Abbott Avoids Compliance Requirements In Kos Off-Label Marketing Settlement

A $41 million settlement of kickback and off-label marketing allegations involving Kos Pharmaceuticals’ cholesterol drugs will not result in new compliance requirements for parent company, Abbott Laboratories.

Abbott, which acquired Kos in December 2006 for $3.7 billion, is not a party to the settlement with the U.S. Department of Justice and the states; therefore, it is not subject to a corporate integrity agreement with the HHS Office of the Inspector General, OIG said.

The alleged conduct, including payments to physicians to induce prescribing of Advicor and Niaspan and off-label promotion, was attributable to Kos, not Abbott, DoJ said. The alleged civil and criminal conduct occurred from 2000 to mid-2006.

By not being a party to the settlement, Abbott will not officially join a host of other major companies that recently have found themselves subject to a CIA after settling pharmaceutical kickback and off-label promotion claims.

Most notable among these was Pfizer’s $2.3 billion settlement in September 2009, which resolved charges related to drugs sold by Pfizer and its Pharmacia & Upjohn subsidiary. The settlement included a far-reaching CIA (Also see "Pfizer's Record-Breaking $2.3 Bil. Settlement With U.S. Attorney Imposes New Restrictions on Corporate Behavior" - Pink Sheet, 7 Sep, 2009.).

More recently, Novartis agreed to pay $422.5 million to resolve civil and criminal claims of off-label promotion and kickbacks involving the company’s hypertension drugs (Also see "Novartis Settlement Encompasses Whistleblower Claims Of Kickbacks For Diovan Prescribing" - Pink Sheet, 1 Oct, 2010.).

However, the Kos settlement money will come out of Abbott’s pocket. In its most recent 10-Q filing with the Securities & Exchange Commission, Abbott said its acquisition of Kos “resulted in the assumption of various cases and investigations and Abbott has recorded a reserve.”

An Abbott spokeswoman told “The Pink Sheet” that the amount of the reserve has not been publicly disclosed, but that the settlement would have no impact on the company’s fourth quarter earnings.

The agreement resolves all state and federal claims relating to promotion of Kos’ cholesterol products, she said, adding that Abbott has not been accused of any wrongdoing.

Abbott also finds itself on the hook for a $126.5 million settlement, announced the same day as the Kos deal, to resolve claims that it reported inflated average wholesale prices for various drugs (Also see "AWP Litigation: Three More Companies Ink Deals With DoJ; Roxane Sets A Record" - Pink Sheet, 13 Dec, 2010.).

Though not currently subject to a CIA, Abbott has had experience with such compliance programs. In 2003 it pleaded guilty to obstructing a criminal investigation and paid more than $600 million to resolve charges involving marketing practices at its Ross Products nutritionals division (Also see "Abbott Touts Compliance Program In Letter To Sen. Grassley" - Pink Sheet, 20 Sep, 2004.).

The 2003 CIA, which required Abbott to implement a code of conduct with specific reference to the federal Anti-Kickback Statute, expired after five years.

Deferred Prosecution, No CIA

Kos is subject to a six-month, deferred prosecution agreement, which could be extended. Under the agreement, DoJ will not prosecute a criminal action against Kos, Abbott or any subsidiaries related to the conduct alleged in the bill of information. However, the agreement does not protect against prosecution of individuals, including present or former directors, officers or employees.

DoJ took several factors into consideration in agreeing to defer prosecution. Kos voluntarily disclosed information to DoJ about the alleged misconduct, performed a thorough internal investigation, undertook remedial measures and cooperated with the government.

Since Kos is now a wholly owned subsidiary of Abbott, it does not manufacture or market products that are reimbursed under federal health care programs. If it decides to sell or acquire such federally covered products during the next five years, it must enter into a CIA with OIG.

Civil And Criminal Settlements

Under the settlement, Kos will pay more than $38 million to resolve civil allegations under the False Claims Act. The federal share of the settlement is $33.7 million, with states receiving $4.5 mil.

Kos also agreed to pay a $3.36 million criminal fine on one count of conspiracy to violate the Anti-Kickback Statute.

The criminal count is laid out in a bill of information, filed in the U.S. District Court for the Middle District of Louisiana. Kos did not object to the filing of the information and accepted responsibility for the acts alleged therein.

The criminal bill of information describes a pay-for-prescribing arrangement with two cardiothoracic surgeons in Louisiana who ran a series of continuing medical education classes.

CME “Sponsorships”

Following a meeting with Kos sales force executives and managers, the physicians proposed that the company pay them approximately $100,000 to sponsor their CME classes. In exchange, the physicians would endorse the use of Kos’ cholesterol drugs and give Kos the participant lists from the CME classes for sales detailing.

In 2002, Kos paid two Louisiana doctors a total of $137,500 in CME “sponsorships” and speaker fees.

During 2002, Kos made total payments of $89,500 to the two physicians for CME “sponsorship”. The company also paid the doctors $48,000 in speaker fees during the year. Kos’ payments to the physicians in 2003 totaled $77,000; in addition, the company paid $52,000 to a third-party entity purportedly used by the physicians to assist in putting on the classes.

A change in Kos’ policy intended to preclude direct payments to physicians for educational grants caused payments to lag in 2004, and Kos executives discussed “a vehicle” through which to sponsor the classes. In December of that year Kos paid approximately $57,200 to another third-party entity purportedly involved in the CME classes.

Whistleblowers Sued In 2004

Separate whistleblower suits filed in 2004 by former employees alleged a broader series of activities aimed at inducing doctors to prescribe Kos’ drugs for both on- and off-label uses.

Kos is alleged to have funneled payments to physicians through a variety of means, including unrestricted educational grants, speaker programs, consultant meetings, advisory councils and “preceptorships.”

Plaintiffs who sued in the U.S. District Court for the Eastern District of Wisconsin alleged that under a marketing program begun in 2003, physicians who started 10 patients on either Niaspan (niacin extended-release) or Advicor (lovastatin/niacin extended-release) received $250. Physicians who started 20 more patients on either drug would receive an additional $750.

Doctors also could receive $1,000 or more for chart reviews conducted to identify patients for whom the Kos drugs were appropriate, according to a whistleblower complaint filed in the U.S. District Court for the Western District of Louisiana.

Physicians typically received approximately $250, along with travel expenses, luxury hotel accommodations and meals, in exchange for attending consultant meetings, the Louisiana plaintiffs allege. Physicians were selected to attend based on the strength and history of their Niaspan and/or Advicor prescriptions and the potential to grow the market. “Physicians who were regarded as opinion leaders were paid higher consulting fees – approximately $750,” the complaint alleges.

In addition, Kos conducted a preceptorship program in which physicians were paid up to $500 to be shadowed by a sales rep for part of the day.

Indications Limited, But Promotion Extensive

The Louisiana complaint describes an organized effort by Kos’ sales team to counter Niaspan and Advicor’s limited indications and strong market competition by promoting the drugs’ efficacy for unapproved uses. Marketing initiatives included distributing studies, on an unsolicited basis, to doctors to encourage prescribing Niaspan in combination with statins to reduce cardiac events and to use Advicor as initial therapy.

Niaspan was approved in 1997 for a variety of uses; in 2003 it was approved for use in combination with lovastatin. Language regarding use in combination with simvastatin was added to the label in 2009.

The current label states: “No incremental benefit of Niaspan co-administered with simvastatin or lovastatin on cardiovascular morbidity and mortality over and above that demonstrated for niacin, simvastatin and lovastatin monotherapy, has been established.”

A 2001 DDMAC letter did not stop Kos’ sales force from promoting Niaspan for unapproved uses, the Louisiana whistleblowers said.

The Louisiana whistleblowers point to a July 2001 warning letter sent by FDA’s Division of Drug Marketing, Advertising and Communications objecting to a Niaspan direct-to-consumer ad.

DDMAC cited several misleading efficacy claims, including suggestions that Niaspan: prevents heart attacks in people with or without a history of myocardial infarction who have normal LDL cholesterol; significantly reduces cardiac events by raising HDL cholesterol; and is indicated as adjunctive therapy with simvastatin to reduce cardiac events.

Despite the DDMAC letter, Kos’ sales force continued to market Niaspan for use in combination with statins to reduce cardiac events and mortality, and to reduce CV events in all patients by raising HDL cholesterol.

At the time of its December 2001 approval, Advicor’s label stated the fixed-dose combination product was not approved for initial therapy.

Since the time of Advicor’s approval, Kos “embarked on a company-wide campaign to market the drug for initial therapy, despite the fact that the FDA, after extensive medical review, has specifically rejected such an indication,” the Louisiana whistleblowers say. Promotional efforts included use of a treatment algorithm recommending Advicor as initial therapy for patients with mixed dyslipidemia and LDL cholesterol below 150.

“Kos Pharmaceuticals also underwrote CME programs that were used to advocate and promote off-label uses of these drugs,” the Louisiana complaint states. “The presentations made by the physician faculty at these programs were controlled and planned by defendant.”

The promotional efforts generated Advicor and Niaspan prescriptions that were submitted for reimbursement under federal and state health insurance programs. “But for their illegal promotion and kickback practices, most of the ineligible claims for payment of these prescriptions would have never been filed,” the whistleblowers say. The Wisconsin and Louisiana whistleblowers will receive more than $6.4 million of the federal share of the Kos settlement.

By Sue Sutter