(This story was updated at 4:15 p.m. ET.)
Drugmaker Warner Chilcott has agreed to plead guilty to healthcare fraud and will pay the government $125 million to resolve civil and criminal allegations, the U.S. Justice Department announced Thursday.
Officials also arrested the company's former president, alleging he conspired to pay illegal kickbacks to doctors. The arrest, some say, is illustrative of a recent Justice Department pledge to increasingly hold individuals accountable in corporate misconduct cases.
Allergan CEO Brent Saunders said in a statement Thursday that the company takes seriously its responsibility to follow the law. Warner Chilcott was acquired in 2013 by Actavis, which later became Allergan after acquiring that company.
“Our company's culture is deeply rooted in compliance, and we recognize the importance of a strong compliance program,” Saunders said. “We have focused on developing and implementing a best-in-class set of compliance policies and procedures, and we remain committed to running our business in full compliance with the regulations and high ethical standards we have set for Allergan."
Warner Chilcott pleaded guilty to paying kickbacks to doctors to encourage them to prescribe its medications. The company admitted to manipulating prior authorizations to spur insurers to pay for prescriptions of Atelvia and for making unsubstantiated marketing claims for the drug Actonel, according to the government. Both medications are used to treat postmenopausal osteoporosis.
Under the plea agreement, Warner Chilcott will pay a criminal fine of $22.9 million. It will pay $102 million as part of a civil settlement.
The government alleged the drugmaker paid kickbacks to prescribing doctors in connection with so-called “medical education events” and speaker programs. The events allegedly were often held at expensive restaurants and involved little or no actual education. Paid speakers often didn't speak about any clinical or scientific topics despite earning between $600 and $1,200, the government alleged. According to the government, the company told some speakers they would not be paid for additional events unless they prescribed more medication.
The government also alleged Warner Chilcott employees doctored prior authorization requests to insurance companies for its drugs. For example, the company knew many insurers would only pay for Atelvia if a doctor submitted an individualized request explaining why a patient could not be treated with a cheaper medication. The government alleged Warner Chilcott sales representatives filled out prior authorizations for the drug using prepared explanations that often didn't apply to the patients' individual medical conditions.
Sometimes the sales representatives pretended to be doctors and submitted these justifications directly to the insurance companies, and other times they coached doctors about how to falsely fill them out, according to the government.
The government also alleged Warner Chilcott managers told employees to make unsubstantiated claims when marketing Actonel.
In addition to the allegations against the company, the government also released an indictment charging former company President Carl Reichel, 57, with conspiring to pay the kickbacks. Reichel was arrested Thursday in Boston.
Reichel's arrest follows a September memo written by U.S. Deputy Attorney General Sally Quillian Yates emphasizing the importance of holding individuals accountable in cases of illegal corporate conduct. In that memo, she said corporate cases should not be resolved without holding individuals accountable because that was one of the most effective ways to combat corporate misconduct.
Reichel's arrest is in line with the message of that memo, said Marc Raspanti, who represents whistle-blowers and criminal defendants as a partner at Pietragallo Gordon Alfano Bosick and Raspanti.
“The Department of Justice is not going to sign off on a case now until they have really vetted whether or not there's any (individual) liability,” Raspanti said. He said he's already seeing federal prosecutors taking a closer look at individual conduct in corporate cases.
Patrick Burns, co-executive director of the Taxpayers Against Fraud Education Fund, a not-for-profit supporting whistle-blower incentive programs, called the Warner Chilcott matter “a landmark case in False Claims Act law enforcement.”
“Not only are taxpayers recovering their stolen money, but the former CEO of the fraudster company has been hauled away in handcuffs,” Burns wrote in an e-mail. “This is a red letter day for integrity. This needs to happen more often.”
Two of Warner Chilcott's former district managers have also pleaded guilty in connection with the fraud, and a third was criminally charged earlier this month in relation to the prior authorization allegations.
A Massachusetts doctor has also been charged with accepting free meals and speaker fees in exchange for prescribing the company's drugs.
The civil settlement arose out of a lawsuit originally filed by a whistle-blower, who will now receive $22.9 million from the federal share of the recovery. In False Claims Act cases, whistle-blowers are entitled to a portion of whatever money the government is able to recover.