Endo Health Solutions and its subsidiary Endo Pharmaceuticals, Inc. will pay $192.7 million to settle civil and criminal charges stemming from a whistleblower case that the company illegally marketed a pain treatment patch called Lidoderm. The settlement comes after an Endo insider blew the whistle on the company’s efforts to market Lidoderm off-label, for uses far beyond its approved indication.
Whistleblower Peggy Ryan, who is represented by the James Hoyer Law Firm, was an Endo sales person hired in 2002 to sell Lidoderm. She became concerned when the company pressured her to sell the drug off-label. The pain patch was only approved to treat symptoms of Post Herpetic Neuralgia, a rare disease which is a complication of Shingles. “Lidoderm had not been proven safe or effective for other uses, but the company pushed me and all the other sales people to sell Lidoderm for everything from low back pain, to carpel tunnel syndrome to neuralgia, and I just did not feel comfortable doing that,” Ryan said.
By marketing Lidoderm to doctors for other ailments besides PHN, Endo improperly caused them to write prescriptions which were paid for by Medicare and Medicaid. The government paid hundreds of millions of dollars over the past decade for Lidoderm prescriptions which were not for the drug’s intended use.
“Peggy Ryan was a tireless advocate for the taxpayer,” said Chris Hoyer, Founding Partner of the James Hoyer law firm. “She worked closely with the FBI and Department of Justice for nearly a decade providing invaluable testimony and evidence.”
Ryan took her concerns to the government in 2005 and filed a whistleblower suit against Endo, U.S. ex rel. Peggy Ryan v. Endo Pharmaceuticals, Inc., in the Eastern District of Pennsylvania where Endo is headquartered. After filing suit, Ryan was enlisted to aid the FBI in its investigation. She turned over hundreds of documents, internal voicemails, and even wore a wire for the FBI recording hundreds of hours of conversations with supervisors.
Exploiting an Orphan Drug
Lidoderm is a so-called “orphan drug.” The FDA gives “orphan drugs” expedited approval and other perks to encourage pharmaceutical companies to produce needed drugs with little profit potential. Getting orphan drug status has become a little known tactic used by Big Pharma to generate big profits, as Endo did in this whistleblower case, making billions on this little orphan drug before its patent expired.
“Companies seek orphan status while, all the while, intending to market to a much broader population. It’s a way to cash in on drugs, without having to go through the lengthy, FDA approval process to assure a drug is safe and effective,” said James Hoyer Law Firm Lead Investigator Al Scudieri, former head of the FBI’S white collar crime division in Tampa. “This case sends a message to Big Pharma that you can’t game the system to drive up profits and expect the taxpayer to pick up the tab.”
Peggy Ryan is not your typical whistleblower. She was a top salesperson at Endo for nearly a decade. As a rising star, trusted by top management, she had unique access to information about the company’s strategy to sell Lidoderm off label. “It was always about the money. Sell more to meet astronomical sales goals that grew every year. We would never have been able to meet the company’s goals if we sold Lidoderm just for Post Herpetic Neuralgia, which only has about 200,000 patients a year,” Ryan said. “This was about greed, pure and simple, and it was cheating the taxpayers,” she said.
Twenty-one million of the settlement is allocated to resolve the criminal charges, and $172-million will go to settle civil charges under the state and federal False Claims Acts. The settlement also includes a deferred prosecution agreement, in which Endo admitted that it intended that Lidoderm be used for unapproved indications and that it promoted Lidoderm to health care providers for those unapproved indications, according to the Department of Justice. As part of the settlement, Endo agreed to enter into a Corporate Integrity Agreement (CIA) with the Department of Health and Human Services Office of Inspector General that requires the company to implement measures designed to avoid or promptly detect conduct similar to that which led to this resolution.
The False Claims Act
The False Claims Act allows private citizens to bring civil actions on behalf of the government in order to recover taxpayer money when fraud is suspected. “Whistleblowers, like Peggy Ryan, are to be commended for their bravery and perseverance,” Attorney Hoyer said. “It’s very easy for a private citizen who sees wrong-doing to look the other way, but Peggy didn’t do that. She did the right thing, and with her help, the taxpayers will now receive restitution from Endo Pharmaceuticals.”
June, 2014: Peggy Ryan named sole whistleblower eligible for reward in $193 million settlement.
July, 2015: Peggy Ryan was awarded close to the maximum percentage that a whistleblower can receive in a False Claims Act whistleblower case. United States District Court Judge Robert Kelly in the Eastern District of Pennsylvania ruled that Ryan is entitled to a 24% share of the federal government’s portion of a settlement reached in February 2014. The reward amounts to $33.6 million for Ryan.
November, 2015: Peggy Ryan named 2015 Whistleblower of the Year and James Hoyer Law named Whistleblower Law Firm of the Year by national non-profit Taxpayers Against Fraud.