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Amgen and the Supremes: Did the CEO Know About a Kickback Scheme?

By Jim Edwards

Updated on: September 27, 2011 / 2:31 PM EDT / MoneyWatch

Amgen (AMGN) is taking the high-risk strategy of appealing to the U.S. Supreme Court in a case that alleges CEO Kevin Sharer had knowledge of an illegal kickback scheme to promote sales of the kidney drug Aranesp.

Whether Amgen wins or loses, its action here will likely draw attention to a 2006 email in which executives at Amgen describe providing information to Sharer (pictured) on the "overfill" in vials of Epogen, a competing drug that Amgen manufactured on behalf of Johnson & Johnson (JNJ). Overfill can be used to bribe doctors as they pay only for the dose marked on the package but can bill Medicare and Medicaid for the overfill as well. In the case, former Amgen employee Kassie Westmoreland alleges Amgen manipulated overfill levels to provide kickbacks to doctors who used Aranesp and to crimp sales of J&J's drug.

The case is doubly controversial as five unnamed Amgen executives and a medical officer manager have asserted their Fifth Amendment rights against self-incrimination in order to avoid being questioned in depositions about the alleged scheme.

Define "kickback"
When Aranesp was launched in 2001, according to the First Circuit appeals court ruling that went against Amgen, Aranesp vials contained 19 percent overfill. Between 2002 and 2008 Amgen maintained the overfill at 16.8 percent. J&J's Epogen was on the market before Aranesp, but when Amgen launched its own version it began reducing the amount of overfill in Epogen, making Aranesp more lucrative for doctors to administer.

The scheme was so successful, Westmoreland claims, that Amgen produced an Excel spreadsheet, marked "For Information Only," that detailed how a 300 mL vial of Aranesp would normally be reimbursed by Medicare at $1,422. With the overfill, doctors could get Medicare to reimburse them $1,661.

It is not clear what question Amgen is asking the Supremes to address, as Amgen's petition is not yet online. The rulings by the district court and the court of appeals addressed the legal definition of "kickback," and whether judges should define it on a common sense basis according to the alleged facts or whether they should use a technical definition, which would virtually require offenders to "knowingly" assert in their reimbursement paperwork they had not received a kickbacks. Amgen has previously argued that as there is no law putting a ceiling on overfill, it can package as much as it likes.

Sixteen states have joined Westmoreland's appeal, seeking their Medicaid money back.

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Image of The Supremes from Wikimedia, CC.