civil litigation

The federal charges were made public as Amgen pleaded guilty to illegally marketing the drug and agreed to pay $762 million in criminal penalties and settlements of whistle-blower lawsuits.

Amgen was “pursuing profits at the risk of patient safety,” Marshall L. Miller, a federal prosecutor in Brooklyn, said in a telephone news briefing on Tuesday.

David J. Scott, Amgen’s general counsel, entered the guilty plea at the United States District Court in Brooklyn to a single misdemeanor count of misbranding the drug, Aranesp, meaning selling it for uses not approved by the F.D.A.

Amgen agreed to pay $136 million in criminal fines and forfeit $14 million, with about $612 million going to settle civil litigation.

The presiding judge, Sterling Johnson Jr., scheduled a hearing for Wednesday to announce whether he will accept the agreement. If he does, a broader settlement and as many as 11 whistle-blower lawsuits would be made public, some containing accusations beyond those to which Amgen pleaded guilty.

In court on Tuesday, prosecutors charged that Amgen had promoted the use of Aranesp to treat anemia in cancer patients who were not undergoing chemotherapy, even though the drug’s approval was only for patients receiving chemotherapy.

A subsequent study sponsored by Amgen showed that use of Aranesp by those nonchemotherapy cancer patients had actually increased the risk of death and the off-label use diminished.

The federal charges also say Amgen promoted using Aranesp less frequently than stated in the label as a way of making the drug more attractive to doctors and patients than Procrit, a rival anemia drug from Johnson Johnson.

Amgen eventually tried to obtain approval for the less frequent dose, but the F.D.A. turned down its requests, saying the company’s studies were inadequate. Nonetheless, according to the federal charges, Amgen continued to promote the off-label dosing, relying on the same studies the F.D.A. had deemed inadequate.

Roger Burlingame, a federal prosecutor, told the judge Tuesday that “in certain instances, Amgen employees were so thoroughly indoctrinated to sell the drug for off-label uses that they did not, in fact, know that the drug had not been approved for the use for which they were selling it.”

A document summarizing the charges says that while sales representatives were not supposed to initiate discussions of off-label uses, they were trained to elicit questions from doctors. Such questions would provide the “necessary cover” for the sales representatives to provide the doctor with studies supporting the off-label use. Amgen referred to this as “reactive” marketing, the document said.

Amgen also managed to list the unapproved uses in a reference called a compendium. Medicare is required to pay for off-label uses of cancer drugs listed in an approved compendium. The compendium system is intended to make drugs more easily available to cancer patients, but critics say the compendiums do not adequately review the evidence.

Amgen issued a statement Tuesday acknowledging the guilty plea and noting that 14 months ago the company announced that it had set aside $780 million for the settlement of federal, state and whistle-blower complaints. Amgen’s stock fell 21 cents, to $89.29.

While doctors are allowed to use drugs for unapproved uses, companies are not supposed to promote such uses. The government has collected billions of dollars from pharmaceutical companies in recent years for off-label marketing.

The Amgen settlement is fairly large, but several have exceeded $1 billion. In July, GlaxoSmithKline agreed to pay $3 billion, in part for promoting antidepressants and other drugs for unapproved uses.

Critics say that fines alone do not deter such behavior because executives are not held personally responsible.

Mr. Miller, the federal prosecutor, said that the evidence in the Amgen case was not sufficient to charge individuals. However, he said, Amgen agreed to sign a corporate integrity agreement that requires executives and board members to personally certify compliance with regulations. That would make it easier to prosecute individuals should violations happen again, he said.

A decision two weeks ago by the Court of Appeals for the Second Circuit in Manhattan held that some off-label promotion was protected as free speech. That ruling could make it harder for the government to pursue such cases in the future. But Mr. Miller said that case involved speech by a sales representative while the Amgen case involved a plan by a company. “It’s a very different type of prosecution.”

Aranesp was once Amgen’s biggest product, with sales of more than $4 billion a year. Sales have declined since 2007 because studies show that high doses can lead to blood clots and the worsening of cancer. Global sales of Aranesp in the first nine months of this year were $1.55 billion, down 12 percent from the first nine months of 2011.

Article source: http://www.nytimes.com/2012/12/19/business/amgen-agrees-to-pay-762-million-in-drug-case.html?partner=rss&emc=rss

The judge, Jed S. Rakoff of United States District Court in Manhattan, ruled that the S.E.C.’s $285 million settlement, announced last month, is “neither fair, nor reasonable, nor adequate, nor in the public interest” because it does not provide the court with evidence on which to judge the settlement.

The ruling could throw the S.E.C.’s enforcement efforts into chaos, because a majority of the fraud cases and other actions that the agency brings against Wall Street firms are settled out of court, most often with a condition that the defendant does not admit that it violated the law while also promising not to deny it.

That condition gives a company or individual an advantage in subsequent civil litigation for damages, because cases in which no facts are established cannot be used in evidence in other cases, like shareholder lawsuits seeking recovery of losses or damages.

The S.E.C.’s policy — “hallowed by history, but not by reason,” Judge Rakoff wrote — creates substantial potential for abuse, the judge said, because “it asks the court to employ its power and assert its authority when it does not know the facts.”

Judge Rakoff also refers at one point to Citigroup as “a recidivist,” or repeat offender, which has violated the antifraud provisions of the nation’s securities laws many times. The company knew that the S.E.C.’s proposed judgment – that it cease and desist from violating the antifraud laws – had not been enforced in at least 10 years, the judge wrote.

The S.E.C. did not respond immediately to a request for comment on the judge’s decision, which was released Monday morning. A Citigroup spokesman said the company was studying the decision and had no immediate comment.

Citigroup was charged with negligence in its selling to customers a billion-dollar mortgage securities fund, known as Class V Funding III. The S.E.C. alleged that Citigroup picked the securities to be included in the fund without telling investors, claiming that the securities were being chosen by an independent entity. Citigroup then bet against the investments because it believed that they would lose value, the S.E.C. said.

Investors lost $700 million in the fund, according to the S.E.C., while Citigroup gained about $160 million in profits.

The settlement established none of those allegations as fact, thereby making it impossible for the court to properly judge whether the settlement meets the required standard of being fair, adequate and in the public interest.

“An application of judicial power that does not rest on facts is worse than mindless, it is inherently dangerous,” Judge Rakoff wrote in the case, S.E.C. v. Citigroup Global Markets. “In any case like this that touches on the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives, there is an overriding public interest in knowing the truth.”

The S.E.C. in particular, he added, “has a duty, inherent in its statutory mission, to see that the truth emerges.”

Article source: http://www.nytimes.com/2011/11/29/business/judge-rejects-sec-accord-with-citi.html?partner=rss&emc=rss

Amgen Agrees to Pay $762 Million in Drug Marketing Case

Judge Blocks Citigroup Settlement With S.E.C.

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