whistleblowers and qui tam lawsuits in the pharmaceutical industry
Phillips & Cohen LLP
With the help of whistleblowers
and their "qui tam" lawsuits, the federal government is
aggressively pursuing civil and criminal cases against drug companies
and their employees for sales and marketing practices that violate
federal laws. Many tactics that sales reps have relied on are no
longer acceptable and could result in huge fines for their employers
and criminal prosecution of sales reps. These illegal tactics include
promoting off-label uses of drugs and providing financial inducements
to doctors in return for prescribing the company's drugs.
The pharmaceutical industry
is reeling from the crackdown. Pfizer/Warner-Lambert paid $430 million
in May 2004 for engaging in a scheme to promote Neurontin for off-label
uses. AstraZeneca Pharmaceuticals LP paid $355 million in June 2003
and pled guilty to giving doctors kickbacks by providing them with
free samples of Zoladex, knowing the doctors would bill Medicare
and Medicaid hundreds of dollars per sample. The record setter was
TAP Pharmaceuticals Inc., which pleaded guilty to participating
in a criminal conspiracy and paid $875 million to settle criminal
and civil fraud charges. TAP provided doctors with free Lupron samples
which the doctors billed to federal programs at the list price and
then pocketed the payments. The drug company also offered doctors
"grants" in exchange for prescribing Lupron.
Even doctors are being held accountable for violating the law. An
Oregon doctor recently paid $213,000 to the federal government for
improperly billing Medicare and other federal health programs for
free samples of Lupron he had been given by TAP.
liability under the False Claims Act
Sales reps could be held liable under criminal laws and the False
Claims Act for illegal sales tactics. A TAP sales rep and seven
other account and sales managers were tried earlier this year in
Boston on charges they had conspired to get doctors to prescribe
Lupron by paying bribes and kickbacks to doctors, such as offering
tickets to sporting events, dinners to fancy restaurants and free
drug samples. Although they were acquitted, this doesn't mean that
prosecutors won't pursue sales reps and executives in similar cases
in the future.
Federal investigations continue
around the country as more and more insiders step forward to reveal
how drug companies are driving up sales illegally. Investigations
into whistleblower allegations are conducted without informing the
company or individuals involved. Whistleblower cases are filed "under
seal," meaning they are not publicly available while the government
is looking into the allegations.
for whistleblowers under the False Claims Act
The people who have exposed the illegal sales and marketing tactics
have been insiders: sales executives, sales representatives, doctors
and others with firsthand knowledge of ways drug companies persuade
healthcare providers to prescribe certain drugs. These whistleblowers
filed "qui tam" (generally pronounced KEY-TAM) lawsuits,
which meant they sued drug companies to recover funds on the government's
Under the federal False Claims
Act, a private individual may file a qui tam lawsuit against a company
that is defrauding the federal government and collect a reward if
any money is recovered as a result. ("Qui tam" comes from
a Latin phrase meaning "he who brings an action for the king
as well as for himself.") Liable companies may have to pay
as much as three times the government's losses.
Congress included a financial
incentive for whistleblowers in the False Claims Act to encourage
them to step forward. If the government joins the qui tam lawsuit,
the whistleblower - known as the "relator" - is entitled
to 15 percent to 25 percent of the funds that are recovered. If
the government declines to join, whistleblowers may pursue the cases
on their own and if successful, get up to 30 percent of the recovery.
In the Pfizer case, which the government joined, the whistleblower
was awarded $26.6 million. Whistleblowers in the TAP settlement
were awarded a total of $94 million.
A qui tam lawsuit is filed
"under seal," which means that no one knows about it for
a certain period other than the government. This gives the government
time to investigate the allegations without letting the target of
the investigation know. The False Claims Act gives the government
60 days to investigate before deciding whether to join the lawsuit.
The seal can be extended and usually stands for at least a year.
The statute of limitations
on False Claims Act violations is as long as 10 years in some cases.
Under a "first to file" rule, if more than one case making
similar allegations against the same company is filed, all but the
first one filed will be dismissed and only that whistleblower would
receive a reward. Whistleblowers may file qui tam lawsuits and receive
a reward even if they participated in the fraud. Congress realized
that the best information about fraud against the government comes
from insiders. However, if the courts find the whistleblowers planned
or initiated the fraud, then their reward may be reduced or eliminated.
Kickbacks, consulting agreements, misleading data,
off-label marketing, seeding trials and other questionable pharmaceutical
Sales reps are always under pressure to sell more to meet their
quotas and collect bonuses. However, they should carefully review
marketing practices that involve any sort of payment or inducement
to doctors to make sure they are not crossing the line into criminal
violations or civil fraud. These practices include:
doctors or others money or other benefits to induce them to change
a current prescription to the sales rep's product is illegal if
the drugs are reimbursable by federal health care programs.
In the TAP case, sales reps
offered the medical director of an HMO "educational grants"
totaling $65,000 that he could use of any purpose if he reversed
his decision that the HMO would cover only Zoladex for prostrate
cancer treatment rather than TAP's Lupron, which was more expensive
Sales reps also should be
aware that federal prosecutors might consider extraordinarily high
expense accounts and incentive bonuses as possible proof that the
drug manufacturer is motivating the sales forces to increase sales
through lavish entertainment and other forms of kickbacks. Direct
or indirect payments in any form that are made to get or reward
the sale of pharmaceuticals to federal health care programs is illegal.
Concealed data: Pharmaceutical
companies that conceal the adverse effects of their products run
the risk of being prosecuted and sued. Even more egregious are instances
where pharmaceutical companies market off-label uses that the U.S.
Food and Drug Administration has specifically rejected or where
clinical trials found negative effects from those off-label uses.
One of the more prominent
cases involving concealed data is a fraud lawsuit brought by New
York state Attorney General Eliot Spitzer against GlaxoSmithKline
for promoting the off-label use of Paxil to treat children and adolescent
for depression. The New York lawsuit says that three of five Glaxo
trials found that certain possibly suicide-related behaviors were
twice as likely among young Paxil users than others taking a placebo.
The lawsuit says that Glaxo delayed submitting the test results
to government regulators for years. Meanwhile, according to the
lawsuit, the company told its sales reps that Paxil demonstrated
"remarkable efficacy and safety" for treating adolescent
Merck & Co. is the target
of government investigations and hundreds of product liability lawsuits
that allege the company knew about the health risks of Vioxx earlier
than it has acknowledged. Merck pulled the arthritis drug from the
market last year after a company-sponsored clinical test showed
that Vioxx increased the risk of strokes and heart attacks in patients
who took the drug more than 18 months.
Pharmaceutical companies cannot encourage doctors to prescribe a
drug for patients with ailments that the drug hasn't been federally
approved to treat. Pharma companies may be liable under the False
Claims Act generally if their promotional practices or claims caused
providers to submit reimbursement claims for off-label uses to Medicare
and other federal health insurance programs. But FDA guidelines
allow pharmaceutical companies and their sales representatives to
provide information that is complete, accurate and not misleading,
such as articles from peer-reviewed journals about off-label uses.
In the fraud case involving
the epilepsy drug Neurontin, it was alleged that Parke-Davis promoted
the use of Neurontin for patients with bipolar disorder, Lou Gehrig's
disease, drug and alcohol withdrawal seizures and attention deficit
disorder, and paid kickbacks to encourage the expansive use of the
drug. Financial inducements led doctors to prescribe Neurontin to
government-insured patients who otherwise wouldn't have received
the drug, essentially defrauding the federal program. Pfizer, which
acquired Warner-Lambert and its Parke-Davis division, paid $430
million to settle criminal charges and civil liabilities resulting
from the qui tam case that exposed the practice
Free samples: Drug
samples can benefit patients and sales reps may distribute them.
However, sales reps may not encourage health care providers to bill
Medicare or other federal programs for the samples the doctors give
to patients as a backdoor way for the doctors to profit from the
free drugs. Sales reps should inform their clients that samples
can't be sold or billed and make sure the samples are clearly labeled
with that information.
Paying doctors as "consultants" when they are expected
simply to attend meetings or conferences raises questions about
whether they are truly providing legitimate consulting services
and might trigger the anti-kickback statute. Financial arrangements
with health-care professionals to use their names for company-written
papers and speeches also raise legal concerns. Any consulting agreements
should be for actual business purposes and not a mechanism for promoting
or marketing a drug.
Ghost-written articles: As a way to encourage doctors to prescribe
their products for off-label uses, pharmaceutical companies have
paid specialists to put their names on articles written by company
employees that promote off-label uses. These articles promote the
off-label use of a drug - which pharmaceutical companies are prohibited
from doing -- by skewing the medical judgment of those who might
prescribe a drug for off-label use. Parke-Davis used this strategy
to promote Neurontin.
Clinical studies: Manufacturers
should develop procedures that clearly separate the awarding of
research contracts from marketing or promotion of their products.
Research initiated or directed by sales agents that is not used
by the company's science team and is a pretense for promoting the
company's product most certainly would violate the law.
Seeding trials: Pharmaceutical
companies use these trials as marketing tools, paying doctors to
prescribe certain drugs for off-label uses as part of a "clinical
trial." Seeding trials are usually conducted post-marketing.
To the extent information is collected, it typically is not for
submission to the FDA or for publication. Seeding trials are intended
primarily to encourage doctors to prescribe the drug more often.
Many pharmaceutical companies
have adopted fraud and abuse compliance programs to prevent future
violations of criminal and civil laws. However, the pressure to
sell may make those guidelines difficult to follow. If an employee
is concerned that an employer may be violating the law, the best
step usually is to consult an expert lawyer in that field.
For more information about
the False Claims Act and qui tam lawsuits, see www.allaboutquitam.org.
A. Kelton is a partner with Phillips
& Cohen LLP, the nation's most successful law firm for
whistleblowers in qui tam lawsuits brought under the False Claims
Act. Whistleblower cases brought by Phillips & Cohen have
returned more than $2 billion to the U.S. Treasury. The National
Law Journal recently named Phillips & Cohen to its Hot
List of the top 20 law firms in the country for plaintiffs'
of the firm's cases was part of the $875 million settlement
that TAP Pharmaceuticals paid to settle two whistleblower
lawsuits and related criminal charges. Phillips & Cohen
and several of its qui tam lawsuits figure prominently in
a book published last year by Atlantic Monthly Press called,
Giantkillers: the Team and the Law that Help Whistleblowers
Recover America's Stolen Billions by Henry Scammell.
Kelton has substantial experience with qui tam cases involving
many different types of fraud against the government, including
fraud in the pharmaceutical, healthcare, telecommunications
and computer industries. She is a frequent speaker at conferences
on the False Claims Act and qui tam lawsuits and has published
several articles on the subject.