Endo to Pay $193 Million to Settle Lidoderm Marketing Probe

Feb 21, 2014 4:58 pm ET

(Updates with whistle-blower lawsuits in 13th paragraph.)

Feb. 21 (Bloomberg) -- Endo Health Solutions Inc. will pay $193 million to resolve government probes and whistle-blower lawsuits focusing on allegations that the drugmaker marketed its Lidoderm shingles drug for unapproved uses.

Endo will pay $20.8 million in criminal penalties and forfeitures and $171.9 million in civil false-claims settlements with the states and the U.S. government as part of the accord, the U.S. Justice Department said today in a statement. The drugmaker also entered a deferred-prosecution agreement.

From 2002 to 2006, Endo sales managers instructed some representatives on how to expand “sales conversations” with doctors beyond the treatment of shingles-related pain, the U.S. said. Under the deferred-prosecution pact, Endo admitted that it intended Lidoderm to be used for uses not approved by the U.S. Food and Drug Administration, the Justice Department said.

The settlement comes about three months after Malvern, Pennsylvania-based Endo, which faces generic competition to Lidoderm, acquired Paladin Labs Inc. for about $1.6 billion to expand in Canada and emerging markets.

The deal gives Endo access to the Canadian market, where Paladin has recorded average sales growth of 28 percent over the past five years, selling pain and allergy treatments. Endo was outbid last month in its attempt to acquire NuPathe Inc., which makes migraine medicines. Rival Teva Pharmaceutical Industries Ltd.’s $144 million bid for the drugmaker topped Endo’s offer.

‘Robust Programs’

“We are pleased to resolve this matter and are confident that we have robust programs in place to assist us in satisfying our legal and regulatory agreements,” Endo Chief Executive Officer Rajiv De Silva said in a statement.

The agreement was filed in federal court in New York. The company also entered into a five-year corporate integrity agreement with the Department of Health and Human Services. Such agreements often require companies to make changes to their sales and marketing practices.

Endo’s settlement pales in comparison to accords federal prosecutors and state attorneys generals have reached with other drugmakers engaged in off-label marketing, said Carl Tobias, who teaches product-liability law at the University of Richmond in Virginia. Those settlements included agreements with companies such as Johnson & Johnson and GlaxoSmithKline Plc, he said.

J&J, Glaxo

“Endo is a much smaller company than J&J and Glaxo and the investigation that was settled focused on the marketing of a single product that affected a smaller number of people than J&J’s and Glaxo’s products,” Tobias said today in a phone interview.

J&J, based in New Brunswick, New Jersey, agreed in November to resolve criminal and civil probes into the marketing of Risperdal, an antipsychotic drug, and other medicines by paying more than $2.2 billion, one of the largest U.S. health-fraud penalties.

In 2012, London-based Glaxo agreed to plead guilty and pay $3 billion to resolve criminal and civil allegations that it illegally promoted prescription drugs, such as the antidepressant Paxil, and failed to report safety data.

In Endo’s case, prosecutors alleged the drugmaker encouraged doctors to file false claims with Medicaid and other federal medical programs by “promoting Lidoderm for unapproved uses, some of which were not medically accepted indications,” according to the Justice Department’s statements. Some of those uses included lower-back problems and chronic pain.

The accord also resolves three whistle-blower suits filed in federal court in Philadelphia filed by two former Lidoderm sales representatives and a physician over the drug’s marketing, according to the government’s statement. The whistle-blowers’ share of the settlement hasn’t been determined, prosecutors added.

The whistle-blower cases U.S.A. ex rel. Ryan v. Endo Pharmaceuticals Inc., 05-cv-03450; U.S.A. ex rel. Weathersby, 10-cv-02039; and U.S.A. ex rel. Dhillon v. Endo Pharmaceuticals, 11-cv-07767, U.S. District Court, Eastern District of Pennsylvania (Philadelphia).

--With assistance from Meg Tirrell in New York and David Voreacos in federal court in Newark, New Jersey,. Editors: Michael Hytha, Mary Romano