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Two drug makers — Roche’s Genentech and OSI Pharmaceuticals — announced a deal on Monday to pay $67 million to resolve charges they made misleading statements about the effectiveness of the Tarceva drug to treat non-small cell lung cancer.

Specifically, the feds contend that between 2006 and 2011, the companies gave promotional materials to oncologists that included misleading and overstated survival data to influence prescribing. The drug was originally approved by the US Food and Drug Administration as a second-line or back-up treatment, but the inflated data prompted some doctors to use Tarceva as a first choice, which boosted usage.

In fact, there was little evidence to show Tarceva was effective in treating patients unless they had never been smokers or had a mutation in a protein involved in the growth and spread of cancer cells, according to a US Department of Justice statement. As a result, the feds contend the companies violated the False Claims Act, because federal health care programs, such as Medicare and Medicaid, overpaid for the medicine.


The case appears to be the first in which a drug maker was found to have violated that law by making misleading statements about survival data. Typically, many drug makers have been accused of violating the False Claims Act by paying kickbacks — in the form of free meals and trips, for instance — in hopes of persuading physician prescribing habits.

Tarceva was developed by Genentech, but was jointly marketed at the time by OSI Pharmaceuticals. However, OSI was purchased by Astellas in 2011, about the same time that the improper marketing appears to have ended, according to the Justice Department. We asked Genentech for comment and will update you accordingly.


The infractions came to light thanks to a whistleblower lawsuit that was filed by Brian Shields, a former Tarceva senior product manager. His 2011 lawsuit described an elaborate scheme that was used to bolster Tarceva prescriptions, including kickbacks purportedly paid to physicians, although that allegation was not stipulated in the settlement with the government.

For his trouble, Shields will receive about $10 million, before subtracting attorney fees. His lawyer, Jeb White, a partner at Nolan Auerbach and White, said a wrongful termination lawsuit that Shields filed against Genentech is still under way.

A Genentech spokeswoman sent us a note that “we believe our Tarceva promotional communications and practices were and are entirely proper and in compliance with the law. This settlement, however, allows the company to avoid the burden, disruption, cost, and distraction of protracted civil litigation and to focus instead on our business of developing medicines that extend and improve human lives.”

The spokeswoman added that the drug maker did not admit to any wrongdoing.

But the Genentech spokeswoman did note that the company did not have to sign a corporate integrity agreement, which is often required of drug makers that are found to have violated the False Claims Act. These agreements usually mandate that companies expand their regulatory compliance departments and that senior executives must personally approve steps taken to improve oversight.

Originally, Shields also named Novartis in his lawsuit since Genentech and Novartis jointly marketed the Xolair asthma treatment. Shields alleged the companies promoted the medicine for unapproved uses, but White said that the federal government, which joined the lawsuits against Genentech and OSI, eventually chose not to pursue those allegations.