Improper sales of medicines targeted

Drug firms have paid fines of $3.5 billion since 2001 for wrongful promotions

May 07, 2006|By JONATHAN D. ROCKOFF | JONATHAN D. ROCKOFF,SUN REPORTER

WASHINGTON -- A Civil War-era law designed to root out fraudulent Army contracts has been quietly employed by whistleblowers and federal prosecutors in recent years as a powerful tool for cracking down on pharmaceutical companies wrongly promoting their drugs.

Companies prosecuted under the federal False Claims Act have paid nearly $3.5 billion in penalties since 2001 for giving doctors televisions, selling them drugs at undisclosed discounts and taking other improper steps to encourage sales.

Such intensive drug marketing campaigns have led doctors to give patients drugs they don't need, sometimes with dangerous results, according to watchdog groups and academics.

Industry lawyers and consultants say the risk of hefty fines has become as potent as the threat of congressional action in prompting pharmaceutical companies to reform their sales practices, especially after studies linking painkillers and anti-depressants to deaths and suicides.

To avoid prosecution under the act, drug companies are hiring compliance officers, re-training sales staff and creating hot lines so employees can alert them of wrongdoing. Concern is so heightened, said one lawyer, that companies interested in acquiring competitors first investigate employee firings and grievances that could result in a whistleblower's filing a false claim complaint.

"There's no facet of pharmaceutical company activities that has not been affected," said William A. Sarraille, another lawyer representing drug manufacturers, who has defended six cases.

Federal law permits companies to promote drugs only for uses approved by the Food and Drug Administration. For decades, that agency, almost exclusively, policed advertising. When it found "off-label" -- not FDA-approved -- promotions or misleading marketing, it sent a warning letter. Occasionally, companies signed a consent degree, but they did not face fines.

Then in 1991 prosecutors began looking into claims that Genentech had marketed the growth hormone Protropin by suggesting that doctors prescribe it to healthy children who did not suffer from a hormone deficiency, an unapproved use. While doctors and patients are free to depart from FDA guidelines for drug use, companies cannot promote off-label prescriptions.

Prosecutors alleged improper marketing under the False Claims Act --- an obscure federal law that had been on the books for more than 100 years -- and Genentech paid $50 million in 1999 to settle the case.

Lincoln backed law

The False Claims Act, passed in 1863 with the strong support of President Abraham Lincoln, was enacted to prevent arms manufacturers from sending to the Union Army crates stuffed with sawdust instead of guns. The act was strengthened in 1986, after criticism that the Pentagon had paid exorbitant prices for toilet seats and hammers.

Until Genentech, the law had been applied only to military procurement. But federal prosecutors realized that they could use it also for pharmaceutical companies that marketed drugs to patients for unapproved purposes and had been reimbursed for the medicine by a federal program, such as Medicare and Medicaid.

"Health care spending was high. There was concern about fraud and abuse issues. Pricing was becoming more complex," said Wayne Pines, a former FDA associate commissioner who now consults for the pharmaceutical industry and who is writing a book about false claims prosecutions. "All those were the variables that led to the enforcement."

Since the Genentech case, prosecutors have used the law in 15 cases involving such major companies as AstraZeneca, Bayer, GlaxoSmithKline, Schering-Plough and Pfizer. Those cases were settled, and another 150 are pending, according to Taxpayers Against Fraud, a nonprofit group that assists whistleblowers and tracks False Claims Act litigation.

One reason the law has been effective is its reward to tipsters, who can receive 15 percent to 30 percent of the penalties against a company. A formal complaint is typically kept under seal while prosecutors decide whether to take the case. The litigation sometimes includes criminal charges under other federal laws. It usually takes 38 months for a case to go from complaint to settlement, according to Taxpayers Against Fraud, and the average award to whistleblowers is $120,000.

A Baltimore woman, Sandra Boucher, was among several whistleblowers who tipped off prosecutors in what turned out to be one of the largest settlements. Last year, Serono Laboratories of Rockland, Mass., agreed to pay $704 million to resolve charges that it had illegally marketed the drug Serostim to patients who didn't need it. Boucher, who was a sales representative, declined through her lawyer to comment.

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