Source | Wall Street Journal
Documents in a lawsuit filed against Johnson & Johnson by two former salesmen show how the pharmaceutical giant sought to boost sales of its blockbuster anti-anemia drug Procrit by offering contracts that fattened doctors’ profits and urging its salespeople to push higher-than-approved doses.
The documents provide a rare window into the complex case that is adding to the legal problems piling up on the health-care giant. J&J is answering questions in multiple federal and state investigations and in whistleblower suits alleging illegal marketing or pricing of its products.
Concerns are rising about marketing of the anti-anemia drugs as questions emerge about the safety of high doses for cancer patients. Today a Food and Drug Administration panel plans to consider whether to add new restrictions on the drugs’ dosing or types of eligible patients.
Dean McClellan, who worked for 12 years at J&J’s Ortho Biotech unit selling Procrit, saved 15,000 pages of company memos, contracts and other work-related documents in a storage unit and shed he built off his garage. He says he was forced to retire in 2004 because the company told him his sales increases weren’t high enough. He believes the company wanted him out because of his age, which was 55 at the time. Angry, he agreed to join a whistleblower lawsuit by another former Procrit salesman, Mark Duxbury. A brief filed by J&J says Mr. Duxbury was fired in 1998 for racial and sexual harassment. Through his attorney, Jan Schlichtmann, Mr. Duxbury says he was a star salesman for Ortho whom the company turned on after he told the truth about their business practices at a court-ordered deposition.
A spokeswoman for J&J’s Ortho Biotech unit says the company doesn’t comment on matters of pending litigation. The suit was filed in U.S. District Court in Boston. The U.S. attorney in Boston has filed an amicus brief in support of the suit.
Some of Mr. McClellan’s documents reviewed by The Wall Street Journal indicate that Ortho Biotech created complex purchasing programs offering doctors discounts and cash rebates on Procrit, which would increase the doctors’ profits.
Procrit is an infused drug, which is administered by a doctor. Unlike pills sold by pharmacies, infused drugs offer profit opportunities for doctors, who can buy the drugs, administer the infusions in their offices, and collect the payments from insurers or the government. Drug companies can fatten the doctor’s margin using discounts and rebates to lower the price.
The Office of Inspector General of the Health and Human Services department put out new compliance guidelines in 2003 saying that marketing the spread may be in violation of anti-kickback laws. The Justice Department has been investigating drug companies for such marketing practices, resulting in big settlements of $875 million for TAP Pharmaceuticals in 2001 and $355 million for AstraZeneca in 2003. After extensive debate, Congress overhauled the Medicare reimbursement system in 2005 to prevent such practices. But drug companies continue to offer large buyers big rebates, which they say are legal.
Mr. McClellan’s documents on the marketing of Procrit show that in 2004 — after Amgen Inc.’s competing drug Aranesp came on the market — J&J made offers that would allow buyers of Procrit to receive discounts off an already-reduced price as well as rebates. For example, an internal company memo calculates that a physician who bought nearly $1 million of Procrit over 15 months would get a check for $237,885 back, or 24%.
Another J&J program offered hospitals an incentive to buy Procrit and shun Aranesp: discounts on purchases from across Johnson & Johnson’s product line — including some huge-selling drugs and medical devices sold by different subsidiaries — if the hospital used Procrit at least 75% of the time when prescribing anti-anemia drugs.
In addition, J&J created a “Right of First Refusal” contract for doctors, requiring them to allow Ortho Biotech to make a counteroffer if Amgen’s Aranesp price undercut Procrit.
Mr. McClellan also alleges the company pushed doctors to prescribe a higher dose years before it was approved as safe and effective by the FDA. For years, the company focused on educating health care providers on Procrit’s medical benefits, he says. But in the mid-1990s at a national sales force meeting, an Ortho executive announced that the division was moving to promote what it called “QW dosing,” switching patients from three, 10,000-unit doses a week to a single, 40,000-unit dose in cancer patients, Mr. McClellan says.
At that time, that dose wasn’t approved for cancer patients. Many years later, the FDA approved the dose in cancer patients, but before then, pushing the unapproved dose would have violated FDA rules.
Initially, “doctors weren’t buying into it,” Mr. McClellan says, in some cases because they worried Medicare wouldn’t reimburse an unapproved dose. To persuade them, Mr. McClellan says he was told to pitch the regimen as more convenient for patients and give doctors free samples of Procrit. He says that at one time he was given roughly 600 cards to give to doctors for free “trial” samples, worth $720,000 in Procrit, to persuade them to try the higher-dose regimen.
When the Arizona Cancer Center ran into resistance from Medicare over reimbursing $1 million for the unapproved dose of Procrit, an Ortho Biotech official drafted a letter, under the name of the center director, to Medicare arguing the appropriateness of the dose, says Mr. McClellan. He adds that he brought the letter to Daniel von Hoff, at the time the hematology/oncology director, for his signature. Dr. von Hoff, now at the Translational Genomics Research Institute, declined repeated requests for comment through an assistant. A spokesman for the Arizona Cancer Center said she wasn’t familiar with the matter.
The company also urged doctors who were still using three-times-a-week dosing to enroll patients in “mini” trials that used once-a-week dosing of a higher quantity of the drug. The doctors were given the drug free for those patients, Mr. McClellan says.
Doctors also got other financial support, Mr. McClellan says. He says the Arizona Cancer Center, one of the larger clinics in his sales territory, in 2003 received $10,000 to train 12 to 20 J&J employees, with a series of lectures given by the center’s doctors. A spokesperson for the Center said she couldn’t confirm whether it received the $10,000 payment from Ortho Biotech, but said the Center does provide classroom-type training to junior drug company employees.
In 2004, the Center announced in its newsletter that J&J’s Ortho Biotech unit had donated $40,000 to the center to “provide salary support” for a Hematology/Oncology fellow. Asked if these payments from J&J could pose any potential conflicts of interest, Thomas Miller, a professor at the Arizona Cancer Center who was involved in the J&J training and director of the fellowship program, said of the fellows, “I don’t think they know where it’s coming from.” He added, “I don’t remember from one year to the next where the money’s coming from.” He said that unlike doctors in private practice who purchase drugs and seek reimbursement for them, the doctors at the center don’t profit themselves from the drugs. “I’ve never written a prescription for Procrit ever,” he said.
Mr. McClellan’s allegations echo some of those in other lawsuits and investigations into pricing and marketing practices at other J & J subsidiaries.
Sales practices around other top-selling products — anti-psychotic Risperdal sold by J&J’s Janssen drug unit; Topamax, an anti-seizure medication sold by J&J’s Ortho-McNeil Pharmaceutical unit; heart drug Natrecor sold by the Scios unit — have drawn federal probes.
Last June, the Justice Department issued a subpoena to J&J’s DePuy unit asking for documents on the manufacture and marketing of orthopedic devices, and search warrants were executed. The U.S. attorney for the District of New Jersey is also leading a probe into kickbacks paid to doctors who use implants sold by DePuy Orthopedics and other companies, according to a person familiar with the matter.
In February, J&J said it believes subsidiaries made improper payments connected to the sale of medical devices in two “small-market” countries — prompting the resignation of a senior J&J executive. A congressional panel is looking into marketing practices of stents sold by the Cordis medical-device unit.
“All public comments on these matters have been made in public statements by our operating companies or in filings we’ve made with the SEC and we have no further comment,” says a J&J spokesman of the continuing investigations.
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