In pleading guilty to off-label marketing of its AIDS-wasting drug Megace (megestrol acetate), Par Pharmaceutical entered a corporate integrity agreement that requires executives to forfeit annual performance pay for up to three years if they are discovered to be involved “in any significant misconduct.”

The corporate integrity agreement (CIA) also prohibits the company from providing incentive compensation to sales representatives based on the volume sale of Megace ES and any successor products. The restriction does not apply to Par’s other branded drug, the vitamin B nasal spray Nascobal (cyanocobalamin).

The five-year CIA is similar in scope to the agreement GlaxoSmithKline PLC signed last year in its record-breaking $3 billion settlement with the Department of Justice. The GSK CIA was the first to include a financial recoupment provision. It also prohibited GSK from providing incentive pay for meeting sales targets for any of its drugs Also see "GSK’s DoJ Settlement Links Executive Bonus To Continued Compliance" - Pink Sheet, 9 July, 2012..

Under Par’s settlement with DoJ, announced March 5, the company agreed to pay a total of $45 million to resolve criminal and civil liability. The sum consists of an $18 million criminal fine, $4.5 million in criminal forfeiture and a $22.5 million civil penalty.

No individuals were charged in the case. CEO Paul Campanelli pled guilty on behalf of Par in Newark federal court. Specifically, the company pled guilty to an information charging it with a criminal misdemeanor for misbranding Megace ES in violation of the federal Food, Drug, and Cosmetic Act. The drug was approved to treat anorexia, cachexia, or other significant weight loss in AIDS patients. Par marketed it for treatment of non-AIDS related geriatric wasting.

U.S. Attorney for the District of New Jersey Paul Fishman described the charges against Par at a press conference held at his office in Newark. He said Par required its sales representatives to market Megace ES in nursing homes and to doctors who treated geriatric patients.

“Some Par sales managers required their sales representatives to visit 10-15 nursing homes a week, and those sales representatives were told that if they refused to promote in the nursing homes, they could be fired,” Fishman stated. “However, if the sales representatives sold to nursing homes as they were asked, Par paid out sales bonuses and awarded top sales representatives with Rolex watches and trips to Cabo San Lucas.”

Fishman said sales representatives asked nursing homes to switch all of their geriatric patients to Megace ES, which he said they called “flipping a house,” and that they made misleading claims that Megace ES was superior to competitor drugs.

Par did not respond to requests for comment.

Par Drops Its Suit Against FDA, Strikes Language In Filing

The government has inked numerous settlements with pharmaceutical companies to resolve allegations of off-label promotion. The Par case stood out because of the company’s suit against FDA in which it raised the novel argument that the agency was criminalizing its speech to healthcare professionals about the on-label use of Megace ES in settings where doctors prescribe the drug for both approved and unapproved uses Also see "When Is On-Label Speech Off-Label Promotion? Par Links The Two In Suit Against FDA" - Pink Sheet, 24 October, 2011..

As part of its plea agreement, Par agreed to a joint stipulation with the government to dismiss its suit. The company also agreed to file a motion to strike potions of its reply memorandum in support of its motion for limited discovery.

These points described certain conversations between Par’s outside counsel and attorneys for government agencies. Par had argued that comments made in these conversations were inconsistent with positions taken by the government in its filings in the litigation. For example, the memo cited a meeting in which government officials suggested the legality of promotional speech about Megace ES turned on the number of AIDS patients the doctor treated. The government argued that these conversations were protected or privileged and that Par should not have described them in its brief.

FDA had opposed Par’s request to depose FDA officials, arguing that it was a fishing expedition and an attempt to gain information to help its defense in the government’s investigation Also see "Par Pursuing Settlement Of FDA Suit And DoJ Off-Label Investigation" - Pink Sheet, 25 July, 2012..

The civil settlement resolves three whistleblower suits brought under the False Claims Act alleging that Par caused false claims to be submitted to federal healthcare programs. The Act allows private parties to file suit on behalf of the government and obtain a portion of the government’s recovery. Two of the whistleblowers, or relators, will receive $4.4 million.

The criminal Information charging Par states that FDA told Par in September 2005 that additional safety data in the non-geriatric adult population would be needed before the company could conduct a clinical trial in the geriatric population. The filing says Par never conducted clinical trials for Megace ES in the geriatric population and never filed a new drug application for the geriatric indication.

The filing says Par trained, directed, and encouraged its sales force to minimize or eliminate mentioning during sales calls the approved indication for Megace ES. In addition, it states that Par implemented a compensation structure whereby sales reps were credited only with Megace ES prescriptions written by a panel of physicians they were asked to call on.

CIA Establishes Clawback Program, Compensation Restrictions, Manager Training

The corporate integrity agreement Par entered into with HHS’ Office of Inspector General seeks to prevent such actions in the future. It specifies that effective April 1, 2013, Par shall not provide any financial reward to its sales representatives or their direct managers “based upon the volume of sales of nongeneric megestrol acetate product within any given employee’s territory or the area of any given manager’s supervision.”

The CIA also requires Par to establish “a financial recoupment program that puts at risk of forfeiture and recoupment an amount equivalent to up to three years of annual performance pay for an executive who is discovered to have been involved in any significant misconduct.”

The repayment conditions apply to all senior Par executives at the level of vice president or above. Triggering events include significant misconduct by a covered executive or by “subordinate employees in the business unit over which the covered executive had responsibility that does not constitute an isolated occurrence and which the covered executive knew or should have known was occurring.”

The CIA also requires Par to provide compliance training for management, a provision that was also included in GSK’s CIA.

Other provisions in the agreement are similar to those in previous CIAs with pharmaceutical companies. Among other things, they call for the Board of Directors to meet at least quarterly to review Par’s compliance program and adopt a resolution signed by each member summarizing its review; a field force monitoring program; and the implementation of risk assessment and mitigation processes to identify risks associated with the marketing and promotion of government reimbursed products.

Par’s Off-Label Plea Deal Includes Clawback For Execs’ Pay In Case Of Future Misconduct

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