Cephalon Accused of Fraud
March 21st, 2013 // 5:25 pm @ jmpickett
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Two years ago, the US Attorney in New York opened an investigation into Cephalon, which was since bought by Teva Pharmaceuticals, over allegations of off-label marketing of its Treanda medication for treating chronic lymphocytic leukemia (back story). And now we learn that, in August 2010, a former Cephalon manager filed a whisteblower lawsuit against the drugmaker over alleged illegal marketing of that drug and one other, the Fentora painkiller.
The patterns detailed in the lawsuit, which was unsealed a few days ago, are familiar. The allegations, which were made by a former Cephalon employee who is only listed as ‘John Doe,’ describe a host of schemes, such as paying various doctors fees for participating in programs so they would prescribe off-label. And ultimately, these efforts forced federal healthcare programs to overpay for the medications, as well as efforts to
However, at the time these activities took place, Cephalon was already operating under a Corporate Integrity Agreement in connection with its 2007 plea to a misdemeanor violation of the Food, Drug and Cosmetic Act for improper marketing of several meds, notably its Provigil narcolepsy drug, which docs were prescribing to treat depression and ADHD (read here). The drugmaker paid a $375 million fine as well.
The upshot is that the lawsuit suggests that Cephalon executives knowingly and brazenly again engaged in off-label marketing. What effect this may have on Teva (TEVA) is unclear. For one thing, the Cephalon management has been overhauled and former Cephalon ceo Frank Baldino passed away (look here). The US Department of Justice declined to intervene, or join, the lawsuit, although it would not be surprising if a settlement is later reached with the feds.
In any event, Cephalon allegedly went to great lengths to promote Treanda for an unapproved use – in this case, front-line treatment for indolent, or slowly progressing, non-Hodgkin’s lymphoma, according to the lawsuit. The medication was only approved for CLL and second or third iNHL. But in 2008, Cephalon executives were nervous that marketing exclusivity that came with orphan drug status would expire in 2015, so an off-label effort was allgedly begun.
This concern prompted some accounting tricks as well, the suit charges. For instance, Treanda is an injectable medication and, initially, was approved only in 100 mg vials, but the FDA approved 25 mg vials in May 2009. However, Cephalon executives calculated they would lose $19 million – or 12 percent of projected Treanda sales – by selling the smaller vials immediately, according to the suit. Instead, they deliberately held off until January 2010.
As for the off-label activities, Cephalon touted a study by one of its consultants, Mathias Rummel, who is the head of hematology at the University Hospital in Giessen, Germany, to physicians and analysts as evidence that Treanda could be widely accepted as a front-line iNHL treatment. Rummel expressed similar views in scheduled talks with physicians. However, there were problems with his study – it was not an FDA registriation trial, which meant it could not be used to seek FDA approval, and his data collection methods were lacking and, therefore, unreliable, the suit charges.
There were other alleged shenanigans. For instance, a Cephalon executive transferred $2 million from the sales and marketing budget to the medical and scientific affairs budget so the money could be used to promote Treanda at continuing medical education sessions. Also, Cephalon paid larger-than-normal fees to group purchasing organizations, whose doctors were then encouraged to prescribe Treanda off-label. This yielded a 12-to-1 return on investment.
After a sales audit conducted by ZS Associates revealed that sales reps were talking up Treanda for off-label use, their bonuses were cut by 25 percent. But the head of global compliance allegedly told reps that the audit was purposely designed not to break down data at the rep level so that individual sales reps would not have to be fired, according to the lawsuit.
Another nugget: at an executive meeting, Baldino asked about the cost of continuing a legitimate study that Cephalon initiated for front-line iNHL approval. The issue was whether it was worth the $60 million investment if it would boost sales by only 5 percent to 8 percent. In other words, the lawsuit alleges the management team was content to emphasize off-label sales, which were already rocketing.
As for Fentora, the drug was approved in 2006 for breakthrough cancer pain and, essentialy, a follow-up to Actiq, one of the drugs cited in the settlement Cephalon reached over previous off-label marketing activity. Once Fentora was on the market, however, Cephalon promoted the drug to pain specialists and primary care docs, since they represented a far bigger market than oncologists.
The lawsuit notes that Cephalon executivfes were rather bold about their efforts. In May 2007, the former exec vp for worldwide operations told analysts about off-label use in “non-cancer pain patients.†This began to catch up with Cephalon, however. In September 2007, the FDA issued a warning about off-label use, which led to some patient deaths.
