Pharmaceutical Companies to Pay $214.5 Million to Resolve Allegations of Off-label Promotion of Zonegran

WASHINGTON – Irish pharmaceutical manufacturer Elan Corporation PLC and its U.S. subsidiary Elan Pharmaceuticals Inc. (EPI) have agreed to pay more than $203 million to resolve criminal and civil liability arising from the illegal promotion of the epilepsy drug Zonegran, the Justice Department announced today. In a separate civil settlement, Japanese drug marketer Eisai Inc., which purchased the drug from Elan, will pay $11 million to resolve civil liability for off-label marketing of Zonegran.

According to the agreement, Elan has agreed to plead guilty to an information charging it with misdemeanor misbranding of Zonegran, in violation of the Food, Drug and Cosmetic Act. Zonegran was approved by the Food and Drug Administration (FDA) as an anti-epileptic drug, for the treatment of partial epileptic seizures in adults over the age of 16, and was not approved for any other uses. Elan promoted the sale of Zonegran for a wide variety of improper off-label uses including mood stabilization for mania and bipolar disorder, migraine headaches, chronic daily headaches, eating disorders, obesity/weight loss and seizures in children under the age of 16. Elan’s off-label marketing efforts targeted non-epilepsy prescribers and the company paid illegal kickbacks to physicians in an effort to persuade them to prescribe Zonegran for these off-label uses. Under the terms of the plea agreement, Elan has agreed to pay a criminal fine of $97,050,266 and plead to a misdemeanor violation of the Food Drug and Cosmetic Act. EPI will also forfeit $3.6 million in assets.

In addition, Elan has agreed to pay $102,890,517 to resolve civil allegations under the False Claims Act and related state statutes that the company illegally promoted Zonegran and caused false claims to be submitted to government health care programs for a variety of uses that were not medically accepted indications and therefore not covered by those programs. The federal share of the civil settlement is $59,491,477, and the state Medicaid share of the civil settlement is $43,399,040.

The civil settlement resolves a whistleblower lawsuit filed by Dr. Lee Chartock, a Massachusetts physician, under the qui tam or whistleblower provisions of the False Claims Act that is pending in the District of Massachusetts: United States ex rel. Chartock, et al. v. Elan Corporation, PLC, et al., Civil Action No. 04-11594-RWZ. The qui tam provisions allow private citizens with knowledge of fraud to bring civil actions on behalf of the United States and share in any recovery.

As part of today’s resolution with Elan, Dr. Chartock will receive payments totaling more than $10 million from the federal share of the civil recovery. The civil settlement with Eisai also resolves allegations in the Chartock action. Dr. Chartock will receive payments totaling more than $1 million from the federal share of the Eisai civil recovery.

Also as part of the settlement, Elan has agreed to enter into a corporate integrity agreement with the Office of Inspector General of the Department of Health and Human Services (OIG-HHS). That agreement requires Elan to institute procedures and reviews designed to avoid and promptly detect problematic conduct in the future.  It also requires Elan to submit regular reports to OIG-HHS.

Under the settlement with Eisai, that company will pay $11 million to resolve civil allegations under the False Claims Act and related state statutes that the company illegally promoted Zonegran and caused false claims to be submitted to government health care programs for uses that were not medically accepted indications and therefore not covered by those programs. The federal share of the civil settlement is $6,341,751 and the state Medicaid share of the civil settlement is $4,658,249. Eisai purchased the drug and its sales force from Elan in April 2004. While Eisai retrained the sales force and took some steps to stop illegal marketing of the drug, some off-label marketing continued and Eisai benefitted from the previous off-label marketing by Elan.

"Off-label promotion of pharmaceutical products undermines the FDA’s important role in protecting the American public by determining whether a drug is safe and effective for a particular use before it is marketed," said Tony West, Assistant Attorney General for the Civil Division. "Such illegal conduct by pharmaceutical companies also costs the government billions of dollars, and these civil settlements and the criminal plea agreement by Elan demonstrate that such conduct will not be tolerated."

"This global resolution reflects the government’s continued commitment to combating pharmaceutical fraud in all its forms, especially where it affects the safe use of potent drugs being prescribed to children. We will continue to aggressively investigate and prosecute companies who intentionally put patient safety at risk in order to turn a profit," said U.S. Attorney Carmen M. Ortiz.

"Our priority is to protect taxpayer-funded government health care programs and beneficiaries," said Daniel R. Levinson, Inspector General of the Department of Health and Human Services. "If Elan – or any of its subsidiaries – intends in the future to actively promote drugs reimbursed by Federal health care programs, the company has agreed to accept even stricter amendments to the formal compliance program signed with OIG today."

"Today’s announcement signals the government’s commitment to investigate and prosecute companies that violate the law and choose to put their profits ahead of the public health" said Deputy Special Agent-in-Charge Kathleen Martin-Weis of FDA’s Office of Criminal Investigations. "The FDA will continue to pursue criminal resolutions when pharmaceutical companies undermine the drug approval process by promoting drugs for uses not approved by the FDA as safe and effective."

This settlement is part of the government’s emphasis on combating health care fraud. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover more than $5 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 have topped $6 billion.  

The criminal case is being prosecuted by the U.S. Attorney’s Office for the District of Massachusetts and the Justice Department’s Office of Consumer Litigation. The civil settlements were reached by the U.S. Attorney’s Office and the Commercial Litigation Branch of the Justice Department’s Civil Division. The corporate integrity agreement was negotiated by the OIG-HHS. Assistance was provided by the National Association of Medicaid Fraud Control Units and the offices of various state attorneys general.