Whistleblower Case Against Celgene Can Proceed, Says Judge

Roxanne Nelson

July 28, 2014

Celgene Corporation has been accused by a whistleblower of putting "an old, highly toxic drug" on the market and selling it for "all types of cancer without any of the research the US Food and Drug Administration (FDA) requires or the oversight it provides."

The drug in question, thalidomide (Thalomid), and its newer analogue lenalidomide (Revlimid), are both widely used in the treatment of multiple myeloma. But the former employee alleges that the manufacturer promoted these drugs heavily to oncologists before they were approved for use in cancer.

These "initial marketing efforts for [thalidomide] were tantamount to ongoing human experimentation," according to allegations made by whistleblower Beverly Brown.

In addition, the claim says that Celgene engaged in unlawful marketing schemes of both drugs, costing the US government and several state healthcare payors hundreds of millions of dollars.

The case, US ex rel. Beverly Brown v. Celgene Corp., was filed in the US District Court for the Central District of California in 2007, and was unsealed by the court in February. Earlier this month, the court denied Celgene's motion to dismiss the claims against them, and gave the green light to move forward with the case.

"The essential allegation is that the drugs were marketed off-label, and safety risks and kickbacks were not disclosed," explained Reuben Guttman, JD, director of the False Claims Litigation Group at Grant & Eisenhofer P.A., the law firm representing Brown. "This falls under the federal and state False Claims Acts, which are statutes that allow an individual whistleblower — who has independent or nonpublic knowledge of a wrongful act — to bring suit in the name of the government."

Qui tam lawsuits are civil lawsuits that allow a person with evidence of fraud against federal programs or contracts to sue the wrongdoer on behalf of the US Government. When brought under the False Claims Act, it allows a whistleblower to receive all or part of any penalty imposed if the qui tam case recovers funds for the government. Qui tam actions give the government the right to intervene, but if the government declines, the private plaintiff can still proceed.

The Department of Justice has chosen not to intervene in the case at this time, Guttman told Medscape Medical News. "But they have the right to jump in at any time."

The Department of Justice gets more than 5000 cases a year, he explained. "In this case, the filing said that they are not making a decision now, but reserve the right to get involved in the case at any time."

Unlawful Promotion

Brown worked as a Los Angeles–based pharmaceutical sales representative for Celgene from 2001 to 2011. She continued working for the company after filing her lawsuit under seal, but she eventually left of her own volition; she was not fired by the company, according to Guttman.

In this qui tam action, Brown claims that Celgene marketed both drugs to cancer patients and their physicians for indications that had not yet been approved by the FDA. The suit also alleges that Celgene defrauded government-funded healthcare programs — including Medicare, Medicaid, TRICARE, the Veterans Administration, and the Federal Employees Health Benefits Program — by systematically promoting the drugs for nonapproved uses and paying illegal kickbacks to providers.

In her lawsuit, Brown states that Celgene's unlawful promotion of thalidomide and lenalidomide for off-label uses caused "federal, state, and local government healthcare programs...to pay for millions of prescriptions that never would have been submitted for reimbursement but for Celgene's activities."

The lawsuit includes not only the government, but seeks redress on behalf of 28 states, the District of Columbia, the City of Chicago, and private health insurers in California. In addition, it was filed under the California Insurance Frauds Prevention Act (IFPA), which allows whistleblowers to bring claims on behalf of private insurers operating in the state and regulated by the California Insurance Commissioner.

A filing under seal means that it is kept secret, so to speak, said Guttman. "Celgene had no knowledge of the allegations until it was unsealed in February."

The seal period, which can vary considerably, allows the government and states time to investigate the case, he explained.

Seeking Profits, No Warnings

Thalidomide was widely used in the late 1950s and early 1960s to treat nausea in pregnant women, and attained notoriety when its use caused severe birth defects in thousands of children. After its teratogenic effects were publicized, thalidomide was banned in many countries, but interest in the drug remained because of its immunomodulatory properties.

Celgene initially investigated the drug in the treatment of leprosy.

According to allegations in the Third Amended Complaint (TAC), Celgene secured an FDA indication for thalidomide in 1998, which "it never intended to use," for erythema nodosum leprosum (ENL), a skin disorder associated with leprosy.

"There was no profit in treating a disease that affects less than a few hundred people a year in the United States. So Celgene never developed substantive marketing materials about ENL or trained its sales representatives to sell [thalidomide] to physicians who treat leprosy," Brown's alleges.

Instead of marketing the drug for this limited indication, Celgene instead "violated explicit FDA regulations prohibiting misbranding, including off-label marketing: Celgene flooded the country with sales representatives" who were under heavy pressure to sell thalidomide and later lenalidomide to oncologists, according to TAC documents. Celgene continued these actions even after receiving warning letters from the FDA in 1998 and 2000.

The TAC also alleges that Celgene failed to disclose potential serious adverse effects, and that "Celgene's initial marketing efforts for [thalidomide] were tantamount to ongoing human experimentation."

Because the drugs were marketed off-label, they lacked the appropriate warnings that are provided in a product insert for on-label use, the claim points out. As an example, by at least 2003, the manufacturer was aware that there was a serious risk for increased venous thromboembolism in multiple myeloma patients taking these agents. But this risk was not disclosed to patients or their providers, and Celgene "trained its sales representatives to either conceal or downplay the risk."

When thalidomide and lenalidomide were eventually approved for the treatment of multiple myeloma in 2006, the FDA insisted on a black-box warning about the potential for birth defects and the increased the risk for venous thromboembolism. The FDA also mandated that Celgene "implement a restricted distribution system requiring physicians to follow specific procedures" before these drugs were prescribed.

Brown indicates that she discovered these actions when she was employed by Celgene, and conducted her own investigations. "She was in communication with the Justice Department before she filed her allegations," said Guttman.

"To a large degree, this claim raises the question of how this company was built," he said, adding the allegation that "as a company, Celgene was basically built on the fruit of unlawful conduct."

Dismissal Denied

Once the case was unsealed, Celgene moved to dismiss Brown's TAC in its entirety, and if that failed, to dismiss certain classes of claims that it asserted "cannot give rise to False Claims Act liability as a matter of law."

In addition, Celgene argued that some of the state law claims are subject to dismissal, in whole or in part, for various independent reasons, and they sought to strike paragraph 88 of the TAC.

When the case was unsealed, a Celgene spokesperson, who was cited in The Pharma Letter, said, "today, we learned that the United States Department of Justice declined to intervene in 3 cases under the False Claims Act and certain states' laws. In 2011, we learned that a case had been filed in the Central District of California. We subsequently learned that cases had also been filed in the Eastern District of Texas and Northern District of Alabama. The plaintiff in the Northern District of Alabama case voluntarily dismissed his action after the Justice Department declined to intervene. We will vigorously defend our position in the 2 remaining actions."

On July 10, Chief US District Judge George King of California refused to dismiss the TAC, but did dismiss the Minnesota, Colorado, and IFPA claims. He also granted the motion to strike paragraph 88 from the TAC.

In denying the better part of Celgene's motion to dismiss the case, Judge King noted that "Celgene cannot reasonably suggest that the 100-plus pages in the TAC do not give adequate notice of the misconduct alleged — as a direct participant in Celgene's off-label promotion, Brown 'sets out the particular workings of a scheme that was communicated directly to [her] by those perpetrating the fraud'."

"What happens now is that this opens the door to the discovery phase. If it doesn't get resolved and settled, then it may go to trial," explained Guttman.

"We have won the first round of the Triple Crown, but we haven't won all 3 races yet," he added.

Celgene declined to comment at this time because of the ongoing litigation.

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