fter years of litigation, AstraZeneca (AZN) agreed to pay $110 million to settle allegations of illegally marketing two best-selling drugs and, subsequently, causing the Texas Medicaid program to overpay for the medicines.

The company was accused of promoting its Seroquel antipsychotic for treating children and teenagers when the drug was not approved for that population, and paying kickbacks to two former state hospital doctors so they would prescribe the pill. AstraZeneca was also accused of marketing its Crestor cholesterol pill for unapproved uses and downplaying risk of diabetes in some patients.

The state allegations were built on claims that were made in lawsuits filed several years ago by two former AstraZeneca sales reps, who alleged the drug maker used various tactics to induce physicians to prescribe the pills and regularly engaged in off-label marketing, which refers to promoting medicines for unapproved uses.


For instance, the state lawsuit alleged the company paid $465,000 to a pair of unidentified state mental health officials “with the power to influence formulary decisions within the state hospital system.” A formulary is a list of drugs for which an insurer offers reimbursement. AstraZeneca also established quotas to force sales reps to market Seroquel for unapproved uses, minimized safety risks, and touted unsubstantiated superiority claims.

In announcing the settlement, Texas Attorney General Ken Paxton noted AstraZeneca was operating under a corporate integrity agreement at the time the sales reps leveled their allegations. In 2010, the drug maker signed the agreement, which obligates a company to adhere to certain business practices, as part of a $520 million settlement with the U.S. Department of Justice over charges of illegally marketing Seroquel. The feds regularly require drug makers to sign such agreements as part of settlements.

An AstraZeneca spokeswoman wrote us that the company “makes no concessions or admissions of fault in the settlement agreements. While AstraZeneca denies the allegations, it is in the best interests of the company to resolve these matters and to move forward with our business of discovering and developing important, life-changing medicines — while avoiding the delay, uncertainty, and expense of protracted litigation.”

Meanwhile, the outcome of the two whistleblower lawsuits filed by the former sales reps were placed on hold until the Texas lawsuit was resolved. One lawsuit was filed by Allison Zayas, who worked in Brooklyn and Staten Island, N.Y., and the other lawsuit was filed by Tracy Miksell-Branch, who worked in Iowa.

Several drug makers reached agreements to resolve allegations of illegal marketing over the years, including Merck (MRK), GlaxoSmithKline (GSK), and Bristol-Myers Squibb (BMY). Many of these episodes occurred years ago and drug makers argue that law enforcement scrutiny has prompted changes in practices. Nonetheless, some say this remains an open question.

“You can say that $110 million sounds like a lot of money, but some people may worry it is not really enough money to affect the behavior that is of concern here, because some drugs are so profitable,” said Patti Zettler, a former associate chief counsel as the Food and Drug Administration who is now a Georgia State University College of Law professor. Seroquel annual sales peaked at about $6.1 billion in 2011.


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It is also worth noting that the pharmaceutical industry is pushing the FDA to modify rules for off-label marketing in ways that would make it easier to disseminate some information. The effort followed a pair of court rulings that found certain information or statements made to physicians about medicines would be permitted so long as they are truthful and not misleading.

And so, to what extent such cases will continue to emerge is also unclear.

“The law has evolved in such a way that is not particularly easy for whistleblowers to bring these cases on their own and the federal government prosecution of off-label cases is not what it used to be,” said James Pepper, an attorney who represents Zayas. “So when you take these factors into account, it becomes difficult to successfully prosecute these cases. That said, we got it done.”

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