Amgen Says it Set Aside $780 Million to Settle Drug Sale Kickback Claims
By Jef Feeley and David Voreacos – Oct 25, 2011 12:01 AM ET
Amgen Inc. (AMGN) said it set aside $780 million to resolve civil and criminal investigations into whether the world’s largest biotechnology company engaged in improper sales of drugs, including its Aranesp anemia medicine.
Amgen said in a release yesterday it took a $780 million charge to cover the costs of settling federal and state probes of its sales and marketing practices. Amgen said it expects the accord to resolve 10 whistle-blower lawsuits, including one claiming fraudulent overbilling tied to Aranesp sales.
“The proposed settlement remains subject to continuing discussions regarding the components of the agreement,” officials of Thousand Oaks, California-based Amgen said in the release.
Amgen officials said in a February regulatory filing that federal prosecutors and state attorneys general had subpoenaed marketing documents for a variety of drugs, including Aranesp. The company has been sued by at least 15 states alleging that it encouraged providers to overbill third-party payers such as Medicaid for Aranesp prescriptions and provided sham consulting agreements.
Christine Regan, an Amgen spokeswoman, declined to comment in a telephone interview on the monies set aside for the settlement beyond what was in the company’s third-quarter earnings release.
Amgen raised its 2011 forecast after reporting third- quarter profit topped analysts’ estimates as higher sales of cancer drugs offset declining revenue from anemia medicines.
Net income for the quarter was reduced by $705 million, or 77 cents a share, because of a charge the company is taking for the proposed settlement, according to the statement.
Amgen officials said federal prosecutors in the Eastern District of New York and the Western District of Washington state were leading probes.
Robert Nardoza, a spokesman for U.S. Attorney Loretta Lynch in Brooklyn, declined to comment yesterday on Amgen’s announcement. Emily Langlie, spokeswoman for U.S. Attorney Jenny A. Durkan in Seattle, also declined to comment.
Aranesp, once Amgen’s best-selling product, lost sales after 2006 when high doses of the drug were linked to increased rates of heart attack and death in kidney patients. Aranesp sales fell 40 percent to $2.49 billion last year from $4.12 billion in 2006. Sales will decline to $2.23 billion 2012, the average estimate of nine analysts surveyed by Bloomberg.
Federal and state investigators are probing allegations by former Amgen employees that the company illegally marketed drugs such as Aranesp, in an effort to win market share from rival Johnson & Johnson (JNJ)’s Procrit anemia medication, according to court filings.
One suit, filed by former sales representative Kassie Westmoreland, contends Amgen officials provided overfilled vials of Aranesp to doctors and then encouraged them to bill Medicare and Medicaid for the extra amounts.
Last year, a federal judge in Boston dismissed claims that Westmoreland brought on behalf of various U.S. states. Many of those states and Westmoreland appealed that ruling, and an appellate court reinstated most of them in July. Last month, Amgen asked the U.S. Supreme Court to review that ruling.
On Sept. 15, Amgen filed court papers seeking to exclude references at trial to the fact that five people who worked for the company invoked their constitutional right against self- incrimination during pre-trial depositions. In invoking the Fifth Amendment, the five refused to answer questions, Amgen said.
The Westmoreland case is U.S. v. Amgen Inc. Civil Action, 06-10972-WGY, U.S. District Court, District of Massachusetts (Boston).
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