Schering-Plough will pay a total of $435 mil. to resolve criminal charges and civil liabilities stemming from an investigation into its sales and marketing practices by the Boston U.S. Attorney.

The amount is significantly less than similar settlements the Boston prosecutor reached with TAP and Serono Labs, but more than the $345.5 mil. Schering paid under an agreement with the Philadelphia U.S. Attorney in 2004.

The Aug. 29 settlement includes $255 mil. in False Claims Act liabilities, which will be paid by Schering and its subsidiary Schering Sales Corp., in addition to a $180 mil. criminal fine to be paid by Schering Sales, according to a Department of Justice release.

Schering Sales will plead guilty to one count of criminal conspiracy to make false statements to FDA regarding improper drug promotional activity and to the former Health Care Financing Administration regarding incorrect Medicaid "best price" reporting for certain drugs. The Schering subsidiary also will be permanently barred from participation in all federal health care programs.

In return, DoJ has agreed not to pursue criminal charges against Schering under a side letter to the plea agreement.

The investigation by the U.S. Attorney's office related to sales and marketing programs for Schering's brain cancer drug Temodar (temozolomide) and hepatitis C therapy PEG-Intron (peginterferon alfa), and Medicaid rebate reporting for K-Dur (potassium chloride) and Claritin RediTabs .

The civil settlement resolves allegations that Schering and Schering Sales "caused the submission of false and/or fraudulent claims for Schering's drugs that were not eligible for reimbursement."

Among the allegations, the government charged that "Schering induced physicians to start patients on Intron A for Hepatitis C by paying them remuneration through three marketing programs," and that the firm likewise "induced physicians to use Temodar for certain patients with brain tumors and brain metastases and to use Intron A for certain patients with superficial bladder cancer through improper preceptorships, sham advisory boards, lavish entertainment, and improper placement of clinical trials."

DoJ also charged that "Schering knowingly promoted off-label uses of Temodar for certain brain tumors and brain metastases and Intron A for superficial bladder cancer despite not having FDA approval."

To address issues relating to the investigation and to "minimize the risk of off-label promotion," Schering will be required to amend an existing corporate integrity agreement with the HHS Office of the Inspector General, which resulted from a 2004 settlement of Medicaid fraud charges.

Those charges, which also involved Claritin, were settled with the Philadelphia U.S. Attorney's office for $345.5 mil. (¹ Also see "Schering Corp. Accepts Federal Contract Ban Under Settlement" - Pink Sheet, 30 July, 2004.).

The Boston prosecutor has been active in pursuing pharmaceutical companies for fraud; his office settled a similar case with Serono last year, in which the company agreed to pay $704 mil. to resolve civil and criminal investigations into marketing practices for its Serostim AIDS wasting drug (² Also see "Serono Labs Pleads Guilty To Criminal Conspiracy Charges In Serostim Case" - Pink Sheet, 17 October, 2005.). The Serono settlement was the second largest pharmaceutical fraud recovery, behind the $875 mil. collected by the Boston prosecutor from TAP in 2001 for violations of the Prescription Drug Marketing Act and False Claims Act.

Schering said it is "putting issues from the past behind us" with the settlement agreement. The firm noted the investigation began prior to the arrival of current CEO Fred Hassan in 2003. The company's existing litigation reserves will be sufficient to cover the settlement, Schering added.

The settlement is subject to court approval.

-Brooke McManus (b.mcmanus@elsevier.com)

Schering Settles Off-Label Promotion, Fraud Allegations For $435 Mil.

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