Schering to Pay $435 Million

Schering-Plough Corp. on Tuesday agreed to pay $435 million and plead guilty to conspiracy to settle a federal investigation into marketing of its drugs for unapproved uses and overcharging Medicaid for certain drugs.

The company, based in Kenilworth, N.J., said it would pay $255 million to resolve civil aspects of the previously disclosed investigation. A subsidiary, Schering Sales Corp., will pay a criminal fine of $180 million and plead guilty to one count of conspiracy to make false statements to the government. The agreement is subject to court approval.

Schering-Plough said the settlement resolved an investigation by the Justice Department and the U.S. attorney’s office in Boston that began before a new management team took over at the company in April 2003.

“With this agreement, we are putting issues from the past behind us,” said Brent Saunders, senior vice president for compliance and business practices.

The agreement comes two years after Schering-Plough agreed to pay $346 million to settle charges that it paid a kickback to a big health insurer to protect the market for its allergy drug Claritin.

U.S. Atty. Michael Sullivan, who announced Tuesday’s settlement at a news conference in Boston, said healthcare corruption “erodes public confidence, compromises the patient-physician relationship and adds costs to important government programs.”

“The American people, as both taxpayers and consumers, expect our healthcare system to be free from fraud and corruption,” Sullivan said.

The investigation that led to Tuesday’s settlement began in 2001.

Investigators found evidence that Schering-Plough marketed drugs for so-called off-label uses -- uses for which they were not approved by government regulators. Doctors can individually choose to prescribe drugs for those purposes.

One such drug was Temodar, which the Food and Drug Administration approved in 1999 to treat anaplastic astrocytoma, a type of brain tumor, in patients who hadn’t responded to other drug regimens. Sullivan said Schering promoted the drug to treat several other types of brain cancers and cancer that spread to the brain from elsewhere. Such uses, he said, had not been approved by the FDA. Temodar, Schering’s No. 4 drug, had sales of $588 million last year.

Saunders said the company had agreed to plead guilty to making false statements in marketing Temodar, related to its salespeople promoting the drug to doctors for uses other than the approved one.

Investigators said they also found evidence of unapproved promotion of Intron A for the treatment of cancer on the surface of the bladder.

Saunders said that after Fred Hassan took over as chief executive in April 2003, Hassan “focused on making sure these things don’t happen in the future.” Hassan put a compliance officer in each of Schering-Plough’s business and geographic units, and the company now trains all employees on its code of conduct, Saunders said.

Other changes include ending a system in which the drug company’s sales force was involved in determining which physicians got grants to run continuing medical education programs on disease treatments. Doctors generally must attend such programs in their specialty periodically to retain their medical licenses.

Schering-Plough shares rose 53 cents, or 2.6%, to close at $20.94 on Tuesday.