleaded guilty to a misdemeanour misbranding violation under the FDCA. A sales manager also pleaded guilty.

AbTox: The government alleged that AbTox informed hospitals that it had received FDA approval for a large steriliser, the AbTox Plazlyte sterilisation system, when in fact the FDA had approved only a smaller device. At least 25 patients suffered corneal damage when the larger, unapproved sterilisation equipment was used, and the company did not report adverse events. The company had prior knowledge that the larger steriliser left residue on instruments. The chief executive and the vice president and chief compliance officer received jail sentences of ten and six years, respectively. In addition, the company was required to reimburse the hospitals $17 million. The company subsequently declared bankruptcy.

Zimmer, DePuy, Smith & Nephew, Biomet and Stryker: In 2007, five orthopaedic device manufacturers settled cases that, although they were kickback, not off-label promotion, cases, contain some provisions in them that have found their way into subsequent off-label settlements. These provisions include: appointment of a federal monitor; inclusion in new agreements and revisions in existing agreements with physician customers of a provision that the physicians must disclose to their patients their relationship with the companies; posting on their websites the names of all consultants and their compensation; and conducting a prior needs assessment to determine what training and product development work the company actually needs.

Cephalon: This case, involving the antiepilepsy drug, Gabitril (tiagabine hydrochloride), the opioid analgesic, Actiq (fentanyl), and the sleep disorder drug, Provigil (modafinil), was the first major settlement following the 2007 device kickback cases and adopted certain of the novel provisions contained in those earlier cases, such as the transparency requirements. The government alleged that Cephalon had trained reps to promote off-label, ignoring restrictions on the product label; included as targets physicians who were specialists in other areas of medicine; structured their quotas and bonuses to require off-label sales; trained reps and medical professionals to speak off-label; and funded continuing medical education (CME) programmes to promote off-label uses.

Cephalon was required to send letters to doctors advising them of the resolution of the case and to post payments to doctors on its website. In addition, the government required the board of directors to assume responsibility for reviewing and overseeing the compliance programme and adopt quarterly resolutions stating that the company “has implemented an effective Global Compliance Program to meet the Federal health care program requirements, FDA requirements, and the obligations of the agreement”. The agreement also requires certain members of Cephalon’s senior management team to assume accountability for adherence to the compliance programme and make annual certifications to that effect. The settlement also required Cephalon to establish a field monitoring programme.

Eli Lilly: In what was then the largest settlement involving off-label promotion at $1.4 billion, Lilly settled a case alleging that the company had created marketing materials promoting the bipolar I disorder and schizophrenia drug, Zyprexa (olanzapine), for off-label uses by training and directing the sales force on how to market off-label and utilising long-term care and primary care sales forces inappropriately. The settlement includes Cephalon-like provisions requiring the board to review annually the company’s compliance programme and to certify as to the compliance programme’s effectiveness. It also includes a Cephalon-type provision requiring Lilly to send letters to doctors notifying them of the settlement and posting on its website all payments to healthcare professionals, including honoraria, travel and lodging. Additionally, managers must certify that their respective departments and functional areas are compliant.

Previously, in 2005, Lilly entered into an agreement with the government for allegedly promoting off-label Evista (raloxifene), an osteoporosis drug. The government alleged that the company had marketed the drug for the prevention of breast cancer [Evista has since been approved for reducing the risk of breast cancer] and cardiovascular disease by engaging in several tactics: training its sales force in off-label uses; producing and distributing a “best practices” videotape on how to market the product for all three uses; and soliciting physicians to ask questions about off-label uses.

Cell Therapeutics, Medicis, Endoscopic (small companies): Cell Therapeutics was alleged to have engaged in off-label uses of the acute promyelocytic leukemia treatment Trisenox (arsenic trioxide) for certain cancers. Medicis allegedly promoted its topical fungicide to treat diaper rash, while approval was for use in patients over ten years old. Endoscopic Therapeutics was alleged to have marketed off-label its surgical ablation devices.

Pfizer IV (2009): This recently settled case is precedent-setting, not only in its dollar amount, but also in terms of the novel provisions that the government has imposed upon Pfizer. It is important to note that this is Pfizer’s fourth settlement since 2002, a point that was evidenced during the press conference announcing the settlement. According to Michael Loucks, the acting US attorney for the Massachusetts district who prosecuted the case, “Among the factors we considered in calibrating this severe punishment was Pfizer’s recidivism.” [emphasis added]

Although this case involved four drugs – the anti-inflammatory, Bextra (valdecoxib), the antipsychotic, Geodon (ziprasidone HCl), the antibiotic, Zyvox (linezolid) and the anti-epileptic, Lyrica (pregabalin) – this article is limited to discussing Bextra, the most widely used of the products and which resulted in, by far, the largest share of the settlement. (Bextra was withdrawn from the market in 2005.) The settlement also involves kickback allegations, which will not be included in this article.

The government alleged that Pfizer engaged in widespread and comprehensive efforts – via both headquarters and field activities – to promote Bextra for off-label uses, including acute pain and surgical pain as well as unapproved dosages. Alleged activities included: differentiating Bextra from Celebrex (celecoxib), another of the company’s drugs, by tagging Bextra as a drug for general acute pain, for which it was not approved, and Celebrex for chronic pain; utilising “key physicians” to influence other physicians; holding various consultant meetings at “lavish resorts”; holding contests for reps to encourage them to and reward them for selling off-label; making comparative claims against Merck’s Vioxx (rofecoxib, which was subsequently withdrawn from the market) without head-to-head studies; providing samples to inappropriate physicians; inappropriately utilising CME programmes to encourage unapproved uses of Bextra; developing a strategy to publish articles discussing off-label uses and dosages; and implementing an inappropriate “manuscript development” process.

In addition to the record monetary settlement, Pfizer is required to implement numerous steps as part of its compliance programme to prevent recurrence of offending activities. While some provisions are similar to ones that have appeared in many previous agreements, others, discussed in Table 2, are device manufacturer-type provisions, Cephalon-type provisions, or novel provisions.

Table 2. Corrective action provisions in the 2009 Pfizer settlement

In the pipeline

In addition to those cases that have settled or gone to trial, there are a number of others that have been publicly disclosed this year as being in the pipeline, including: AtriCure; Medtronic; St Jude Medical; Boston Scientific; Blackstone Medical; Forest Labs; Synthes; and Gilead.

Of particular note is the Synthes case. The government alleges that, to circumvent clinical trials for as yet unapproved indications, the company had urged physicians to use off-label its Norian brand of cement products during surgery. The approved label specifically warned against those uses. Three patients died during surgery, according to prosecutors. While the company entered a not guilty plea in late July, four executives have pleaded guilty to allegations that they shipped misbranded products across state lines. Sentencing of the individuals is expected this autumn.

Individuals

Off-label promotion can represent more than just a large company payout; it can also result in individual liability for executives and employees.

A recent trend in government investigations has been the pursuit of executives and employees in their individual capacities at various companies, including Purdue, AbTox, Stryker, Synthes, Intermune and Pfizer. These prosecutions have included not only sales representatives, but also such senior executives as: chief executive, general counsel, executive vice president of worldwide research and development, president, chief compliance officer, district manager, regional director, director of regulatory and clinical affairs, vice president, operations; and senior vice president of global strategy.

In the Pfizer case, two individuals were found guilty for their part in the Bextra off-label promotion activities: in July, a Pfizer sales manager, who had been convicted earlier this year for his role in leading a group of sales reps in off-label promotion activities, was sentenced to home confinement with an electronic monitoring device for six months, and three years’ probation, without a fine. He also was accused of having deleted files from his computer and assisting a colleague in backdating documents after the Bextra investigation began. A regional manager, the sales manager’s supervisor, was previously convicted and sentenced to two years’ probation, plus a $75,000 fine.

Lessons learned

An in-depth analysis of the aforementioned settlements can serve as an educational tool for companies that wish to avoid a similar fate (see Table 3).

Preventative and reactive steps

There are a number of critical steps each company should take to ensure that they will not be the next to appear in headlines. It is important to be both proactive by establishing an infrastructure to prevent offending actions from occurring in the first place and reactive, by stopping the haemorrhaging, developing a corrective action plan, conducting a root cause analysis and remediating when an offending action is identified. As the US Court of Appeals for the Seventh Circuit stated in Caputo v United States³:

Corporate compliance officers are very much today’s corporate ‘fire personnel.’ They are often the company’s ‘first responders’ and must focus on both proactive and reactive efforts to be effective. Proactive efforts need to emphasize the complementary goals of crime prevention and corporate ethical behavior. Reactive efforts measure how well a corporation reacts when it learns that questionable and potentially illegal corporate conduct has occurred. [Emphasis added.]

Below is a checklist of general areas of concern that will assist your company in ensuring an effective compliance programme that can prevent, detect and correct off-label promotion activities. Each item should be tailored to meet your company’s resources and limitations, management structure and the company’s culture and risk tolerance.

Effective compliance programmes:

• appoint a qualified compliance officer, reporting directly to the chief executive or president, with sufficient resources and staff to implement and maintain a credible compliance programme;
• establish policies and procedures that set parameters for expected behaviours;
• conduct periodic comprehensive training for all appropriate employees;
• monitor all high-risk areas, including all promotional materials and activities, requests for information and interactions with healthcare professionals;
• establish and maintain a compliance hotline that is well publicised to employees;
• conduct investigations when issues arise, conduct root cause analyses, resolve all issues and plan and implement corrective action plans;
• stay current. Be knowledgeable of current requirements and trends. Read all cases, warning letters and government and industry communiqués; analyse and determine their applicability to your company, and implement changes where appropriate. Use lessons from settlements to improve your compliance programme; and
• conduct benchmarking against other companies to learn of new and useful compliance tools.

Corporate-wide ethical culture:

• establish a tone at the top of the organisation, a critical component of a compliance programme. Ensure senior management inculcates the importance of compliance throughout the entire organisation. Instill an ethical culture;
• do not communicate with a wink and a nod;
• set expectations of compliant behaviour as employees are hired and remind them frequently via different modes of communication;
• articulate and publicise zero tolerance for compliance violations in general and off-label promotion in particular;
• ensure that employees understand that compliance is the responsibility of all. The compliance department puts in place the rules, but the business is responsible for compliant behaviour. All departments should work together to ensure compliance; and
• document all steps taken, including review of materials, decisions made, direction given, investigations, corrective actions and risk assessments.

Education and training:

• conduct periodic and comprehensive training of all relevant employees to ensure that they are knowledgeable about all compliance policies, including off-label promotion guidelines: what is permitted, what is prohibited; how to avoid off-label promotion; and how to detect off-label promotion;
• do not train reps to promote off-label;
• ensure that reps understand that they can neither promote nor discuss off-label use with healthcare professionals; and
• instruct reps to distribute only company-approved materials and not to create and distribute “home-made” materials, including articles from the internet.

Policies and procedures:

• develop effective policies and procedures for controlling and detecting inappropriate activities, including off-label promotion; and
• develop policies and procedures for conducting investigations.

Two-way communications:

• ensure you have in place open lines of communication for employees to safely air complaints and grievances with anonymity and without fear of retribution, including through the compliance hotline, the compliance department and other sources. Remember: a vast majority of these cases have been brought by whistleblowers; and
• communicate frequently with employees about compliance issues.

Monitoring activities:

• review all promotional and training materials to ensure they do not include off-label statements;
• ensure review of all relevant activities, eg speaker programmes and advisory boards, and documents, including brand plans to ensure that off-label promotion is not being taken into account to reach the goal;
• ensure grants are for appropriate medical education only, and not illegal inducements to promote off-label;
• monitor specific payments to healthcare professionals to ascertain if they are being paid to promote off-label. Monitor aggregate payments to healthcare professionals to determine if a significant amount is going to a specific healthcare professional and ascertain why;
• review unsolicited requests for off-label information to ensure genuineness;
• monitor distribution of samples to ensure they are provided only to appropriate customers;
• scrutinise payments to healthcare professionals;
• review appropriateness of target customers for the product label; and
• ensure compliance with all federal and state laws regarding posting of clinical studies.

Investigations:

• investigate thoroughly every allegation and complaint and resolve every issue; and
• document every step of an investigation.

Employee requirements:

• include compliance in annual performance reviews;
• take appropriate disciplinary actions when necessary;
• work closely with human resources on all allegations of off-label promotion;
• scrutinise reps who are outliers to determine if their numbers are too good to be true;
• scrutinise reps’ incentive programmes: are sales goals too high to be reached only via on-label promotion? Are bonuses calculated for only on-label uses?; and
• review the role and placement of medical science liaisons.

For non-US companies venturing into the US:

• carefully adopt and follow US compliance standards;
• ensure a solid understanding of what your compliance programme should look like;
• fully understand FDA promotional rules; and
• train all employees – including executives – on US compliance requirements, appropriate and inappropriate activities, cases and laws.

If a problem arises, remember: the purpose of a compliance programme is to prevent wrongdoing in the first instance, and to discover and correct problematic actions. To address an infraction: first, stop the haemorrhaging – immediately put a halt to the problematic activity; develop and implement a corrective action plan; conduct a root cause analysis; correct the problem: if systemic, fix the problem, eg modify policies and/or conduct additional training; if associated with an individual, take HR action, if appropriate; and if warranted, make self-disclosure to the government.

Conclusion

Off-label promotion cases have been in the forefront of the US government’s watchful eye. Settlement amounts have been rising and the requirements within the settlement agreements have become more onerous. Myths about small companies and device manufacturers have been debunked: they are not off the radar screen. The government is focusing on new areas and requiring companies to implement novel and onerous requirements.

Take proactive steps now to protect your company. Avoid becoming the next company to be included on a chart listing manufacturers settling for millions or billions of dollars for off-label promotion violations.

References

1. The US Attorney’s Office: District of Massachusetts, press release (2 September 2009) and related settlement documents, www.usdoj.gov/usao/ma/Pfizer.html

2. HHS, 2009 Pfizer Corporate Integrity Agreement, 31 August 2009, http://oig.hhs.gov/fraud/cia/agreements/pfizer_inc.pdf

3. Caputo v United States, 517 F.3d 935 (7th Cir. 2008)

Retta M Riordan, JD, is the founder and president of Riordan Consulting LLC, which provides guidance to US and global life science companies on how to navigate the complicated maze of regulatory requirements. Formerly, she was the business ethics and compliance officer for Organon Biosciences. Email: Retta.Riordan@Comcast.net.