Schwarz Pharma agrees to pay $22 million to settle a lawsuit that alleges the company failed to advise CMS that two drug products no longer qualify for federal coverage.

The two products in question are the nitroglycerin skin patch Deponit used for the prevention of angina and hyoscyamine sulfate extended-release tablets and capsules used to treat various stomach, intestinal and urinary tract disorders that involved cramps, colic or other painful muscle contractions. Neither drug ever received full regulatory approval for safety and effectiveness and neither is now on the market, according to the Department of Justice.

The Justice Department, in a settlement agreement made public April 29, highlights the allegations against the drug manufacturer, including that for the period April 1999 through December 2005, "Schwarz knowingly caused false claims to be submitted to federal health care programs for Deponit."

Controlled-release nitroglycerin products were among a number of older products that were marketed under DESI (Drug Efficacy Study Implementation) provisions and subsequently reviewed by FDA. In March 1999, FDA determined that the Deponit "lacked substantial evidence of effectiveness," and subsequently proposed to withdraw approval for the product (Also see "DESI withdrawals" - Pink Sheet, 29 March, 1999.). That conclusion meant that the product was not eligible for federal program coverage.

"From April 1999, and continuing through December 2005, Schwarz submitted to the Centers for Medicare and Medicaid Services false quarterly reports that misrepresented Deponit's regulatory status and failed to advise CMS that Deponit no longer qualified as a covered outpatient drug," the agreement document states. Continued marketing of the drug in those years also caused it to be reimbursed by Medicaid, Tricare (the program for military families) and the VA.

DoJ recently began targeting manufacturers whose drugs remained on the market after FDA determined there was not enough evidence of their effectiveness. It previously reached a settlement with EON Labs regarding DESI products (Also see "DoJ Sets Its Sights On DESI Drugs: Eon Labs Settles Claims It Marketed An Ineffective Drug" - Pink Sheet, 23 February, 2010.).

Regarding, hyoscyamine sulfate extended-release tablets and capsules, Justice says that "during the period January 2001 through December 31, 2008, "Schwarz knowingly caused false claims to be submitted to federal health care programs."

In March 1997, FDA determined that timed-release dosage forms of the drugs, including hyoscyamine sulfate extended release tablets and capsules, were unapproved new drugs. As a result, they no longer qualified as covered outpatient drugs in federal health care programs.

"From January 2001 and continuing through December 31, 2008, Schwarz submitted to CMS false quarterly reports that misrepresented the regulatory status" of hyoscyamine sulfate extended release tablets and capsules, the document states.

According to the settlement agreement, "there is no admission of facts or liability by Schwarz, and Schwarz expressly denies the allegations ... as set forth herein ... and denies that it engaged in any wrongful conduct." Schwarz is now a subsidiary of Belgium-based UCB S.A. (Also see "May The Schwarz Be With You: UCB Proposes $5.6 Bil. Acquisition" - Pink Sheet, 25 September, 2006.).

As part of the agreement, which covered two whistleblower cases joined by the U.S. government against Schwarz Pharma, the federal share of the settlement is $12.2 million, and the state Medicaid share is $9.8 million. The two whistleblowers, Constance Conrad and James Conrad, will receive $1.8 million from the federal share.

The Schwarz Pharma agreement was one of three Justice actions on marketing of no-longer approved drugs or of off-label uses. The same-day, the agency announced an $81 million settlement with Johnson & Johnson to resolve civil and criminal allegations related to marketing of the epilepsy drug Topamax for off-label psychiatric uses. Among actions cited was a program where physicians accompanied company sales reps on their visits to other physician offices.

Two days earlier, the agency and AstraZeneca made final a $520 million civil settlement with the Department of Justice resolving allegations that the company promoted its antipsychotic Seroquel (quetiapine) for off-label uses and gave kickbacks to doctors for off-label prescribing (Also see "AstraZeneca Seroquel Settlement With DoJ Leaves Door Open To Possible Criminal Claims" - Pink Sheet, 27 April, 2010.).

- Gregory Twachtman (g.twachtman@elsevier.com)

Schwarz Pharma Settles False Claims Suit For $22 Million, As DoJ Continues Focus On DESI Drugs

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