Schering-Plough to pay $435M and plead guilty to conspiracy

Aug 30 2006

Schering-Plough on Tuesday agreed to pay $435 million and plead guilty to criminal conspiracy charges to settle a federal investigation into the company's marketing practices and Medicaid charges, the AP/Houston Chronicle reports (AP/Houston Chronicle, 8/30).

The Department of Justice alleged that Schering engaged in illegal sales and marketing programs for several cancer treatments, including brain cancer drug Temodar and bladder cancer drug Intron A.

DOJ alleged that Schering sales representatives illegally marketed the drugs for "off-label" uses. DOJ also alleged that the company paid "illegal remuneration" to doctors "to induce utilization of Temodar."

Examples of this practice included placing doctors on medical advisory boards that primarily existed to pay doctors stipends and provide entertainment.

The company also awarded potentially prestigious and lucrative clinical studies to doctors based on how often they prescribed Temodar, according to DOJ (Krasner, Boston Globe, 8/30).

DOJ also alleged that Schering defrauded Medicaid of $4.3 million by failing to provide CMS with its best price on allergy treatment Claritin RediTabs.

Schering provided free Claritin RediTabs to an HMO in order to secure future purchases and therefore should have provided Medicaid with larger rebates in order to ensure that the federal program obtained the best price for the drug, according to DOJ.

DOJ said Schering also underpaid rebates for stomach treatment K-Dur. Schering in 2001 told FDA that the off-label promotions in 2001, 2002 and 2003 were isolated incidents (Schmit, USA Today, 8/30).

Under the settlement, Schering said it will pay $255 million to resolve civil charges. Schering Sales Corporation, a company subsidiary, will pay a criminal fine of $180 million and plead guilty to one count of conspiracy to make false statements to the government.

The settlement requires court approval (AP/Houston Chronicle, 8/30). The settlement is Schering's third major government settlement in five years, the Globe reports. Including the latest settlement, the company has paid about $1.3 billion in civil and criminal fines since 2002 (Boston Globe, 8/30).

Reaction

Deputy U.S. Attorney General Paul McNulty said, "This settlement sends a clear message to the pharmaceutical industry that the Justice Department will not tolerate these deceptive and illegal marketing practices" (Philadelphia Inquirer, 8/30).

Schering said the settlement resolves an investigation by DOJ and the U.S. attorney's office in Boston that began before a new management team was installed in April 2003 (AP/Houston Chronicle, 8/30).

Schering Senior Vice President Brent Saunders said, "We take full responsibility for the actions of the past and want to make sure they don't repeat" (USA Today, 8/30).

"This is the last of the major U.S. attorneys' investigations that we're aware of," Saunders said, adding that the company still faces investigations by HHS, DOJ and several states into wholesale pricing practices.

Saunders said CEO Fred Hassan, who joined the company in 2003, has conducted a "transformational change" to "embed business integrity and compliance into our DNA" (Boston Globe, 8/30).