Cell Therapeutics settles law suit with Government

Apr 18 2007

Cell Therapeutics has announced that it has settled all government claims arising out of a Department of Justice investigation into allegations regarding alleged overpayments by Medicare to doctors who prescribed the anti-cancer drug, TRISENOX.

As part of the settlement, the Department of Justice agreed to fully release CTI from all liability for the issues under investigation, including claims asserted in a qui tam lawsuit.

The terms of the settlement contain no admission of wrongdoing by CTI.

The claims at issue, which had been under investigation since August 2004, relate to prescriptions written by physicians for certain off-label uses of the drug TRISENOX(R). CTI had announced the government's investigation in a 2004 SEC filing and has fully cooperated during the investigation. CTI transferred all rights, title and interest in TRISENOX(R) to Cephalon in July 2005.

James A. Bianco, M.D., President and CEO, stated, "We were proud to introduce an important and potentially life-saving treatment for patients with relapsed Acute Promyelocytic Leukemia (APL) and more recently, newly-diagnosed APL, and are disappointed the government chose to ignore the benefits this therapy provides for patients with this blood-related cancer."

Under the settlement agreement, CTI will pay the USAO a single payment of $10.5 million plus interest accrued since the date of reaching an agreement in principle, to compensate Medicare for alleged overpayments Medicare made to reimburse physicians for certain off-label uses of TRISENOX(R). The government claimed these uses were not properly reimbursable under Medicare guidelines. CTI previously recorded a charge in the fourth quarter of 2006 for this matter.

Suit Filed Against Reimbursement Advisor

As a result and as previously disclosed, CTI has filed suit against the Lash Group alleging that it provided CTI negligent professional advice about Medicare reimbursements which created this liability, and is seeking to enforce the Lash Group's agreement to indemnify CTI.

CTI ultimately settled with the government to avoid the uncertainty, cost, and distraction associated with extended litigation concerning a product CTI no longer owns, markets, or sells.

Resolution of these claims allows CTI to focus on its primary mission -- developing drugs for cancer patients. CTI has two cancer drugs in late stage trials.