Celgene Settles Whistle-Blower Fraud Suit for $280 Million

(Bloomberg) -- Celgene Corp. agreed to pay $280 million to resolve a whistle-blower’s claims the drugmaker used illegal marketing tactics to turn its Thalomid and Revlimid cancer drugs into blockbuster sellers, the U.S. said.

The settlement ends claims by a former company saleswoman that Celgene defrauded federal and state Medicare programs out of billions by luring doctors into prescribing the cancer drugs for unapproved uses, Acting U.S. Attorney Sandra Brown in Los Angeles said Tuesday in a statement.

The payment is equivalent to about two weeks worth of sales of Revlimid, which generated $6.97 billion in revenue for Celgene last year, according to data compiled by Bloomberg. Celgene fell 1 percent to $136.44 at 4 p.m. in New York.

Celgene continues to deny the allegations by the saleswoman, Beverly Brown, and settled the suit to avoid the “uncertainty, distraction and expense of protracted litigation,” spokesman Brian Gill said in an email Tuesday. The drugmaker doesn’t have to enter a corporate integrity agreement as part of the accord, he added.

Brown, who worked at Celgene for a decade, alleged the company paid doctors and hired ghostwriters to tout uses for Thalomid beyond the product’s approval, including treating blood cancer, years before it was authorized by regulators. Brown said the company used similar tactics to promote Thalomid’s successor, Revlimid.

Blockbuster Revenue

Thalomid, Revlimid, and Celgene’s latest successor drug, Pomalyst, accounted for $8.4 billion, or about 75 percent, of Celgene’s revenue last year and made the company one of the fastest-growing U.S. biotech firms.

Celgene has vowed to nearly double total sales to more than $21 billion by 2020. The stock has soared 350 percent, more than fourfold, in the past five years, outperforming the Nasdaq Biotechnology Index.

As part of the settlement, Brown may be entitled to as much as $84 million, or 30 percent of the recovery, under federal false-claims laws. 

“This case was a classic example of what happens when Wall Street promises drive health-care delivery,” Reuben Guttman, a lawyer for Brown, said in an email.

The settlement amount “isn’t something to be dismissed,” said Patrick Burns, president of the Washington advocacy group Taxpayers Against Fraud Education Fund. The deal ranks among the top 100 false-claims accords in U.S. history, he said.

The majority of the settlement will be split between the federal government, 28 states and the city of Chicago, as reimbursement for Medicare payments covering off-label prescriptions of the drugs, Celgene said in a statement.

Medicare Reimbursement

While doctors have broad latitude in prescribing drugs, even for uses that aren’t approved, drugmakers are barred from enticing physicians to use medicines for illnesses not sanctioned by regulators.

Although the U.S. Justice Department declined to join Brown’s suit, a California judge earlier this year set her case for trial. Brown originally argued Celgene was liable for as much as $40 billion in reimbursements to Medicare tied its off-label promotions of drugs.

Brown alleged that while Celgene initially got U.S. Food and Drug Administration approval in 1998 for Thalomid to be used on leprosy patients, the company hired more than 100 salespeople to hype the drug to cancer doctors.

Even after the FDA approved Thalomid for multiple myeloma in the mid-2000s, Celgene continued to promote it for other forms of cancer, including cervix, thyroid and brain, Brown said in the 2010 complaint.

Since Thalomid’s early safety labels didn’t provide any information about cancer, Brown contends the company’s push to generate off-label use of the drug amounted to “human experimentation,” according to court filings.

The case is U.S. ex rel. Brown v. Celgene Corp., case number, 10-cv-3165, U.S. District Court for the Central District of California (Los Angeles).

To contact the reporters on this story: Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net, Doni Bloomfield in Boston at mbloomfiel12@bloomberg.net.

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Drew Armstrong at darmstrong17@bloomberg.net, Sophia Pearson, Andrew Martin