Markets

Elan's Epilepsy Drug Is Toast, But a Prescribing Doc Is Up $11 M

By Jim Edwards

Updated on: December 16, 2010 / 3:28 PM EST / MoneyWatch

Elan (ELN)'s $203.5 million settlement of an "off-label" marketing case in which it illegally promoted the epilepsy drug Zonegran for weight loss reveals how a drug company's marketing assets -- influential doctors who can increase the number of patients on their drugs -- can immediately turn into liabilities if the company crosses the legal line.

The case was brought by a doctor whom the company paid to participate in its illegal scheme. Basically, the psychiatrist took the company's money, became an "advisor," enjoyed a conference/vacation in Boca Raton, Fla., and in response increased his prescriptions of the drug. Then he turned around and sued the company in a whistleblower action. He won $11 million of the settlement.

The settlement also highlights again Elan's infamously incompetent management: The settlement is almost as large as the entire sales of the drug. When most companies settle off-label cases with the government, the payment they make is generally much less than the total revenues they earned selling the drug. In this way, such settlements become part of the pharmaceutical business model. Elan's settlement, however, is as large -- possibly larger -- than the drug's entire revenues for the company since it was approved, according to the whistleblower suit that triggered the settlement. The drug's patent expired in 2005, and with it all its revenue earning power. In the face of cheap generic competition, Elan won't be able to get that money back from future Zonegran sales.
The suit also describes how little off-label activity needs to occur before liabilities kick in. It was brought by Dr. Lee R. Chartock of South Weymouth, Mass., a psychiatrist who specilized in "treatment-resistant patients." Even though he didn't believe any of his patients needed Zonegran, he agreed to go to an Elan conference in Florida:

In or about January 2003, an Elan sales representative, Stacy Garson, "cold called" the Relator [Chartock] and arranged to pay a visit to his place of work. On or around January 30, 2003, Ms. Garson and the Relator met and discussed Zonegran. At that first meeting, the sales representative told Relator that Elan had organized a seminar in Florida and would like to send him, at the company's expense.
Stacy Garson explained that before she could ensure that Relator was eligible, he would have to begin writing prescriptions for Zonegran. Relator explained that, with his patients, there would be almost no clinical need for a drug to treat temporal lobe epilepsy in adults. During this initial discussion, Ms. Garson began to advocate Zonegran for its off-label use in weight loss and mood stabilization explaining that she understood Relator's position in the field and his willingness to pioneer unapproved uses.

Chartock went to Boca, where attendees were paid $750 or $1250 for their time. Elan paid for airfare and hotel accommodation, too. Chartock was unimpressed by the studies presented at the meeting, which detailed off-label uses, were not peer reviewed, misrepresented clinical data and were generally "cavalier" and "lacking in substance," according to the suit. Bizarrely, Chartock says the scheme nonetheless worked like a charm:

[I] was impressed with Zonegran and gradually increased his prescription level, until approximately 40 patients were receiving Zonegran, 70 â€" 80 % as an adjunctive therapy.
Most patients were encouraged by the mild weight loss associated with the drug...

Chartock then filed his whistleblower suit against the company and is now a millionaire. It's as stark a cautionary tale as a pharmaceutical sales rep or manager is ever likely to hear: One doctor, one conference, and 40 prescriptions led to litigation that wiped out an entire franchise.

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Image by Flickr user ewilman, CC.