Judge Revisits Cephalon's Off-Label Madness: Actiq Is "an ER on a Stick!"

Last Updated Sep 2, 2009 2:14 PM EDT

Cephalon recently persuaded a federal judge in Delaware to dismiss a derivative suit filed by shareholder Jerald King, but her ruling describes a fascinating timeline of wrongdoing at the company. At one point, sales reps were promoting Actiq, a fentanyl painkiller delivered via lollipop and approved only for cancer patients, as "An ER on a stick" for migraine sufferers.

Here's a digest of the ruling, which you can download here. Note that Cephalon did not dispute the allegations against it; rather, King lost because he did not specifically tie Cephalon's board members to the marketing decisions made by Cephalon's staff that "damaged" shareholders and the company.

The timeline starts When Cephalon acquired Actiq from Anesta in 2000, and the drug had sales of just $15 million. Its FDA approval was "to be used only in the care of cancer patients," the judge says.

Because fentanyl is so addictive, the FDA also required Cephalon to alert if it any type of doctor outside oncology and pain specialists came to account for more than 15 percent of Actiq's sales. To get around that, the ruling says:

In late 2001, Cephalon issued a new standard operating procedure "for interpreting the FDA's risk-management program" by "expand[ing] the definition of pain specialists . . . to include anesthesiologists, physical medicine, rehabilitation medicine and palliative medicine."
In 2002, ... Cephalon "began to push the use of Actiq in patients with migraines by targeting neurologists even though its internal marketing documents for that year make clear that it didn't expect them to prescribe the drug for cancer pain."
A document titled "Actiq in Migraine" instructed the Company's sales representatives to pitch Actiq as "an ER on a stick."
By 2002, Cephalon had increased Actiq sales by 92 percent. Enter the whistleblower:
In 2003, a Cephalon compliance auditor, David Brennan, concluded that the company was failing to comply with FDA reporting requirements for Actiq. Specifically, that the Company did not report to the FDA every quarter when groups of physicians who represent potential off-label usage greater than 15% were prescribing Actiq.
The company responded by punishing him and then offering him hush money:
After Brennan sought to have the findings of his audit published, he was terminated by Cephalon in February 2004. Cephalon purportedly offered Brennan money and job-search assistance if he agreed not to disclose the audit. Brennan refused that offer.
By 2006, sales increased to $471 million, as sales rep visits to non-cancer docs increased sixfold. The judge wrote, "data suggested that more than 80% of patients using Actiq did not have cancer," and "oncologists accounted for only 1% of Actiq prescriptions filled at retail pharmacies in the U.S."

In 2007, the madness came to a halt. Cephalon disclosed to investors that it had been under investigation by the U.S. Attorney's Office in Philadelphia for its Actiq sales -- since 2004 -- and the DOJ was also looking at promotional practices for Gabitril and Provigil.

Later that year, Cephalon announced a $425 million settlement to end the end the probe. The company also pled guilty to a single federal misdemeanor violation.