Kos Pharmaceuticals to Pay More Than $41 Million to Resolve Kickback and Off-Label Promotion Allegations

WASHINGTON -- Kos Pharmaceuticals, a subsidiary of Abbott Laboratories, has agreed to pay more than $41 million to resolve criminal and civil liability arising from conduct relating to its drugs Advicor and Niaspan, the Justice Department announced today.

According to the agreement reached with the government, the Delaware-based company will pay more than $38 million to settle civil allegations under the False Claims Act. Specifically, the civil settlement resolves allegations that Kos offered and paid doctors, other medical professionals, physician groups and managed care organizations, illegal kickbacks in the form of money, free travel, grants, honoraria and other valuable goods and services, in violation of the Anti-Kickback Statute to get them to prescribe or recommend Niaspan and Advicor.

In addition, the United States contends that Kos promoted the sale and use of Advicor for use as first-line therapy for management of mixed dyslipidemias (a disruption of the lipids in the blood). Such an off-label use was not approved by the Food and Drug Administration nor was it a medically-accepted indication for which the United States and state Medicaid programs provided coverage for Advicor. The federal share of the civil settlement is $33,705,310 and the state Medicaid share is $4,454,432.

As part of today’s resolution, Kos also has entered into a deferred prosecution agreement and agreed to the filing of a criminal information in U.S. District Court for the Middle District of Louisiana charging the company with one count of conspiracy to violate the Anti-Kickback Statute. According to the criminal information, Kos conspired to violate the statute by agreeing to pay physicians kickbacks in exchange for their writing prescriptions for Kos drugs.

Specifically, two doctors proposed that they would endorse the use of Kos products, including Advicor, for the treatment of cholesterol in exchange for a series of payments. Between January 2002 and June 2006, one of the doctors wrote 4,130 prescriptions for Kos products. According to the court documents, some of those prescriptions were paid for by Medicare and Medicaid. From 2002 to 2004, Kos made a series of payments to the two doctors or a third party intermediary in the form of “sponsorship” of continuing medical education classes conducted by the doctors and purported speakers’ fees. Kos has agreed to pay a $3.36 million criminal fine as a condition of the deferred prosecution agreement.

The department agreed to enter into a deferred prosecution agreement with Kos based in part on the company’s undertaking of a thorough internal investigation of misconduct; its reporting of information from the investigation to the department on a regular basis; its continued and ongoing cooperation with the department’s investigation of the matter; and in recognition of the remedial measures undertaken by the company.

“Pharmaceutical companies that pay kickbacks to medical professionals take from the taxpayers and undermine the integrity of choices that doctors make for their patients,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “We will work with our federal partners to ensure that important health care decisions are based on sound medicine, not illegal payments.”

“Today’s resolution exemplifies the strong commitment of the Criminal Division, the Civil Division, and the U.S. Attorneys’ Offices to work collaboratively to ensure that kickbacks and off-label drug promotions are prosecuted to the fullest extent of the law,” said Assistant Attorney General Lanny A. Breuer of the Criminal Division. “As this case shows, pharmaceutical companies that don’t play by the rules will face serious criminal and civil consequences.”

The civil settlement resolves two lawsuits filed under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private citizens with knowledge of fraud to bring civil actions on behalf of the United States and share in any recovery. As a part of today’s resolution, the whistleblowers, all former employees of Kos, will receive payments totaling more than $6.4 million from the federal share of the civil recovery.

“Today’s resolution of claims against Kos underscores one of the key purposes of the Anti-Kickback law–that is, to ensure that the judgment exercised by health care providers in treating Medicare and Medicaid patients is not influenced by illegal payments,” said James L. Santelle, U.S. Attorney for Eastern District of Wisconsin.

“Kos Pharmaceuticals made illegal payments to physicians and participated in an unlawful marketing scheme,” said Stephanie A. Finley, U.S. Attorney of the Western District of Louisiana. “This settlement reflects the commitment of the U.S. Attorney's Office to aggressively investigate and pursue healthcare providers who seek public funds through unlawful methods.”

“This resolution reflects our office’s continued commitment to combat health care fraud at all levels,” said Donald J. Cazayoux Jr., U.S. Attorney for the Middle District of Louisiana. “We greatly appreciate our partners in the Criminal Division who led the effort on the criminal side.”

“Paying kickbacks to doctors and marketing drugs for off-label purposes will simply not be tolerated," said Daniel R. Levinson, Inspector General of the Department of Health and Human Services. "Kos, which currently does not sell any products that are reimbursed by federal health care programs, has agreed that, should it seek to sell such products anytime in the next five years, the company will enter into a formal compliance program with OIG.”

The criminal case was handled by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Middle District of Louisiana. The Justice Department’s Civil Division, the U.S. Attorney for the Eastern District of Wisconsin and the U.S. Attorney’s Office for the Western District of Louisiana handled the civil lawsuits, with assistance from the Office of Inspector General for Health and Human Services and the National Association of Medicaid Fraud Control Units.

This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in that effort is the FCA, which the Justice Department has used to recover almost $4.6 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act since January 2009 have topped $5.8 billion.