Drugmaker to pay $116 million in fraud settlement for cashing in on dementia patients

A pharmaceutical company that whistleblowers alleged paid doctors to prescribe its main drug and urged salespeople to push it as a way to control unruly dementia patients will pay more than $100 million to settle government fraud allegations. Full credit: Megan Pendergrass/Getty Images/CNN

A pharmaceutical company that whistleblowers alleged paid doctors to prescribe its main drug and urged salespeople to push it as a way to control unruly dementia patients will pay more than $100 million to settle government fraud allegations.

The Department of Justice announced the settlement with Avanir Pharmaceuticals on Thursday, four years after these whistleblowers alerted the federal government that they believed the company was paying kickbacks to doctors and illegally marketing its main drug, Nuedexta — particularly in nursing homes. Each of these three whistleblowers will receive a portion of the millions Avanir has agreed to pay.

In addition to the settlement with Avanir, Justice Department officials announced they had indicted two doctors and two of the drugmaker’s salespeople for their alleged involvement in a “kickback conspiracy.”

The allegations resulting in Thursday’s $116 million settlement — which includes both civil damages and criminal penalties to federal and state governments — mirrored those exposed by a 2017 CNN investigation into inappropriate and potentially fraudulent use of Nuedexta in nursing homes. Avanir said the company is “deeply committed to regulatory and legal compliance, integrity and ethical behavior” and that it had cooperated with the government investigation and “engaged in extensive remedial measures,” which the government said included terminating or otherwise removing multiple employees.

The DOJ also said Avanir admits it paid a doctor “to induce him to not only maintain, but increase his prescription volume.”

Nuedexta, which hit the market in 2011, is only approved by the federal government for a rare condition characterized by uncontrollable laughing and crying, known as pseudobulbar affect, or PBA.

Yet whistleblowers alleged in lawsuits that from the drug’s early years, the company illegally directed salespeople to market Nuedexta in nursing homes as an alternative to antipsychotic drugs specifically for “use in controlling the behavior of patients prone to disruptive outbursts.” This came as the government attempted to crack down on the use of antipsychotics in restraining elderly dementia patients.

They also claimed that salespeople coached doctors on how to fill out prescriptions to ensure approval, forged physician signatures on paperwork for insurers and asked nursing home employees for names of patients to create lists of people physicians should target with Nuedexta.

“At least one Avanir (salesperson) went so far as to dress in scrubs, review patients’ files at the nurses’ station in nursing homes, and write the diagnosis for PBA in the medical files of patients,” one lawsuit stated, adding that these tactics were allegedly praised by an executive on a national sales call.

Federal laws restrict the tactics pharmaceutical sales representatives can use to sell a medication. They can’t give favors or payments in exchange for a doctor prescribing the drug. They can’t have any contact with private patient records without the patient’s consent. And they can’t promote use of a drug off-label, in a way that hasn’t been approved by the FDA.

Pharmaceutical companies are allowed to pay a doctor to promote a drug to colleagues and other medical professionals. It is illegal, however, for doctors to prescribe the drug in exchange for kickback payments from a manufacturer.

But the DOJ found that in order to boost prescriptions — and in turn their own paychecks — Avanir salespeople incentivized physicians by paying them for speaking events and meals. In one case, a salesperson allegedly offered to pay for a physician’s firearms training. And in another, a doctor’s staff Christmas parties were allegedly paid for by Avanir, according to one of the whistleblower suits.

Thursday’s announcement resolved a government investigation involving the two separate whistleblower lawsuits. These complaints were originally filed under seal in 2015, and they were kept secret until the DOJ chose to publicly intervene in the cases with this settlement. Separately, the Los Angeles City Attorney’s Office opened its own probe into the sale and marketing of Nuedexta in the wake of CNN’s investigation in 2017. The office would not comment on whether this inquiry is ongoing.

“It is particularly concerning when a pharmaceutical company uses kickbacks to drive up sales in connection with a vulnerable population, such as elderly patients in nursing care facilities,” US Assistant Attorney Jody Hunt said in the DOJ statement.

Medicare’s Part D prescription drug program spent roughly $225 million on Nuedexta in 2017 — up more than 700% from five years earlier, according to government data.

Much of this sales growth was fueled by doctors who received kickbacks, according to the whistleblowers. They noted how some of the doctors who were paid to promote the drug went on to prescribe Nuedexta to disproportionate numbers of patients in the same nursing homes — pointing to one example where a doctor allegedly put at least 30% of a facility’s patients on Nuedexta. And the DOJ said an Avanir employee reported that a physician had placed “entire units” of patients on the medication.

“Avanir instructed sales representatives to provide false and misleading information that PBA patients could be exhibiting a wide variety of ‘behaviors’ such as crying without tears, moaning, or making other inarticulate sounds, when, in fact, those symptoms are commonly observed in patients who have dementia but do not have a diagnosis of PBA,” the DOJ’s press release stated. “This strategy worked, and Nuedexta utilization in (long-term care) facilities increased.”

One of the whistleblowers involved in Thursday’s settlement, a former sales director, said he was fired months after starting with the company, after he spoke out against practices including improper payments to a select group of high-prescribing doctors “who were willing to recommend Nuedexta to patients who likely didn’t need the drug,” according to a press release from The Employment Law Group, which represents him.

“Soon after he complained to an Avanir vice president about the company’s use of ‘speaker fees’ to reward doctors for writing unnecessary prescriptions for Nuedexta, (he) was fired,” the release states. While the government settlement resolves fraud claims against the company, the former employee is still suing Avanir for unlawful retaliation.

His suit also highlighted payments to an Ohio doctor, Deepak Raheja. CNN previously reported that Raheja had received nearly $300,000 from Avanir during a four-year-period, and was under investigation by the federal government for fraudulently diagnosing patients with PBA in order to secure Medicare coverage.

The DOJ also announced on Thursday that Raheja had been indicted — saying he was one of multiple doctors who allegedly prescribed Nuedexta in exchange for payments from the company. The top prescriber of Nuedexta in a nearly five-year period, Raheja allegedly falsified symptoms in patient records to support his phony diagnoses, the DOJ stated. Earlier this month, a letter from the Ohio Medical Board stated that Raheja had inappropriately diagnosed nearly a dozen patients with PBA and then prescribed them Nuedexta “without sufficient justification.”

As a result, the board is determining whether Raheja’s license should be revoked, suspended or otherwise limited. Raheja’s attorney declined to comment.

“Doctors should prescribe medicine based on what is best for their patients, not on which drug company is paying for their travel and meals,” US Attorney for the Northern District of Ohio Justin Herdman said in Thursday’s statement.

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