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For Immediate Release:  
For Further Information:
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September 29, 2008  

Peter Aseltine
609-292-4791

Office of The Attorney General
- Anne Milgram, Attorney General
Division of Criminal Justice
- Deborah L. Gramiccioni, Director
Office of the Insurance Fraud Prosecutor
- Greta Gooden Brown, Insurance Fraud Prosecutor

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New Jersey to Receive Nearly $2.5 Million in Medicaid Settlement with CEPHALON Over Illegal Off-Label Marketing of Drugs

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TRENTON - Attorney General Anne Milgram announced today that New Jersey will receive nearly $2.5 million in restitution in a national Medicaid fraud settlement with pharmaceutical company Cephalon Inc. regarding illegal off-label marketing of prescription drugs.

Under the national settlement, Cephalon will pay a total of $425 million, plus interest, to resolve criminal charges and civil liabilities for off-label marketing involving the prescription drugs Gabitril, Provigil and Actiq.

The settlement arose from federal and state false claim actions filed by the U.S. Attorney’s Office for the Eastern District of Pennsylvania and several states. New Jersey headed a team of state Medicaid Fraud Control Units that worked with the U.S. Department of Justice to negotiate the settlement.

Cephalon will pay a $50 million criminal fine and $375 million to Medicaid and other federal government healthcare programs that paid reimbursements for medically unnecessary treatments as a result of the illegal practices.

Medicaid is jointly funded by the state and federal governments. New Jersey has reached an agreement in principle with Cephalon under which the joint federal and state settlement payment to the New Jersey Medicaid program will be $5,219,430. The state’s share is $2,479,755.

“Through settlements such as this one, we are recovering millions of dollars that will be used by the New Jersey Medicaid program to assist people who otherwise could not afford vital health care services and prescription drugs,” said Attorney General Milgram. “We are committed to investigating and prosecuting Medicaid fraud and other abuses affecting our Medicaid program.”

Attorney General Milgram credited Assistant Attorney General John Krayniak, Senior Counsel in New Jersey’s Medicaid Fraud Control Unit in the Office of Insurance Fraud Prosecutor, with helping to negotiate the settlement with state and federal authorities. Krayniak led the team of state negotiators for the National Association of Medicaid Fraud Control Units.

In connection with the settlement, Cephalon will plead guilty to a misdemeanor violation of the federal Food, Drug, and Cosmetic Act. The U.S. Attorney’s Office for the Eastern District of Pennsylvania charged Cephalon today in a criminal information filed in U.S. District Court. Cephalon also entered into a Corporate Integrity Agreement with the Department of Health and Human Services, Office of the Inspector General.

Cephalon engaged in a company-wide scheme to illegally market the prescription drugs Actiq, Gabitril, and Provigil for unapproved “off-label” uses. Before approving a drug, the Food and Drug Administration must determine that the drug is safe and effective for the use proposed by the company. The drug may not be marketed for “off label” uses not approved by the FDA.

Actiq is a strong and highly addictive narcotic product manufactured as a lollipop that was approved by the FDA for use only in opioid-tolerant cancer patients or those patients for whom morphine-based painkillers are no longer effective. However, from 2001 through at least 2006, Cephalon promoted the drug for non-cancer patients to treat conditions such as migraines, sickle-cell pain crises, injuries, and in anticipation of changing wound dressings or radiation therapy. Cephalon also promoted Actiq for patients who were not yet opioid tolerant, for whom it could have life-threatening results. Despite Actiq’s limited approved use, Cephalon marketed the drug to general and family practitioners, as well as physicians specializing in internal medicine, in order to expand the market beyond breakthrough cancer pain.

Gabitril is FDA-approved for use as an anti-epilepsy drug in the treatment of partial seizures. However, from 2001 to 2005, Cephalon allegedly marketed Gabitril as a safe and effective treatment for additional conditions including depression, anxiety, Tourette’s syndrome, and chronic pain. Cephalon told its sales force to visit not just neurologists, but also psychiatrists to promote off-label uses. In 2005, after reports of seizures in patients taking Gabitril who did not have epilepsy, the FDA required Cephalon to issue a warning notice to doctors. It later required Cephalon to educate doctors and discourage them from writing off-label Gabitril prescriptions.

Provigil is FDA-approved to treat narcolepsy, sleep apnea and sleep disorders associated with shift work. However, from 2001 through 2006, Cephalon illegally marketed Provigil for off-label conditions including fatigue associated with depression, multiple sclerosis, schizophrenia, Parkinson’s disease, chronic fatigue syndrome, anxiety, neuropathic pain, and attention deficit/hyperactivity disorder in children. In 2002, the FDA sent Cephalon a letter instructing the company not to continue to promote Provigil off-label, which the company ignored.

Cephalon also violated the federal Anti-Kickback Statute by (1) sponsoring Continuing Medical Education (CME) programs to fund expensive vacations for attending physicians; (2) providing grants to physicians to reward high-volume prescribers; (3) paying excessive fees to physicians to speak on behalf of the company at CME programs; and (4) providing paid incentives to sales representatives to encourage off-label promotion. Additionally, with regard to Gabitril, Cephalon disseminated off-label promotional literature to physicians at CME programs.

In addition to the senior counsel from New Jersey, the team of negotiators for the National Association of Medicaid Fraud Control Units included representatives from South Carolina, Oregon, Ohio, and Virginia.

In Medicaid settlements in 2008, New Jersey recovered $7.4 million from Merck & Co. in February; $1,758,000 from Purdue Pharma in January; $1 million from Walgreens in June; $350,000 from CVS/Caremark in March; and $195,000 from Aventis in February.

Attorney General Milgram noted that New Jersey has a new tool to combat Medicaid fraud. She explained that in January, Governor Corzine signed the New Jersey False Claims Act, which contains a whistleblower provision to provide rewards to people, often corporate insiders, who blow the whistle on fraud.

New Jersey administers the Medicaid program through the Division of Medical Assistance and Health Services and through the Medicaid Fraud Control Unit in the Office of Insurance Fraud Prosecutor, which investigates both criminal and civil Medicaid fraud and abuse in that program.

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