Leading US drug manufacturer, Jazz Pharmaceuticals, has agreed to pay $20 million to settle a federal investigation into claims that one of its subsidiaries illegally marketed a narcolepsy drug for other unapproved uses.
Narcolepsy is a sleep disorder marked by sudden, uncontrollable urges to sleep, causing an individual to fall asleep at inappropriate times.
The case is the latest of several federal drug-marketing probes involving Bay Area firms (in northern California) and is centered on the sales activities of Orphan Medical, a Minnesota company Jazz bought in 2005.
As part of the settlement - which Jazz will pay over the next five years - Orphan executives pleaded guilty to illegally promoting their drug Xyrem.
That medication has been approved by the U.S. Food and Drug Administration (FDA) for treating people suffering from narcolepsy only.
But the settlement agreement signed by Jazz and the U.S. Attorney's Office in New York said Orphan's sales representatives promoted Xyrem for so-called off-label purposes, meaning uses not approved by the FDA.
Among other things, Orphan's employees were accused of promoting the drug as a treatment for chronic pain, weight loss, depression, bipolar disorders and Parkinson's Disease.
The employees also were accused of paying a New York psychiatrist thousands of dollars to attend speaking engagements and tout Xyrem for unapproved uses.
Xyrem is the prescription version of the street drug, gamma hydroxybutyrate, a quick anesthetic with serious risks of overdose, including coma and death.
Xyrem's active ingredient is also federally classified as a date-rape drug because it can be easily slipped into a person's drink to render them unconscious.
Federal authorities said the illegal marketing occurred from January 2003 through March of this year. Jazz bought Orphan in June of 2005.
Jazz agreed to cooperate with the government's continuing criminal investigation, and will never promote the drug for uses other than those approved by the FDA.
Because of its risks, Xyrem can be distributed only under strict rules. The narcolepsy market in the United States is small, estimated at only 120,000 patients, and sales of Xyrem totaled just $29 million in 2006.
"It is vital to public health and safety that pharmaceutical companies are deterred from improperly marketing their drugs to doctors and patients," said Peter D. Keisler, assistant attorney general, in a statement announcing the settlement.
Last year, prosecutors charged Dr. Peter Gleason, a Maryland psychiatrist, with improperly promoting Xyrem on Jazz's behalf. The indictment has raised questions about free-speech issues and the government's right to regulate the practice of medicine.
Dr. Gleason is fighting the charges. A trial has not been set yet.
The investigation began after Shelley Lauterbach, a former saleswoman for Orphan, filed a whistle-blower lawsuit in 2005 in Federal District Court in Brooklyn.
Lauterbach, who will share part of the $20 million settlement, said she was pleased that Jazz had agreed to plead guilty. Her portion of the settlement has not been determined.
Several other Bay Area biotech companies have also come under federal scrutiny recently for their drug marketing practices.
In October, InterMune of Brisbane agreed to pay $36.9 million to settle federal charges it engaged in off-label marketing of Actimmune.
Although the FDA had approved Actimmune for treating a bone disorder and a condition that makes people prone to infections, InterMune was accused of improperly promoting it to treat a fatal lung disease.
Scios of Mountain View, a division of Johnson & Johnson, has acknowledged that the U.S. attorney in San Francisco is investigating it for allegedly engaging in off-label marketing of its drug Natrecor.
Although the FDA has approved Natrecor's sale to people with congestive heart failure who have trouble breathing while doing minimal activity, Scios has been accused of improperly promoting frequent injections of the drug in out-patient settings.
South San Francisco-based Genentech also has acknowledged that federal prosecutors are examining the marketing of its drug, Rituxan. Although the focus of the investigation is unclear, a lawsuit by a former Genentech employee has accused the firm and its partner, Biogen Idec, of promoting Rituxan for rheumatoid arthritis before the FDA approved the drug for that purpose.
In yet another local case, Gilead Sciences of Foster City disclosed in December that it has received a federal subpoena seeking documents regarding its marketing of three drugs widely used to treat people infected with HIV.