[Also posted on Postscript]

The guilty plea and $1.5 billion settlement by Abbott to resolve their illegal off-label promotion of Depakote revealed a saga of extensive industry abuses and influence peddling that put millions of vulnerable seniors at risk. Abbott’s extensive promotion of the unapproved uses of the anti-convulsant drug Depakote to treat both seniors with dementia and to treat children is shocking. But it is even more alarming that this not the first major drugmaker to plead guilty to illegal marketing tactics that have targeted this exceptionally vulnerable population of seniors.

Many may recall that Eli Lilly was caught illegally promoting the unapproved, or “off-label” use of the antipsychotic drug Zyprexa to treat seniors with dementia, despite their internal studies showing that the risk of death from this drug increased in elderly patients.

Marketing these drugs to nursing homes for use on patients who ‘act up’ or are unruly has been a lucrative strategy for drugmakers. In response, we applaud the Department of Justice and the State Attorneys-General for their increasingly aggressive litigation to penalize these dangerous and unconscionable marketing practices.

But unfortunately for the millions of seniors who may be given Depakote or Zyprexa today or in the near future, the record-breaking $1.4 and $1.5 billion settlements respectively may not translate into improved care, unless further action is taken.

We urge Medicare and Medicaid officials at the federal and state level to move quickly to develop and implement safeguards, such as prior approvals or mandatory second opinions, that could be put in place to protect these vulnerable seniors from any unwarranted or inappropriate use of the drug Depakote to treat their dementia.

Looking forward, it’s time that all off-label settlements by the DOJ or the states include a requirement that the drugmaker pay to correct the misinformation that off-label marketing creates – i.e. that a drug is safer or more effective than it really is. Using lawsuits to fund corrective educational campaigns has a long history, both in public and private sector litigation. (See description here.)

To help stop the inappropriate and potentially harmful overuse of Depakote, Zyprexa, or Risperdal from continuing, doctors should be retrained to undo the misinformation campaigns by Abbott, Eli Lilly, and Johnson and Johnson. Several states, including Pennsylvania and New York have implemented “academic detailing” programs that send independent medical experts, usually nurse practitioners and pharmacists, to provide doctors with the truth about how effective drugs are from an objective, evidence-based perspective. Many state programs specifically address mental health drugs such as Zyprexa and Depakote. Indeed, one of the first of these education programs designed by Dr. Jerry Avorn, who spearheaded the concept in the 1990’s, recommended that a little tender loving care by nursing home staff could reduce the inappropriate use of sedatives, common at that time. A similar conclusion was reached by some nursing homes profiled in an  inspiring Boston Globe article addressing the overuse of Depakote.

– Wells Wilkinson,
Director, Prescription Access Litigation
Staff Attorney, Community Catalyst

Posted May 29th, 2012

The Affordable Care Act created some desperately needed means to start controlling ever-rising health care costs. Many — like preventive care or delivery reforms — will take some time to realize savings. In contrast, new anti-fraud efforts look to be paying off right away, in amounts much bigger than expected.

The health reform law provided $350 million over ten years to increase anti-fraud investigation and enforcement resources for the Department of Justice (DOJ) and State Attorneys-General. The goal? Saving $6.4 billion over the next decade. Given that some estimate that fraud and waste cost as much as $60 billion a year, or $600 billion over a decade, saving one percent of that amount seems a pretty modest impact.

But wait! New estimates project that current or pending settlements of drug fraud litigation by the DOJ and the Attorneys-General will top $8 billion in FY2012 alone, according to the group Taxpayers Against Fraud. (See list below.) This is not the culmination of hundreds of lawsuits; it’s just the eight biggest. So it looks like this anti-fraud effort under the ACA will meet and then surpass its ten-year goal in less than two years!

To be fair, most of these eight drug fraud investigations were undoubtedly underway before the increased funding for anti-fraud efforts reached the DOJ and State Attorneys-General offices. But there is little doubt that providing these over-worked regulators with increased resources was a big help in increasing enforcement. DOJ probably has fewer lawyers working on all their pending drug fraud cases than some of the biggest drugmakers hire to defend a single lawsuit. But despite these disparities, these results show that very modest government investment in fighting fraud, coupled with hard work by government lawyers and whistleblowers, can pay off big.

For example, earlier this week drugmaker Abbott Labs in Chicago settled a civil and criminal investigation of their illegal promotion of the anti-convulsant drug Depakote as an unapproved treatment of dementia in seniors, and of various conditions in children. Abbott pleaded guilty to promoting these unapproved, or ‘off-label’ uses of Depakote, and agreed to pay $1.6 billion – one of the biggest settlements for the illegal promotion of a single drug.

There could be as many as a couple hundred pending whistle-blower lawsuits that are filed under seal and being investigated now by the federal or state regulators. These pending lawsuits may add up to billions of dollars of additional fines and settlements.

Some critics have warned that even billion-dollar fines are an inadequate deterrent when a drug company can make far in profits on illegally promoted sales of a drug.

For instance, the $1.4 billion record-breaking settlement with Eli Lilly in 2009 for illegal promotion of their antipsychotic drug Zeprexa was less than 5 percent of Lilly’s gross sales. Eight months later, DOJ shattered this record with an even bigger $2.3 billion settlement, which amounted to 14 percent of Pfizer’s gross sales of eight illegally marketed drugs (see here).

Similarly, this month’s $1.6 billion Depakote settlement is nearly 12 percent of the drug’s $13.8 billion in gross sales revenue from 1998 to 2008. Furthermore, DOJ is pioneering two mechanisms to deter future illegal conduct by Abbott, along with this hefty fine.

First, the Depakote settlement places Abbott on probation and imposes a corporate compliance and monitoring program, for five years. If Abbott violates the compliance agreement or significantly violates the law, the government can exclude Abbott, and all their drug products, from federal health care programs. That would cost Abbott billions in lost sales on numerous drugs.

The settlement also aims to hold Abbott’s corporate leadership personally accountable. Abbott’s CEO must personally certify compliance and the board of directors must review and report on compliance each year. If the CEO or the board is lax in these duties, they could be excluded from their positions at Abbott. And if CEO or board intentionally lie to the government to cover up any misconduct, they could face personal criminal liability under the federal False Statements Statute. (Find the plea agreement and related documents here.)

Sadly, Abbott’s illegal promotion of ineffective and dangerous uses of Depakote has both harmed and put at risk what is arguably the most vulnerable patient population – seniors suffering from dementia, who live away from their families in nursing homes. Undoubtedly millions of seniors were, and likely continue to be given Depakote inappropriately as a result of Abbott’s illegal promotional campaign.

Check back soon for more on (1) actions that Medicare and Medicaid can take to address the continuing effects on patients of illegal promotions of off-label use of drugs and (2) how the Arkansas AG fought prescription drug fraud, winning huge fines to plug the state’s Medicaid budget deficit.

Wells Wilkinson

Director, Prescription Access Litigation

Staff Attorney, Community Catalyst

Projected Drug Fraud Settlements in FY 2012, excerpted from the Taxpayers Against Fraud website.

A version of this blog was posted earlier on Health Policy Hub and Postscript. 

Medicare Part B has long paid for drugs that are given in a doctor’s office, such as drug treatments for cancer. Until 2005, the price that Medicare paid to doctors for these drugs was based on figures called “Average Wholesale Prices,” or AWP. In 2003, Congress created a new system for reimbursing doctors for these drugs, based on “Average Sales Prices” (“ASP”). ASP is “the weighted average of all of the sales of the drugs to all purchasers.” In 2005, Medicare began paying doctors 106% of the ASP for a drug given in the doctor’s office.

Why did Congress force Medicare to stop using AWP? It became increasingly clear that AWPs were often artificially inflated by drug companies to increase how much doctors earned by prescribing them, and thus to increase sales of those drugs. Several PAL coalition members are plaintiffs in a massive national class action lawsuit alleging that dozens of drug companies did just that. The case is In re Pharmaceutical Industry Average Wholesale Price Litigation, and is before Judge Patti B. Saris in the U.S. District Court for the District of Massachusetts. More on that case can be found here. Judge Saris recently issued a decision finding that Astra Zeneca, Bristol Myers Squibb and Warrick Pharmaceuticals had in fact illegally inflated and manipulated the AWPs of a number of drugs covered by Medicare Part B.

Industry and physician groups predicted that the amount Medicare would pay them for these drugs would be less than what doctors paid for them in the first place. The Office of the Inspector General (“OIG”) recently issued a Report finding that most physician practices that treat cancer patients generally purchase drugs at costs less than the Medicare reimbursement rates.

Despite the predictions of groups like the Community Oncology Alliance, American Society of Clinical Oncology and American Society of Hematologists, the report found that Medicare’s reimbursement rates were generally adequate for the purchase of cancer drugs. The study found that nine of the twelve physicians offices studied were able to buy most of the fifteen cancer drugs examined at or below the Medicare-established reimbursement rate.

One of the arguments that industry and physicians groups had made against the switch was that the rate that Medicare paid doctors for administering the drugs was not enough, and that any “excess” in the reimbursement for the drug itself helped even this imbalance out. So the report also looked at whether physicians’ offices had in place procedures to track how much it actually cost to administer the drugs. The study found that more than 91% of the physicians offices studied (11 out of 12) could not show how much it cost them to administer these drugs. The study pinned the problem on the fact that federal regulations do not require physician practices to track administrative costs. Without knowing how much it costs to administer such drugs, it’s impossible to determine if Medicare is paying doctors enough (or too little, or too much) for these services.

There’ve been anecdotes since this change about doctors not giving these drugs to patients in their offices because the doctors allegedly lose money when they do so, but rather, sending them to hospitals to have the drugs administered. It generally costs Medicare much more to have this done in hospitals rather than doctors’ offices. But unless doctors can demonstrate that they are not being adequately reimbursed for these procedures, their claims will fall on deaf ears.

In sum, the shift from AWP to ASP so far appears to be bringing Medicare’s payments to physicians for drugs administered in their offices in line with what it actually costs physicians to buy those drugs. Whether or not physicians are being paid enough by Medicare for administering those drugs is still an open question – but physicians need to actually document how much it costs to administer them if they want to argue for increased payments from Medicare, and not merely state they are not being paid enough.