ISTA Pharmaceuticals, Inc. (“ISTA”), a unit of eye care giant Bausch + Lomb (“B&L”), recently agreed to a $33.5 million Government settlement involving civil and criminal charges.  The conduct underlying the settlement pre-dated B&L’s acquisition of ISTA in June, 2012 and underscores once again that when it comes to these kinds of settlements, it’s better for companies to play ball and let the Feds have their press release.

Background

According to the DOJ press release, ISTA pled guilty to a felony misbranding charge regarding the off-label promotion of Xibrom®, an ophthalmic, nonsteroidal, anti-inflammatory drug.  Although FDA’s approval of Xibrom® was limited to the treatment of pain and inflammation following cataract surgery, the Government charged that ISTA employees promoted Xibrom® for unapproved uses that included the use of Xibrom® following Lasik and glaucoma surgeries and for the treatment and prevention of cystoid macular edeman.  Because ISTA employees were instructed not to memorialize their interactions with physicians regarding off-label uses and not to leave reprints in physician offices – supposedly to avoid detection of their off-label promotion activities – ISTA’s misbranding was charged as a felony.  In addition to misbranding related to off-label promotion, ISTA was also charged under the Anti-Kickback statute for providing phyisicians with “illegal inducements” that included free drug samples of Vitrase®, wine tastings, golf outings, paid consulting and/or speaking engagements and “honoraria for participation in advisory meetings which were intended to be marketing opportunities . . . .”

Except as otherwise admitted in the criminal plea, the ISTA civil settlement was based only on allegations of False Claims Act violations, since no liability was determined as to those off-label promotion claims.  The combined civil and criminal penalties were as follows:

  • $16.125 million in criminal fines for the conspiracy to sell Xibrom® off-label
  • $15 million in civil penalties for off-label promotions of Xibrom®
  • $1.85 million in asset forfeiture related to the misbranding charge
  • $500K for violations of the Anti-Kickback statute

Finally, the Government went to great lengths to point out that as a result of the criminal conviction, ISTA will face mandatory exclusion from participation in federal healthcare programs for 15 years effective six months after the May 24th settlement.

B&L Compliance and Ethics Program

On top of all the penalties and the exclusion of ISTA, B&L further agreed to maintain a Compliance and Ethics Program in which:

  • Decisions on the disbursement of educational grants will not be unduly influenced by marketing or commercial personnel;
  • Sales personnel wil promote products in a manner consistent with FDA-approved uses and that any information requests regarding off-label use be forwarded to a B&L Medical Affairs Professional; and
  • Refraining from conduct that violates the Anti-Kickback Statute is prohibited.

In addition, B&L agreed that its President of Global Pharmaceuticals will conduct an annual review of the effectiveness of the Company’s compliance program as it relates to the marketing, promotion and sale of prescription pharmaceutical products and certify the on-going use of effective measures to prevent violations.

Observations

The DOJ press release announcing the criminal plea and settlement contained the usual, recycled law enforcement sound bites about “making sure that pharmaceutical companies play by the rules” and “send[ing] a clear message that pharmaceutical companies cannot put profit[s] ahead of people” blah, blah, blah.  Come on.  As both the DOJ’s and B&L’s press releases pointed out, B&L was aware of the Government’s investigation prior to its acquisition of ISTA, had cooperated fully with the Government to resolve the matter, had not retained a single ISTA director or officer following the acquisition and was not a party to any conduct related to the case.  Nonetheless, I’m sure B&L wanted to get off on the right foot with the Feds and was probably looking to put ISTA in its rear view mirror, especially given the recent announcement that Valeant Pharmaceuticals International, Inc., had agreed to purchase B&L for $8.7 billion in cash.

Moreover, the so-called “death penalty” of mandatory exclusion for ISTA represents the ultimate triumph of form over substance.  As B&L stated in its own press release, ISTA’s old products will simply be marketed by a different entity:  “Bepreve®, Bromday®, Istalol®, Prolensa® and Vitrase® have been transferred to [B&L], and therefore are not subject to any exclusion resulting from this settlement and continue to be eligible for reimbursement under [federal healthcare] programs.”  “Form” aside, B&L’s financial penalties and the “criminal” conduct by ISTA upon which they were based, are quite “substantive” and can’t be ignored.  Indeed, as we discussed last week in our blog post about C.R. Bard’s settlement, no company can rest assured that its past sins, no matter how old, will evade Government notice.  As long as the Government has a current or former employee turned whistleblower who can recite a good narrative of how things “used to be” – in this case an ISTA sales rep named Keith Schenker – an investigation, sanctions and relator’s “bounty” will ultimately follow.