Par Pharmaceuticals Settles Off-Label Case, Drops First Amendment Case

Earlier this month, New Jersey-based Par Pharmaceutical
Companies Inc. (“Par”) pleaded guilty in federal court agreed to pay $45
million to resolve its criminal and civil liability in the company’s off-label promotion
of its prescription drug Megace ES. According to the press release
from the U.S. Department of Justice, Par was fined $18 million and ordered $4.5
million in criminal forfeiture.  Par also
agreed to pay $22.5 million to resolve its civil liability.

What is unique about this off-label settlement is that
Par has agreed to dismiss its First
Amendment case
that it filed against the FDA with respect to its off-label
promotion and protected commercial speech (similar to what was done when
Allergan settled with the government).
As a result, we are left with United
States v. Caronia
as the most current case law on off-label promotion
being protected as commercial speech.

As noted by pharmarisc.com,
Par also dropped a previously unknown action Par filed against the
Government regarding “a grand jury matter pending before the Third Circuit” (In re: Grand Jury Matter,
Case No. 11-2679 (D.N.J.)).  Interestingly, the post notes that “Gone from
the Information, Plea Agreement and Settlement Agreement was any mention of the
First Amendment, Par’s assertion that most of what went on in those nursing homes
was “on-label” speech about “weight wasting” (even if directed at an off-label
audience of physicians), or the fact that the Government’s investigation had
also focused on marketing Megace ES to physicians treating weight wasting in
cancer patients.”  The post noted that
the government did give up a few things in its deal:

  • agreeing not to seek to place Par on
    probation (based on the restrictive nature of the CIA)
  • agreeing not to go after Strativa
    Pharmaceutical or any other Par affiliate,
  • foregoing Par’s exclusion from
    participation in federal healthcare programs, unless exclusion is mandatory, and
  • getting the relators to agree dropping
    their qui tam civil suits in exchange for $4.4 million or about 20% of the
    civil recovery.

It is difficult, however, to see how DOJ
could agree to not excluding Par since that is the jurisdiction and authority
of HHS-OIG.

Case Background

Par pleaded guilty to an information charging it with a
criminal misdemeanor for 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, a
use that was intended by Par but never approved by the FDA.

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 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. The United States further alleged that Par
deliberately and improperly targeted sales to elderly nursing home residents
with weight loss, whether or not such patients suffered from AIDS, and launched
a long-term care sales force to market to this population.  During this marketing campaign, Par was
allegedly 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.

The United States alleged that 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. Except as admitted in the plea agreement, the claims settled by the
civil settlement agreement are allegations only, and there has been no determination
of liability as to those claims.

Corporate Integrity Agreement

Par also agreed to enter into a five-year corporate
integrity agreement
(CIA), which contains provisions similar to those
contained in the recent GlaxoSmithKline
CIA
.  Specifically, Daniel R. Levinson, Inspector General
of the U.S. Department of Health and Human Services, noted that “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 (based on volume) for [Megace ES] in the case, or
successor branded versions of that drug.”
Par cannot discipline employees for sales performance as well.

The new “Employee and Executive
Incentive Compensation Restriction Program and Executive Financial Recoupment Program,” goes into effect
April 1, 2013, and must last while Par is under the CIA.  The financial recoupment program puts at risk
of forfeiture and recoupment an amount equivalent to up to 3 years of annual
performance pay for an executive who is discovered to have been involved in any
significant misconduct (Executive Financial Recoupment Program).  The financial recoupment program applies to
Covered Executives who are either current Par employees or who are former
Par employees
at the time of a Recoupment Determination.

The eligibility and repayment conditions described above are
triggered upon a Recoupment Determination that finds:

  1. significant
    misconduct (e.g., violation of a significant Par policy, or regulation,
    or law) by the Covered Executive that, if discovered prior to payment, would have
    made the Covered Executive ineligible for an annual bonus, bonus deferral, or
    other deferred or unvested Equity Awards in that plan year or subsequent plan
    years; or
  2. significant
    misconduct by subordinate employees in the business unit over which the Covered
    Executive had responsibility that does not constitute an isolated occurrence
    and which the Covered Executive knew or should have known was occurring that,
    if discovered prior to payment, would have made the Covered Executive and/or
    employees in question ineligible for an annual bonus, bonus deferral or other deferred
    or unvested Equity Awards in that plan year or subsequent plan years.

Reporting of Physician Payments

Par’s CIA is the first since CMS issued the finalized
Physician Payment Sunshine Act regulations
.
Interestingly, the CIA requires Par to post payments before CMS would be
able to post such payments – by August 30, 2013.  Thereafter, 60 days after the end of each
calendar quarter, Par must post on its website a report of the cumulative value
of the Payments provided to each physician and Related Entity during the
preceding calendar quarter.

On or before March 31, 2014, and 90 days after the end of
each subsequent calendar year, Par must post on its website a report of the
cumulative value of the Payments provided to all U.S.-based physicians and
Related Entities directly or indirectly from Par during the prior applicable
calendar year.  Each quarterly and annual
report must be easily accessible and readily searchable. The first annual
report will contain information for the second through the fourth quarters of
2013.

In setting out the definitions, OIG notd that “payments”
are defined  to include all “payments or
other transfers of value” as that term is defined in §1128G(e)(10) under
Section 6002 of the Affordable Care Act (the Sunshine Act) and any regulations
promulgated thereunder. The term Payments includes, by way of example, the
types of payments or transfers of value enumerated in §1128G(a)(1)(A)(vi) of
the Affordable Care Act.  The term includes
all payments or transfers of value made to Related Entities on behalf of, at
the request of
, for the benefit or use of, or under the name of a
physician for whom Par would otherwise report a Payment if made directly to the
physician.

The term Payments also includes any payments or transfers
of value made, directly by Par or by a vendor retained by Par to a physician or
Related Entity in connection with, or under the auspices of, a co-promotion
arrangement.

OIG also recognized the Sunshine Act provisions for
payment delay for “research.”
Specifically, “For purposes of its annual and quarterly website postings
as described above, and only with regard to payments made pursuant to product
research or development agreements and clinical investigations as set forth in
§ 1128G(c)(E) of the Affordable Care Act, Par may delay the inclusion of such payments
on its website listings consistent with § 1128G(c)(E) of the Act and any
subsequent regulations promulgated thereunder.”

OIG recognized that the term “Payments” does not
include transfers of value or other items that are not included in or are excluded
from the definition of “payment” as set forth in § 1128G(e)(10) under Section
6002 of the Affordable Care Act and any regulations promulgated thereunder.

 

 

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