Cephalon is to become the third pharmaceutical company to disclose its payments to physicians. While Lilly and Merck recently volunteered to do so, Cephalon's disclosure is mandated under a settlement agreement with the U.S. Department of Justice to resolve charges that it promoted off-label use of three drugs.

Under the settlement announced Sept. 29, Cephalon is to enter a five-year corporate integrity agreement with HHS' Office of the Inspector General. The OIG has inked 16 previous CIAs with pharmaceutical companies but this is the first to require reporting of physician payments.

The agreement specifies that by Jan. 31, 2010, Cephalon is to post in a prominent place on its Web site a readily searchable listing of all physicians who received payments from Cephalon and the aggregate value of the payments. Items to be reported include grants, honoraria, research funds and speaking and consulting fees.

While the disclosures are new to government settlements, they may soon become standard industry practice. Lilly and Merck announced last month that they plan to launch online registries of payments to doctors for speaking and consulting services (¹ 'The Pink Sheet,' Sept. 29, 2008, In Brief). Sens. Chuck Grassley, R-Iowa, and Herb Kohl, D-Wis., have introduced legislation that would mandate such disclosures.

Under its settlement with DoJ, Cephalon agreed to plead guilty to a single misdemeanor violation of the Food, Drug, and Cosmetic Act and to pay $425 million plus an estimated $12 million in accrued interest expense. Cephalon notified investors last year of the pending deal (² Also see "Cephalon Settles Federal Investigation Of Marketing Practices For $425 Million" - Pink Sheet, 9 November, 2007.).

The agreement, reached with the DoJ and the U.S. Attorney's Office for the Eastern District of Pennsylvania, resolves criminal charges that the company marketed Gabitril (tiagabine), Actiq (fentanyl) and Provigil (modafinil) for unapproved usesfrom January 2001 through at least 2006. The civil settlement also resolves four whistle blower actions filed in the Eastern District of Pennsylvania, three of which were filed by former employees.

Cephalon also announced that it settled investigations by the Attorneys General of Connecticut and Massachusetts involving off-label promotion of the three drugs. Cephalon agreed to pay $6.15 million to Connecticut and $700,000 to Massachusetts.

Actiq, an addictive pain drug sold as a lollipop, is approved for use in opioid tolerant cancer patients with breakthrough cancer pain. DoJ claimed Cephalon promoted its use for migraines, sickle-cell pain crises, injuries, wound dressings and radiation therapy.

According to the DoJ, Cephalon used the mantra "pain is pain" to encourage Actiq sales reps to target general practitioners, not just oncologists, and to promote the drug for uses other than breakthrough cancer pain.

In the case of Gabitril, Cephalon allegedly promoted the anti-epilepsy drug for anxiety, insomnia and pain, and encouraged sales reps to visit psychiatrists, not just neurologists.

Provigil is approved for treatment of excessive daytime sleepiness associated with narcolepsy, sleep apnea and shift work sleep disorder. However, DoJ said Cephalon marketed the drug as a non-stimulant drug for treatment of sleepiness, tiredness, decreased activity, lack of energy and fatigue.

Sales Quotas Required Off-Label Promotion

DoJ said Cephalon structured its sales quotas and bonuses so that reps could not reach their sales goals unless they promoted and sold the drugs for off-label uses. The government also stated that Cephalon provided more than $80 million from 2001 to 2004 to put toward continuing medical education programs to promote off-label uses for its drugs.

Cephalon is the latest of a long line of pharma companies to settle DoJ investigations of off-label marketing, and the fine is in line with those paid by Schering-Plough and Pfizer (³ Also see "Schering Settles Off-Label Promotion, Fraud Allegations For $435 Mil." - Pink Sheet, 29 August, 2006.).

The Justice Department began focusing on health care fraud in the pharmaceutical industry 10 years ago. From 1990 through 2007, the federal government inked more than 40 settlements of at least $1 million with pharmaceutical companies, recovering $6.1 billion. The investigations involved price fixing, kickbacks, and misbranding, as well as off-label promotion (⁴ Also see "A Closer Look: Health Care Fraud Investigations In Pharma Sector Take New Twists" - Pink Sheet, 31 March, 2008., p. 15).

- Brenda Sandburg (b.sandburg@elsevier.com) and Jessica Merrill (j.merrill@elsevier.com)

Cephalon Must Report Payments To Physicians In Settlement Of Off-Label Charges

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