A Bitter Pill for Bristol-Myers to Swallow

Pharma giant Bristol-Myers Squibb and its subsidiary Apothecon have agreed to pay more than $515 million to settle state and federal charges that some of its drug marketing and pricing practices were illegal, the Justice Department announced late Friday.

Prosecutors alleged that Bristol-Myers paid consulting fees, expenses and travel to luxury resorts, from 2000 to 2003, to persuade doctors and other health care providers to buy the company's drugs. The drug maker's top sellers are Plavix, a blood thinner, and Pravachol, a cholesterol-lowering drug.

The settlement, which returns $187 million to states which received improper Medicaid reimbursements, is one of several the Justice Department has reached with pharmaceutical companies over illegal marketing of their drugs.

Schering-Plough Corp, for example, and its sales subsidiary, earlier this year agreed to pay $435 million for similar charges of murky pricing and illegal promotion of drugs.

In addition to Bristol's wrongdoing, Apothecon, from 1994 through 2001, paid illegal remuneration that included price protection payments and free goods to induce its retail pharmacy and wholesaler customers to purchase its products. In both cases, the government alleged, the two companies knew its actions resulted in submission of false and fraudulent claims to federal health care programs.

Rolling out a laundry list of alleged wrongful actions, government investigators said Bristol also pushed sales of Abilify, which is approved to treat bipolar disorder and schizophrenia, for pediatric use and to treat psychoses which are dementia-related—although neither use is approved by the U.S. Food and Drug Administration.

Even so, from 2002 through the end of 2005, Bristol sales people called on child psychiatrists and other pediatric specialists, government investigators found, and urged doctors and others to prescribe Abilify for children.

The company also created a special sales force to target nursing homes, according to the government's case, where patients with dementia-related psychosis are far more likely to be found those qualifying for the drug's approved uses.

The two companies also inflated prices for a wide assortment of cancer and generic drug products, boosting the reimbursement they received from government programs, the government said. And the Bristol was alleged to have knowingly misreported its price for the anti-depression drug, Serzone—stating a price that was not its lowest, which is required under Medicaid.

Part of the settlement, which encompasses seven different state and federal cases, will return $187 million to states whose Medicaid reimbursements were affected, as well as clearing the way for as much as $50 million to go to people who blew the whistle on Bristol and Apothecon's activities.

by Elizabeth Olson