ISTA PHARMACEUTICALS INC., WILL PAY $33.5 MILLION TO SETTLE FALSE CLAIM ACT VIOLATIONS

FROM: U.S. DEPARTMENT OF JUSTICE
Friday, May 24, 2013
ISTA Pharmaceuticals Inc. Pleads Guilty to Federal Felony Charges; Will Pay $33.5 Million to Resolve Criminal Liability and False Claims Act Allegations

Pharmaceutical company ISTA Pharmaceuticals, Inc. pled guilty earlier today to conspiracy to introduce a misbranded drug into interstate commerce and conspiracy to pay illegal remuneration in violation of the Federal Anti-Kickback Statute, the Justice Department announced today. U.S. District Court Judge Richard J. Arcara accepted ISTA's guilty pleas. The guilty pleas are part of a global settlement with the United States in which ISTA agreed to pay $33.5 million to resolve criminal and civil liability arising from its marketing, distribution and sale of its drug Xibrom.

ISTA pled guilty in the Western District of New York to criminal charges that the company conspired to illegally introduce a misbranded drug, Xibrom, into interstate commerce. Under the Food, Drug and Cosmetic Act (FDCA), it is illegal for a drug company to introduce into interstate commerce any drug that the company intends will be used for uses not approved by the Food and Drug Administration (FDA). Xibrom is an ophthalmic, nonsteroidal, anti-inflammatory drug that was approved by FDA to treat pain and inflammation following cataract surgery. In order to expand sales of Xibrom outside of its approved use, ISTA conspired to introduce misbranded Xibrom into interstate commerce.

Between 2005 and 2010, some ISTA employees promoted Xibrom for unapproved new uses, including the use of Xibrom following Lasik and glaucoma surgeries, and for the treatment and prevention of cystoid macular edema. The evidence showed that continuing medical education programs were used to promote Xibrom for uses that were not approved by the FDA as safe and effective, and that post-operative instruction sheets for unapproved uses were paid for by some company employees and provided to physicians. These activities are evidence of intended uses unapproved by FDA, which rendered the drug misbranded under the FDCA.

ISTA pled guilty to a felony based on evidence that some ISTA employees were told by management not to memorialize in writing certain interactions with physicians regarding unapproved new uses, and not to leave certain printed materials in physicians' offices relating to unapproved new uses. These instructions were given in order to avoid having their conduct relating to unapproved new uses being detected by others. ISTA agreed that this conduct represented an intent to defraud under the law.

In addition, ISTA pled guilty to a conspiracy to knowingly and willfully offering or paying remuneration to physicians in order to induce those physicians to prescribe Xibrom, in violation of the federal Anti-Kickback Statute. Under the law, it is illegal to offer or pay remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to physicians to induce them to refer individuals to pharmacies for the dispensing of drugs, for which payments are made in whole or in part under a Federal health care program. In this matter, certain ISTA employees, with the knowledge and at the direction of ISTA, offered and provided physicians with free Vitrase, another ISTA product, with the intent to induce such physicians to refer individuals to pharmacies for the dispensing of the drug Xibrom. In addition, ISTA provided other illegal remuneration, including a monetary payment to sponsor an event of a non-profit group associated with a particular physician, a golf outing, a wine-tasting event, paid consulting or speaker arrangements, and honoraria for participation in advisory meetings which were intended to be marketing opportunities, with the intent to induce physicians to refer individuals to pharmacies for the dispensing of the drug Xibrom.

Under the terms of the plea agreement, ISTA will pay a total of $18.5 million, including a criminal fine of $16,125,000 for the conspiracy to introduce misbranded Xibrom into interstate commerce, $500,000 for the conspiracy to violate the Anti-Kickback Statute, and $1,850,000 in asset forfeiture associated with the misbranding charge.

ISTA also entered into a civil settlement agreement under which it agreed to pay $15 million to the federal government and states to resolve claims arising from its marketing of Xibrom, which caused false claims to be submitted to government health care programs. The civil settlement resolved allegations that ISTA promoted the sale and use of Xibrom for certain uses that were not FDA-approved and not covered by the Federal health care programs, including prevention and treatment of cystoid macular edema, treatment of pain and inflammation associated with non-cataract eye surgery, and treatment of glaucoma. The United States further alleged that ISTA's violations of the Anti-Kickback Statute resulted in false claims being submitted to federal health care programs. The federal share of the civil settlement is $14,609,746.16, and the state Medicaid share of the civil settlement is $390,253.84. Except as admitted in the plea agreement, the claims settled by the civil settlement agreement are allegations only, and there has been no determination of liability as to those claims.

"As today's global resolution demonstrates, the Department of Justice is committed to making sure that pharmaceutical companies play by the rules," said Stuart F. Delery, Acting Assistant Attorney General for the Civil Division. "Health care fraud in any form undermines the integrity of our health care system and can drive up costs for all of us."

"Today's resolution sends a clear message that pharmaceutical companies cannot put profit ahead of people, by disregarding laws designed to protect the health of the American public," said United States Attorney William J. Hochul, Jr. "The fact that ISTA offered doctors illegal inducements - such as a wine tasting, golf outing, and payments to attend what were in essence marketing sessions - makes the company's illegal conduct particularly deserving of the hefty penalty ISTA has agreed to pay."

"It is especially concerning when companies actively take steps to conceal improper conduct which may jeopardize public health," said Antoinette V. Henry, Special Agent in Charge, Metro-Washington Field Office, FDA Office of Criminal Investigations. "We will continue to work tirelessly with the Department of Justice and our law enforcement counterparts to uncover such conduct."

In addition to the criminal fines and asset forfeiture, ISTA's parent company, Bausch+Lomb, Incorporated (B+L), has agreed to maintain a Compliance and Ethics Program. B+L has agreed that it will maintain policies and procedures that: (1) prohibit the involvement of sales and marketing personnel and others on the businesses' commercial team in the final decision-making process with respect to educational grants in the United States, while also ensuring that the educational programming is focused on objective scientific and educational activities and discourse; (2) require sales agents to discuss only those product uses that are consistent with what is indicated on the product's approved package labeling and to forward requests for information regarding uses of B+L's products not approved by FDA to a Medical Affairs Professional; and (3) prohibit the company from engaging in any conduct that violates the Anti-Kickback Statute, including the offering or paying of any remuneration to any person to induce such person to prescribe any drug for which payment may be made in whole or in part under a Federal health care program. The Program also requires that B+L's President of Global Pharmaceuticals conduct an annual review of the effectiveness of B+L's Program as it relates to the marketing, promotion, and sale of prescription pharmaceutical products, and certify that to the best of his or her knowledge, the Program was effective in preventing violations of Federal health care program requirements and the FDCA regarding sales, marketing, and promotion of B+L's prescription pharmaceutical products.

The civil settlement resolves two lawsuits filed under the whistleblower provisions of the False Claims Act, which permit private parties to file suit on behalf of the United States for false claims and obtain a portion of the government's recovery. The civil lawsuits were filed in the Western District of New York and are captioned United States ex rel. Keith Schenker v. ISTA Pharmaceuticals, Inc. and United States, et al., ex rel. DJ PARTNERSHIP 2011, LLP v. ISTA Pharmaceuticals, Inc. As part of today's resolution, Mr. Schenker will receive approximately $2.5 million from the federal share of the civil recovery.

Upon conviction for the criminal charges described above, ISTA will face mandatory exclusion from Federal healthcare programs. Exclusion will mean that on the effective date of the exclusion, any ISTA labeled drugs in ISTA's possession would no longer be reimbursable by Medicare, Medicaid, or other Federal healthcare programs. In June 2012, B+L acquired ISTA. Simultaneous with the False Claims Act settlement and the entry of the plea, the U.S. Department of Health and Human Services' Office of Inspector General, ISTA, and B+L will enter into a Divestiture Agreement under which ISTA agrees to be excluded for 15 years, effective six months after the date of the settlement. Under the terms of the Divestiture Agreement, ISTA will transfer all assets to B+L or a B+L subsidiary and will stop shipping ISTA labeled drugs within six months of the Divestiture Agreement. Six months after the effective date of the Divestiture Agreement, all ISTA labeled drugs in the possession of ISTA or B+L will no longer be reimbursable by Medicare, Medicaid, and other Federal healthcare programs. Those ISTA labeled drugs in the stream of commerce at that time will continue to be reimbursable.

"We agreed to enter into this Divestiture Agreement based on the facts of this case, including that B+L did not have a corporate relationship with ISTA during the improper conduct," said Daniel R. Levinson, Inspector General of the U.S. Department of Health and Human Services. "In addition, B+L acquired ISTA more than a year after the improper conduct ended, and B+L did not hire any of ISTA's executives or senior management."

The criminal case was prosecuted by Assistant Director Jeffrey Steger of the Consumer Protection Branch of the Civil Division of the Department of Justice and Assistant United States Attorney MaryEllen Kresse of the Office of the U.S. Attorney for the Western District of New York. They were assisted by Associate Chief Counsel Kelsey Schaefer of the Food and Drug Division, Office of General Counsel, Department of Health and Human Services. The case was investigated by the Food and Drug Administration's Office of Criminal Investigations and Health and Human Services Office of Inspector General. The civil settlement was handled by Trial Attorneys Colin Huntley and Benjamin Young of the Commercial Litigation Branch of the Civil Division of the Department of Justice and Assistant United States Attorney Kathleen Lynch of the Office of the U.S. Attorney for the Western District of New York.

This resolution is part of the government's emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover more than $10.4 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department's total recoveries in False Claims Act cases since January 2009 are over $14.3 billion.

U.S. SUES FISH PROCESSORS OVER FOOD SAFETY

FROM: U.S. DEPARTMENT OF JUSTICE
Friday, May 17, 2013
United States Sues Brooklyn Fish Processors in Food Safety Case
The Department of Justice has filed a lawsuit and sought a preliminary injunction against N.Y. Fish Inc.; New York City Fish Inc.; Maxim Kutsyk, Pavel Roytkov, Leonid Staroseletesky, and Steven Koyfman under the federal Food, Drug, and Cosmetic Act (FDCA). New York City Fish manufactures and distributes ready-to-eat fishery products, including smoked salmon and mackerel, and operates out of a food processing facility located at 738 Chester Street in Brooklyn. N.Y. Fish previously operated a similar fish processing business out of the same location, employing virtually all of the same employees. Although N.Y. Fish has ceased manufacturing, FDA believes that N.Y. Fish products continue to be distributed and sold. The complaint alleges that all defendants have a history of processing fishery products under insanitary conditions, with inadequate safety procedures.

"Consumers depend on food producers to follow the right procedures to make sure our food is safe to eat," said Acting Assistant Attorney General for the Civil Division Stuart F. Delery. "As this case demonstrates, the Department of Justice is committed to taking action against those who produce or process food under insanitary conditions or with inadequate safety procedures."

"Inspectors who visited the defendants’ facility found more than Nemo; they found life-threatening bacteria. Despite repeated warnings and direction to sanitize the facility, the defendants have failed to do so. They cannot be allowed to continue to distribute potentially unsafe food to our families. Those who store, package and sell the food that we eat must maintain basic standards of cleanliness in their facilities. We are committed to protecting the public from health risks by ensuring that food manufacturers comply with federal laws prohibiting them from preparing, packing and holding food products under insanitary conditions," stated Loretta E. Lynch, the United States Attorney for the Eastern District of New York.

According to the complaint, FDA conducted seven inspections of the Chester Street facility between 2006 and 2013. The inspections showed a repeated failure to minimize the risk of contamination by two dangerous types of bacteria: Listeria monocytogenes and Clostridium botulinum. People who eat food contaminated with Listeria monocytogenes can contract the disease listeriosis, which can be serious,even fatal,for vulnerable groups such as newborns and those with impaired immune systems. Complications from the disease can also lead to miscarriage. Clostridium botulinum spores can produce the toxin that causes botulism. Eating food tainted with this toxin can lead to paralysis and potentially death.

FDA’s most recent inspection occurred in February 2013, when New York City Fish was operating the Chester Street facility. According to court filings, the company missed critical processing steps that are essential to prevent the growth and toxin production of Clostridium botulinum and to eliminate any Listeria monocytogenes contamination, including heating fish for a dangerously short time and using insufficiently salty brining solution.

FDA previously investigated the facility in August 2012, when it was operated by N.Y. Fish. FDA inspectors discovered widespread sanitation problems and a similar failure to meet critical steps necessary to prevent contamination. They also found salmon products and production equipment contaminated with Listeria monocytogenes, even after the company attempted to clean and sanitize the facility.

Further testing by the FDA revealed that certain strains of Listeria monocytogenes it found likely had persisted in the Chester Street facility for years. FDA contends that the facility is so infiltrated with Listeria monocytogenes that New York City Fish must institute heightened monitoring and strict sanitation procedures to have any hope of eradicating this life-threatening organism, but that it has failed to do so.

The lawsuit is being brought by Assistant U.S. Attorney Elliot M. Schachner of the Eastern District of New York, and Trial Attorney Adrienne Fowler of the Civil Division’s Consumer Protection Branch, with the assistance of Associate Chief Counsel for Enforcement Julie Dohm of the FDA.

INDICTMENTS IN SALMONELLA-TAINTED PEANUT PRODUCTS

FROM: U.S. DEPARTMENT OF JUSTICE
Thursday, February 21, 2013
Former Officials and Broker of Peanut Corporation of America Indicted Related to Salmonella-Tainted Peanut Products
Allegations Include Mail and Wire Fraud, Introduction of Adulterated and Misbranded Food into Interstate Commerce with Intent to Defraud or Mislead, and Conspiracy

A 76-count indictment was unsealed yesterday charging four former officials of the Peanut Corporation of America (PCA) and a related company with numerous charges relating to salmonella-tainted peanuts and peanut products, the Justice Department announced today. Stewart Parnell, 58, of Lynchburg, Va.; Michael Parnell, 54, of Midlothian, Va.; and Samuel Lightsey, 48, of Blakely, Ga., have been charged with mail and wire fraud, the introduction of adulterated and misbranded food into interstate commerce with the intent to defraud or mislead, and conspiracy. Stewart Parnell, Lightsey and Mary Wilkerson, 39, of Edison, Ga., were also charged with obstruction of justice.

Also yesterday, an information filed against Daniel Kilgore, 44, of Blakely was unsealed. On the same day that charges against Kilgore were filed, he pleaded guilty to that information, which charged him with mail and wire fraud, the introduction of adulterated and misbranded food into interstate commerce with the intent to defraud or mislead, and conspiracy.

The investigation into the activity at PCA began in 2009, after the Food and Drug Administration and the U.S. Centers for Disease Control and Prevention traced a national outbreak of salmonella to a PCA plant in Blakely as the likely source. As alleged in the indictment, the Blakely plant was a peanut roasting facility where PCA roasted raw peanuts and produced granulated peanuts, peanut butter, and peanut paste; PCA sold these peanut products to its customers around the country.

The charging documents charge that Stewart Parnell, Michael Parnell, Lightsey and Kilgore participated in a scheme to manufacture and ship salmonella-contaminated peanuts and peanut products, and in so doing misled PCA customers. As alleged in the indictment, those customers ranged in size from small, family-owned businesses to global, multibillion-dollar food companies.

"When those responsible for producing or supplying our food lie and cut corners, as alleged in the indictment, they put all of us at risk," said Stuart F. Delery, who heads the Justice Department’s Civil Division. "The Department of Justice will not hesitate to pursue any person whose criminal conduct risks the safety of Americans who have done nothing more than eat a peanut butter and jelly sandwich."

Although PCA is now no longer in business, the allegations against each of the defendants arise from his or her conduct while at PCA and a related company. The following allegations are set forth in the indictment: Stewart Parnell was an owner and president of PCA; Michael Parnell, who worked at P.P. Sales, was a food broker who worked on behalf of PCA; Lightsey was the operations manager at the Blakely plant from on or about July 2008 through February 2009; and Wilkerson held various positions at the Blakely plant – receptionist, office manager and quality assurance manager – from on or about April 2002 through February 2009. As charged in the information, Kilgore served as operations manager of the PCA plant in Blakely from on or about June 2002 through May 2008.

"We all place a great deal of trust in the companies and individuals who prepare and package our food, often times taking it for granted that the public’s health and safety interests will outweigh individual and corporate greed," said Michael Moore, U.S. Attorney for the Middle District of Georgia. "Unfortunately and as alleged in the indictment, these defendants cared less about the quality of the food they were providing to the American people and more about the quantity of money they were gathering while disregarding food safety. This investigation was complex and extensive, and I credit the cooperation of our federal agencies with not only making sure that the cause of this outbreak was uncovered and the people responsible called to account, but also with working hard every day to make sure that parents across the country can feel confident that the food they are feeding their children is safe."

The charging documents allege that Stewart Parnell, Michael Parnell, Lightsey and Kilgore participated in several schemes by which they defrauded PCA customers about the quality and purity of their peanut products and specifically misled PCA customers about the existence of foodborne pathogens, most notably salmonella, in the peanut products PCA sold to them. As the charging documents allege, the members of the conspiracy did so in several ways – for example, even when laboratory testing revealed the presence of salmonella in peanut products from the Blakely plant, Stewart Parnell, Michael Parnell, Lightsey and Kilgore failed to notify customers of the presence of salmonella in the products shipped to them.

In addition, the charging documents allege that Stewart Parnell, Michael Parnell, Lightsey and Kilgore participated in a scheme to fabricate certificates of analysis (COAs) accompanying various shipments of peanut products. COAs are documents that summarize laboratory results, including results concerning the presence or absence of pathogens. As alleged in the charging documents, on several occasions these four defendants participated in a scheme to fabricate COAs stating that shipments of peanut products were free of pathogens when, in fact, there had been no tests on the products at all or when the laboratory results showed that a sample tested positive for salmonella.

After the salmonella outbreak that gave rise to this investigation, FDA inspectors visited the plant several times in January 2009. According to the indictment, the inspectors asked specific questions about the plant, its operations, and its history, and, in several instances, Stewart Parnell, Lightsey and Wilkerson gave untrue or misleading answers to these questions.

"The charges announced today show that if an individual violates food safety rules or conceals relevant information, we will seek to hold them accountable," said FDA Commissioner Margaret A. Hamburg, M.D. "The health of our families and the safety of our food system is too important to be thwarted by the criminal acts of any individual or company."

Stewart Parnell, Michael Parnell, and Samuel Lightsey are each charged with two counts of conspiracy; multiple counts of introducing adulterated food into interstate commerce with the intent to defraud; multiple counts of introducing misbranded food into interstate commerce with the intent to defraud; multiple counts of interstate shipment fraud; and multiple counts of wire fraud. Stewart Parnell, Lightsey and Wilkerson are also charged with multiple counts of obstruction of justice.

Kilgore pleaded guilty to one count of conspiracy to commit fraud, one count of conspiracy to introduce adulterated and misbranded food into interstate commerce, eight counts of introducing adulterated food into interstate commerce with the intent to defraud, six counts of introducing misbranded food into interstate commerce with the intent to defraud, eight counts of interstate shipment fraud, and five counts of wire fraud.

Mark F. Giuliano, Special Agent in Charge, FBI Atlanta Field Office, stated, "The FBI was brought in to this matter to provide additional resources and expertise to a complex and very serious investigation. We fully understand the victim impact as a result of this salmonella outbreak and will be asking to hear from other possible victims in this matter."
The case is being prosecuted by Trial Attorneys Patrick Hearn and Mary M. Englehart of the Consumer Protection Branch of the Civil Division of the Department of Justice and Assistant U.S. Attorney Alan Dasher of the Middle District of Georgia. Marietta Geckos, formerly a Trial Attorney with the Consumer Protection Branch, also worked on the prosecution. The case was investigated by the Food and Drug Administration’s Office of Criminal Investigations and the FBI.

An indictment is merely an allegation, and every defendant is presumed innocent until proven guilty beyond a reasonable doubt.