By Denise Lavoie
Wednesday, August 30, 2006
BOSTON, Aug. 29 -- Schering-Plough Corp. on Tuesday agreed to pay $435 million and plead guilty to conspiracy to settle a federal investigation into marketing of its drugs for unapproved uses and overcharging Medicaid for certain drugs.
Schering-Plough, of Kenilworth, N.J., said it will pay $255 million to resolve civil aspects of the previously disclosed investigation. A subsidiary, Schering Sales Corp., will pay a criminal fine of $180 million and plead guilty to one count of conspiracy to make false statements to the government. The agreement is subject to court approval.
Schering-Plough said the settlement resolves an investigation by the Department of Justice and the U.S. attorney in Boston that began before a new management team took over in April 2003.
"With this agreement, we are putting issues from the past behind us," said Brent Saunders, senior vice president for compliance and business practices.
The agreement comes two years after Schering-Plough agreed to pay $345 million to settle charges that it paid a kickback to a big health insurer to protect the market for its allergy drug, Claritin.
U.S. Attorney Michael J. Sullivan, who announced the settlement, said health care corruption "erodes public confidence, compromises the patient-physician relationship and adds costs to important government programs."
"The American people, as both taxpayers and consumers, expect our health care system to be free from fraud and corruption," Sullivan said.
The investigation that led to the settlement began in 2001. Investigators found evidence that Schering-Plough marketed drugs for so-called "off-label" uses not approved by regulators, even though doctors can choose to prescribe drugs for those purposes.
One such drug was Temodar, which the Food & Drug Administration in 1999 approved to treat a type of brain tumor in patients who had not responded to other drug regimens. Sullivan said Schering promoted the drug to treat several other types of brain cancers and cancer that spread to the brain from elsewhere, uses the FDA had not approved. Temodar, Schering's No. 4 drug, had sales of $588 million last year.
Saunders said the company has agreed to plead guilty to making false statements in marketing Temodar related to promotion of the drug to doctors for uses other than the approved one.
Sullivan also said Schering-Plough provided misleading information to the government about the pricing of Claritin RediTabs to secure business from a major health maintenance organization. Prosecutors said Schering gave free Claritin RediTabs to the unnamed HMO to disguise a new lower price it was offering the HMO. Drugmakers are required to report their best price on drugs provided to commercial customers to the Health Care Financing Administration and to pay rebates to the Medicaid program to make sure Medicaid obtains the benefit of that low price.
Prosecutors said that from April 1998 through 1999, Schering Sales reported a false best price to HCFA to avoid paying millions of dollars in additional rebates to Medicaid.
As part of the settlement, Schering said it would add a section to an existing corporate integrity agreement it has with the Department of Health and Human Services. The agreement requires the company to monitor its sales, marketing and drug pricing, and to correct past abuses.
Schering-Plough shares rose 2.6 percent, to close at $20.94 on the New York Stock Exchange.