Schering-Plough Corp. agreed to pay $435 million and a unit pleaded guilty to criminal charges to settle federal allegations of fraudulent drug marketing and pricing.
The settlement is one of the largest in a crackdown that has forced Schering-Plough and other big drug marketers to return billions of dollars the government says were illegally extracted from Medicare and Medicaid. Schering-Plough, of Kenilworth, N.J., will pay $255 million to settle related civil accusations. Its Schering Sales unit will pay a $180 million criminal fine.
The government accused the company of illegally inducing doctors to prescribe a number of drugs, including the cancer medications Temodar and Intron A and several hepatitis treatments, by, among other things, paying doctors up to $500 for each patient started on therapy, placing Schering-Plough-funded physician assistants in doctor's offices or paying doctors to attend Schering-Plough events.
According to prosecutors, Schering-Plough hid favorable prices it had negotiated with some health plans for two of its drugs, Claritin Redi-Tabs and K-Dur, overcharging Medicaid as a result. Drug makers are required to give Medicaid the lowest price paid by any other buyer.
Schering Sales agreed to plead guilty to one count of criminal conspiracy for making false statements regarding its price for Claritin as negotiated with a health plan and for lying to the Food and Drug Administration about its promotion of Temodar and Intron A. Except for that plea, Schering-Plough neither admitted or denied other wrongdoing alleged in the settlement.
"We will not tolerate corporate attempts to profit at the expense of the ill and needy in our society," said Michael Sullivan, the U.S. attorney in Boston, whose office brought the case.
The settlement, subject to court approval, resolves the biggest remaining liability Schering-Plough Chief Executive Fred Hassan inherited from previous management. Mr. Hassan took the helm in 2003 with a mandate to turn around the drug maker after it was crippled by a series of problems, ranging from shoddy manufacturing to federal investigations.
"With this agreement, we are putting issues from the past behind us," Brent Saunders, senior vice president of global compliance and business practices, said in a statement.
A company's criminal conviction or guilty plea can often be fatal. But in its health-care cases, the government has repeatedly reached settlements that exact a guilty plea while avoiding the direst consequences.
The guilty plea from Schering Sales means it can no longer sell drugs to the government, but its marketing functions have been taken over by other parts of the company, which are permitted to continue doing business with Medicaid and Medicare.
Schering Sales "is an entity whose sole purpose is to plead guilty in these matters," said Mr. Saunders. "Schering-Plough takes responsibility for the actions of the past while not putting patients in a position where they can't get important medications," he said.
According to the government's complaint, Schering-Plough realized approximately $124 million in before-tax profits from its off-label marketing of Intron A and Temodar. In the case of Claritin, the company failed to pay the government program more than $4 million in rebates, the complaint said.
The settlement follows a similar agreement two years ago with the U.S. attorney in Philadelphia. Under that deal, Schering-Plough pleaded guilty and paid $345.5 million to settle charges that it defrauded Medicare by overcharging the agency for allergy drug Claritin.
Mr. Sullivan said his office's investigation of Schering-Plough was continuing, and he wouldn't rule out future criminal charges.
In July 2005 the company said it had added $250 million to its litigation reserves, for a total of $500 million, relating to the investigation.
Source: Bulresearch
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