Medicis settles federal suit for $9.8 million

Key Points

Scottsdale, Ariz. - Medicis' recent payment of $9.8 million to settle allegations that the company's promotion of Loprox (ciclopirox) for an off-label use violated the False Claims Act has spurred the company to implement an industry-leading compliance program, a Medicis spokesman says.

The U.S. Attorney's office for the District of Kansas, Kansas City, Kan., filed the suit in August 2004, says Charles Miller, spokesman for the U.S. Department of Justice's civil division, which helped to handle the case. The suit stemmed from claims by four former Medicis employees that from November 2001 through April 2004, Medicis sales representatives urged pediatricians to use the antifungal Loprox as a treatment for diaper rash, a nonapproved indication, he tells Dermatology Times.

At issue were millions of Medicaid dollars the government would never have spent reimbursing Loprox prescriptions if authorities had known they resulted from off-label marketing, according to a Department of Justice news release.

Along with verbal promotion of Loprox for diaper dermatitis, "There may have been promotional pieces" pushing this indication, says Jason Hanson, Medicis executive vice president and general counsel.

Loprox is approved by the Food and Drug Administration (FDA) for pediatric use, he says, "but only for patients 10 and older." Nevertheless, Mr. Hanson says, "The product is safe and efficacious for all age ranges and was the standard of care for diaper dermatitis for a while because it worked very well. I assume doctors still use antifungal creams like Loprox to treat diaper rash."

However, he says the company had never pursued this indication through the FDA.

"There's no prohibition" against physicians' prescribing medications off-label, Mr. Miller says. "But for a pharmaceutical company to say the drug was approved for one thing, but they are using it for something totally different and promoting it - that's a whole different story."

As part of the civil settlement - $1.1 million of which will go to the whistleblowers under terms of the False Claims Act - Medicis in April 2007 signed a Corporate Integrity Agreement, which sources say is normal in such cases. Under these agreements, the Department of Health and Human Services partners with the signing company to "make sure its compliance procedures are up to snuff" to prevent future infractions, Mr. Hanson says.

In the settlement agreement, "The company did not admit any wrongdoing," Mr. Hanson says.

He adds that because Medicis had divested the offending division, Ascent Pediatrics, before it knew of any wrongdoing, and the product doesn't figure largely in its portfolio, "We really wanted to get this behind us and move forward."

Medicis takes "a different view of the evidence," he says, "but no drug company wants to fight City Hall - it costs more, and creates a cloud" that affects public perception.

Therefore, he says, "We confronted (the situation) head-on. We dealt with the federal government in a straightforward manner and proactively implemented a compliance program that is stronger than anything the government would require."

For example, Medicis hired a former federal prosecutor to head this effort, a move "definitely unique, probably in all pharmaceutical companies, much less dermatology," says Mr. Hanson, who is also a former federal prosecutor.

Accordingly, he says, "We're going to lead the pack. And we'd like to see others in the industry follow suit." The specialty pharmaceutical industry is "a bit behind the mainstream pharmaceutical and medical device companies" in this regard, he says.