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NJ drugmaker faces civil, criminal fines over drug

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SAMANTHA HENRY and LINDA A. JOHNSON | March 5, 2013 04:32 PM EST | AP

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NEWARK, N.J. — A New Jersey-based drugmaker agreed on Tuesday to pay $45 million to resolve charges that it improperly marketed its weight-gain drug to frail seniors particularly vulnerable to its side effects, federal officials said Tuesday.

Officials from Woodcliff Lake-based Par Pharmaceutical Cos. pleaded guilty on behalf of the company to a charge of criminal misbranding. Par CEO Paul V. Campanelli admitted the company had improperly marketed its Megace ES drug for treating anorexia and malnutrition in nursing home residents and dying hospice patients even though they did not have AIDS. The drug is only approved for helping AIDS patients gain weight.

U.S. Magistrate Judge Madeline Cox Arleo imposed a fine of $18 million on the company for the criminal charge, and ordered it to pay $4.5 million in criminal forfeiture. The company also agreed to enter into a five-year corporate integrity agreement with federal health officials, and to drop a lawsuit it had filed against the U.S. government.

Paul J. Fishman, the U.S. attorney for the District of New Jersey, said Par also agreed to pay $22.5 million to resolve its civil liability. That money will go to the federal government and various states that paid for prescriptions for Megace given to nursing home patients for whom the drug wasn't appropriate.

Campanelli and attorneys for the privately held Par declined to comment Tuesday following the proceedings in federal court in Newark, N.J.

The Justice Department began investigating after four different whistleblowers went to attorneys with allegations about misconduct by Par's sales force for the drug.

Along with illegally encouraging physicians to prescribe the drug for elderly patients for whom its use was not approved, a practice known as off-label marketing, Par was accused of filing false claims for reimbursement by federal health programs. That's because prescriptions were being billed to programs such as Medicare for elderly patients who didn't have AIDS.

The illegal marketing occurred for several years, starting shortly after the drug was approved for U.S. sales in 2005, according to attorney Timothy J. McInnis. He represents two of the whistleblowers who asked to remain anonymous. Both are sales representatives who worked for Par until they left in early 2009, shortly before the company became aware of their actions.

"Par's Megace ES marketing to hospice physicians represents the ultimate in off-label insanity," McInnis said. "Patients are admitted to hospices when their conditions are terminal, where medical staff helps them die in peace and dignity. Par, instead, saw them as an opportunity for easy money."

Fishman said Par started the improper marketing after HIV treatment in this country began to change, so far fewer HIV patients were becoming emaciated and needed medication to gain weight.

"The company, which had invested time and resources in this drug, found itself in a position that it was no longer of use," Fishman said. "So, it turned to other uses and marketed it aggressively."

Attorneys for another of the whistleblowers, Christine Thompson, said their client had only been working for Par for a few weeks as a regional business manager when she discovered Par's plan to promote Megace ES to an exclusively off-label patient population: elderly residents of long-term facilities. Thompson claimed her verbal and written complaints about the practice were rebuffed by Par executives, according to her attorneys at Kenney & McCafferty P.C.

The company did not seek approval to use the drug for non-AIDS geriatric patients, or conduct the testing in patients that would be required to win that approval, Fishman said.

However, the marketing to nursing home doctors and pharmacists was so aggressive, Fishman said, that salespeople were rewarded with Rolex watches or trips to the Mexican resort of Cabo San Lucas if they were able to "flip" nursing homes, or persuade their medical staff to switch lots of patients to Megace.

"I think it's terrible when companies cheat Medicare or Medicaid, but the real issue here is patient safety," Fishman said. "It made them (Par) a lot of money they wouldn't have made if they had marketed this drug only for its approved uses."

Fishman said federal prosecutors didn't know how many people had been incorrectly prescribed the drug, and there are no allegations that anyone was harmed. However, Megace has significant side effects, ranging from death and life-threatening blood clots to high blood pressure and worsening of diabetes.

As part of the civil settlement, the company will enter into a corporate integrity agreement with the Department of Health and Human Services, requiring enhanced accountability, increased transparency and monitoring activities.

Par agreed to be acquired in July 2012 for about $1.84 billion in cash by an affiliate of private investment firm TPG.

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AP Business Writer Linda A. Johnson contributed from Trenton, N.J.