Akorn: Keeping the Prescription Label for Profit

In the Akorn prescription OTC Medicare settlement, Akorn Operating Company LLC agreed to pay $7.9 million to resolve allegations that obsolete prescription-only labels caused Medicare Part D to pay for three generic drugs that no longer qualified for coverage. Akorn admitted that it kept selling newly manufactured units under those labels after learning that the brand-name products had switched to over-the-counter status. If you work in regulatory affairs, labeling or reimbursement, the decision behind that mismatch may be familiar: the product’s status changed, but the business kept selling it as before.

The Justice Department announced the settlement on September 14, 2022. This pharmaceutical fraud case began in part with a whistleblower’s complaint about diclofenac gel. The resolution also covered olopatadine eyedrops and azelastine nasal spray.

Why a Full Over-the-Counter Switch Changes the Claim

Medicare Part D covers prescription-only drugs and does not reimburse for over-the-counter drugs. After a brand-name product fully switches to over-the-counter status, its generic equivalents must follow the regulatory change. Their manufacturers must seek Food and Drug Administration approval to convert their own products or withdraw the prescription approvals and stop marketing them.

The Akorn settlement agreement, available through the Justice Department’s announcement explains why the word full matters. The switch covers every approved use, strength, dosage form and patient population for that product. No part of its approval remains prescription-only. Akorn’s generics had originally received prescription approvals because the brand-name products they matched were prescription-only too.

A drug manufacturer sells a specific approved product: a strength, dosage form, label and package. The brand-name product it matches is its reference listed drug. Here, the approved status of that reference drug changed what the generic could claim on its label and whether Medicare would pay for it.

Akorn’s admission supplies the commercial reason the labels stayed:

The same agreement says there was no meaningful difference between Akorn’s products and their now-over-the-counter reference drugs. The prescription label preserved a distinction the products no longer supported. Taxpayers funded Medicare claims for drugs that no longer belonged in its prescription benefit.

The Drugs Took Different Paths

Akorn eventually sought over-the-counter conversion for diclofenac and olopatadine, but withdrew its prescription approval for azelastine.

Diclofenac Sodium

The reference product for Akorn’s diclofenac sodium 1% switched to over-the-counter status in February 2020. Akorn did not apply for its own over-the-counter conversion until March 2021. The whistleblower’s complaint focused on diclofenac gel and compared its marketing with the brand-name product, Voltaren, and competing generics.

Olopatadine Hydrochloride

Akorn sold olopatadine hydrochloride antihistamine eyedrops in 0.1% and 0.2% strengths. Their brand-name reference products also switched in February 2020. Akorn waited until January 2021 to apply for over-the-counter conversion. The settlement covered continued sales of newly manufactured eyedrops under the old prescription-only labeling during that delay.

Azelastine Hydrochloride

The reference product for Akorn’s azelastine hydrochloride 0.15% antihistamine nasal spray switched in June 2021. Akorn chose withdrawal rather than over-the-counter conversion, but did not seek it until January 2022. The Food and Drug Administration implemented the withdrawal in February 2022.

The government’s account of Akorn’s actions connects both paths to the same earlier decision: continuing sales under the obsolete labels.

What the Complaint Said About Akorn’s Labels

The whistleblower alleged that Akorn’s own website and its labeling on the Food and Drug Administration website still presented diclofenac gel as prescription-only. That gave the allegation a concrete product trail, beyond the fact that Voltaren had switched.

The complaint described four competing generic versions that followed Voltaren’s over-the-counter switch, while the versions sold by Cipla and Akorn did not. It identified those manufacturers’ conversion requests and approvals. For Akorn, it pointed to the company’s marketing and the dates on its submitted labeling:

The trail extended to a repackager. The complaint alleged that RemedyRepack’s labeling for Akorn’s diclofenac showed an April 7, 2020 marketing start date, after Voltaren’s switch, and no marketing end date. A manufacturer and a repackager can leave separate records of how the same drug was presented for sale. Here, the whistleblower used both.

Are Pharmaceutical Companies Liable for False Claims?

A pharmaceutical company can face False Claims Act liability for causing pharmacies to submit false claims. Akorn admitted in its agreement that continuing to sell these products under prescription-only labels caused false Medicare Part D claims.

The complaint describes the payment chain. Medicare contracts with private Part D plan sponsors, which arrange for pharmacies to dispense drugs to enrolled patients. Pharmacies and other downstream entities submit claims to the plans. The plans pay using funds supplied by Medicare. That pharmaceutical supply chain connects a manufacturer’s representation about its product to a claim submitted elsewhere in the business.

The whistleblower alleged both that the defendants caused ineligible claims and that their prescription-only statements helped produce those claims. The package description was part of the payment story. Medicare paid for products whose reference drugs had already moved out of prescription-only coverage.

What Evidence Is Needed to Prove Fraud?

In Akorn’s case, the complaint traced the labels, and the agreement connected continued sales to company knowledge and false Medicare claims. Regulatory, labeling and reimbursement staff each see a piece of that chain.

The company’s own admission supplied what the label alone could not: it knew the reference drugs had switched, and it believed keeping prescription labels would be more profitable. We work with insiders to connect their product knowledge to the company’s decisions and the claims they caused.

The Settlement and the Whistleblower’s Share

A whistleblower brought the original qui tam case, and the government joined the claims against Akorn. The agreement designated $5,136,359 of the settlement to repay the government’s losses and provided for a payment to the whistleblower from the recovery.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know Why the Label Stayed

If you saw a prescription label stay in use after a drug’s over-the-counter switch, speak to one of our whistleblower experts about the decision behind it. We build the case with you around the product, the company’s knowledge and the Medicare claims, and bring in pharmaceutical fraud whistleblower lawyers who understand the connection between drug approval and reimbursement. We stay beside you through the process, working to build your strongest pharmaceutical whistleblower case.