DealBook: Amgen Said to Be Near Deal to Buy Onyx for $10.5 Billion

Securities Law: Amgen a Victory for the Investing Public

In an important vindication of shareholder rights, the U.S. Supreme Court in February's Amgen v. Connecticut Retirement Plans and Trust Funds, on a 6-3 vote, held that securities fraud plaintiffs have no obligation to prove that defendant's misrepresentations and omissions were material at the class certification stage.

Rare Win for Class Action Plaintiffs in Amgen

The Supreme Court on Wednesday continued its extensive exploration of class action litigation, handing a rare victory to plaintiffs in one case while hearing arguments in another that could come down on the side of defendants.

Amgen to Pay $762 Million in Drug Marketing Case

Amgen Inc. has agreed to pay $762 million to resolve federal litigation accusing the drugmaker of marketing the anemia treatment Aranesp for unapproved uses.

The Thousand Oaks, Calif., company pleaded guilty Tuesday to illegally introducing a misbranded drug into interstate commerce and will pay a $136 million fine and a $14 million forfeiture, according to the U.S. Attorney's Office for the Eastern District of New York.

It also agreed to a $612 million civil settlement according to a law firm connected to the case.

But the U.S. attorney's office declined to comment on that because the civil settlement won't be unsealed until a Wednesday court hearing, when a federal judge also will decide whether to accept the plea and sentence in the criminal case.

Amgen said in an email that if the court accepts the plea and sentence, it will immediately resolve civil and criminal matters for which it had set aside $780 million last year. A company representative declined further comment on the plea agreement.

Amgen develops biologic medicines, or drugs produced by living cells rather than by mixing chemicals. Aranesp is approved for treating patients with anemia caused by chronic renal failure and chemotherapy.

The Food and Drug Administration approved the drug to be administered once a week or once every two or three weeks, depending on the patient. But prosecutors accused Amgen, among other things, of promoting a once-a-month dose to help Aranesp compete with Johnson & Johnson's Procrit, which was well-established in the market, according to federal court documents.

Amgen sales representative created a "Freedom Time" chart to show both doctors and patients how much time they could save if the drug was administered less frequently, the documents said. Sales representatives also used clinical studies to support the dosing, even though the FDA had found the studies insufficient to support its safety and effectiveness.

The guilty plea sends a message to the drug industry that "if you introduce misbranded drugs into interstate commerce, we will find you, prosecute you and hold you accountable," said Marshall Miller, who served as acting U.S. attorney for the Eastern District of New York for this case.

The agreement is the latest between the Justice Department and a drugmaker over allegations of improper marketing. Pharmaceutical companies aren't allowed to market drugs for unapproved uses, but the issue is far from clear cut.

Doctors can prescribe drugs for unapproved uses, and they say these prescriptions play a crucial role in treating patients, especially those with deadly illnesses and few treatment options.

And while drug companies can't market for off-label uses, their sales representatives can distribute copies of scientific journal articles that discuss off-label uses.

Amgen's settlement pales compared to what other big drugmakers have paid as the U.S. government has cracked down on industry tactics in recent years. In July, British drugmaker GlaxoSmithKline PLC said it will pay $3 billion in fines for criminal and civil violations involving 10 drugs as part of the largest health care fraud settlement in U.S. history

In 2009, federal prosecutors hit Pfizer Inc., the world's largest drugmaker, with $2.3 billion in penalties tied to violations of federal drug rules.

The large settlements are smaller than the annual sales top blockbuster drugs can generate, but they generate bad publicity that drugmakers want to avoid, said Dr. Adriane Fugh-Berman, a Georgetown University professor. Fugh-Berman has served as a paid witness in court cases over drug marketing and started the watchdog website pharmedout.org, which details industry tactics.

"I like to think (settlements and fines) have some mitigating effect, but it's hard to gauge," she said.

Amgen shares fell 21 cents to close at $89.29 Tuesday, while the broader markets rose higher.

Amgen Agrees to Pay $762 Million in Drug Marketing Case

David Scott, Amgen’s general counsel, entered the guilty plea at the United States District Court in Brooklyn to a single count of misbranding Aranesp, meaning selling it for uses not approved by the Food and Drug Administration.

The company agreed to pay $136 million in criminal fines and $14 million in a criminal forfeiture, as well as $612 million to settle various civil lawsuits from whistle-blowers.

The United States attorney’s office for the Eastern District of New York said in court that Amgen had promoted uses of Aranesp at different frequencies and different doses than stated on the drug’s label. This was apparently to try to increase use of the drug and to compete with a rival anemia drug from Johnson & Johnson.

Prosecutors also said that Amgen promoted Aranesp as a treatment for anemia in cancer patients who were not undergoing chemotherapy, even though the drug’s approval was only for patients getting chemotherapy. The use of the drug in cancer patients not getting chemotherapy was later found to be dangerous.

The presiding judge, Sterling Johnson Jr., scheduled a hearing for Wednesday at which he said he would announce whether he had accepted the settlement. Until then, the whistle-blower lawsuits remain under seal.

Amgen announced 14 months ago that it had set aside $780 million for a settlement of federal and state investigations and 10 separate whistle-blower lawsuits. In more recent regulatory filings, Amgen said the settlement was likely to include an 11th whistle-blower suit, one regarding the marketing of Enbrel, its blockbuster drug for rheumatoid arthritis and psoriasis.

The company has also said that as part of the settlement it would sign a corporate integrity agreement with the inspector general of the Health and Human Services Department. That would put some restrictions on the company’s future practices.

The corporate integrity agreement requires the executives and board members to personally certify compliance. They can be held personally and criminally liable if the company does not comply.

Marshall L. Miller, a federal prosecutor, called the agreement “a sweeping victory for the American public.”

“If you introduce misbranded drugs into interstate commerce, we will find you, prosecute you and hold you accountable,” Mr. Miller said.

The United States attorney’s office in Brooklyn has been investigating Amgen since 2007, according to Amgen’s regulatory disclosures. Aranesp, which is used to treat anemia caused by kidney disease or by cancer chemotherapy, was once Amgen’s biggest seller. But sales have been declining because of concerns that the drug can cause heart attacks and make cancer worse.

One whistle-blower lawsuit that was not under seal was filed by Kassie Westmoreland, a former Amgen sales representative.

Her suit charged that Amgen overfilled vials of Aranesp as a way of providing doctors with free medicine. The doctors could bill Medicare and private insurers for this extra amount, providing the doctors with extra profits. The suit said that this was intended to induce doctors to buy Aranesp for use in their practices rather than Procrit, a competing anemia drug from Johnson & Johnson.

During depositions in that case, five former Amgen executives invoked the Fifth Amendment against self-incrimination, according to court documents.