Bristol-Myers Squibb and Apothecon: Seven Whistleblower Cases Behind One Settlement

In the Bristol Myers Squibb Apothecon settlement, the companies agreed to pay more than $515 million over allegations of kickbacks, off-label Abilify promotion and drug-price reporting that affected government health programs. Seven whistleblower cases fed into the civil resolution. A sales employee, a pricing analyst and a pharmacy buyer would recognize different parts of the story: who was paid to prescribe or purchase, what uses were promoted, and which price the government saw.

The Department of Justice announced the resolution on September 28, 2007, naming Bristol-Myers Squibb Company and its wholly owned subsidiary Apothecon, Inc. It brought together allegations across several kinds of pharmaceutical fraud cases.

Kickbacks to Prescribers and Drug Buyers

The alleged pharmaceutical kickbacks reached both prescribers and purchasers. From approximately 2000 through mid-2003, Bristol-Myers Squibb allegedly paid physicians and other healthcare providers consulting fees and expenses to induce purchases of its drugs. The programs included advisory boards and preceptorships. Some involved travel to luxurious resorts.

Apothecon’s alleged payments went to retail pharmacies and wholesalers. From 1994 through 2001, the government alleged, it used stocking allowances, price protection payments, prebates, market share payments and free goods to induce customers to buy its products.

The government alleged that both companies caused false claims to federal health care programs through these payments. The alleged kickback bought influence over the drug choice. The next payment, from the public program, paid for the drug chosen. The payment’s purpose connects the sales side of the business to the taxpayer’s bill.

What Is Considered Off-Label Promotion?

Off-label promotion means marketing a drug for a use outside its FDA-approved labeling. The government alleged that Bristol-Myers Squibb promoted Abilify for children and adolescents and for dementia-related psychosis from 2002 through the end of 2005.

At the time described in the announcement, Abilify was approved for adult schizophrenia and bipolar disorder, but not for those pediatric or dementia uses. The FDA had required a black-box warning about its use for dementia-related psychosis.

The alleged sales strategy followed the patients the company wanted to reach. Bristol-Myers Squibb directed representatives to child psychiatrists and other pediatric specialists. It also created a specialized long-term care sales force that called almost exclusively on nursing homes, where dementia-related psychosis was much more prevalent than schizophrenia or bipolar disorder.

In a pharmaceutical false claims case involving promotion, a manufacturer’s sales campaign can cause claims submitted by a pharmacy or physician. The call lists and sales instructions show the commercial decisions behind the promotion.

How the Reported Drug Price Reaches Government Money

Average Wholesale Price and the Reimbursement Spread

Bristol-Myers Squibb and Apothecon allegedly reported inflated prices for oncology and generic drugs, including a drug used primarily to reduce the side effects of cancer treatments. The government said those reported prices were substantially higher than prices commonly available to customers, yet federal programs used them to set reimbursement.

That is the gap exploited in average wholesale price fraud. Average wholesale price is privately published. Its name suggests a transaction average, but the benchmark can be far removed from the prices available to pharmacies and physicians.

A buyer could purchase the drug at the lower price, obtain government reimbursement based on the higher number and keep the difference. The larger the spread, the larger the buyer’s profit. The price the government used became part of the sales incentive.

Taxpayers finance that incentive. A competitor that refuses to inflate its benchmark can lose business to a product offering the buyer a larger reimbursement margin.

Serzone and the Low Price Medicaid Did Not Get

The Serzone allegation concerned Medicaid Best Price reporting. The government alleged that Bristol-Myers Squibb left out the low prices it charged Kaiser, a large commercial purchaser, for private-label Serzone, an antidepressant. That omission denied Medicaid and certain Public Health Service purchasers the benefit of the lower price.

Best Price is the lowest qualifying manufacturer price available to specified purchasers. It feeds the Medicaid rebate calculation alongside average manufacturer price. Where the Best Price part of the formula controls, a lower qualifying customer price means a larger rebate owed to Medicaid. Reporting Best Price too high can shrink that rebate. The manufacturer keeps money that should have gone back to the program.

The business detail is in the discounts. Best Price takes account of cash discounts, purchase-dependent free goods, volume discounts and rebates. A customer’s invoice may therefore tell only part of the price story. The contract and the concessions delivered under it explain the rest.

Seven Whistleblower Cases Reached One Resolution

Seven qui tam cases under the False Claims Act fed this settlement. A Florida Keys pharmacy brought cases involving both Bristol-Myers Squibb and Apothecon. The pharmacy’s perspective came from the buying and reimbursement side of the drug trade.

The government combined allegations about prescribing, promotion and prices in a corporate resolution. An insider looking at the price-reporting part would be examining a different business decision from someone who saw a payment intended to influence a prescription.

Federal and State Payments

The announced allocation put more than $328 million on the federal side and more than $187 million with participating Medicaid states. Within the federal amount, more than $25 million concerned the surrender of gains from Abilify promotion under the Food, Drug, and Cosmetic Act.

Bristol-Myers Squibb also entered a Corporate Integrity Agreement with the Department of Health and Human Services’ Office of Inspector General. It required accurate reporting of average sales prices and average manufacturer prices for drugs covered by Medicare and other federal health care programs. The settlement reached the price reports that public programs would continue to rely on.

Can a Pharmacist Be a Whistleblower?

Yes. A Key West home-infusion pharmacy helped bring the Bristol-Myers Squibb and Apothecon resolution and repeatedly brought average wholesale price cases.

A pharmacy sees a part of the transaction that the manufacturer’s public price report can obscure. It buys the drug and sees the reimbursement. That vantage point can expose a gap between the benchmark and the actual acquisition price. The knowledge can come from dealing with the manufacturer as a customer.

Public Citizen’s 2018 study, Twenty-Seven Years of Pharmaceutical Industry Criminal and Civil Penalties: 1991 Through 2017, found that whistleblower revelations contributed to 92 of 170 federal pharmaceutical settlements during its study period.

The business buying the drug could challenge the numbers that helped set its reimbursement. That puts the customer’s knowledge of ordinary transactions at the center of a manufacturer’s pricing case.

The Later Bristol-Myers Squibb AMP Settlement

Bristol-Myers Squibb faced a separate price-reporting case that ended in a $75 million settlement announced on April 1, 2021. That case concerned average manufacturer price and wholesaler contracts.

The government alleged that Bristol-Myers Squibb improperly deducted wholesaler service fees and left out additional value received under price-appreciation provisions. Those provisions concern inventory already held by a wholesaler when the manufacturer raises its price. A contract can return part of that inventory gain to the manufacturer. The allegation was that this value belonged in the reported price, where it would affect the Medicaid rebate.

The comparison is useful because each drug-price benchmark follows different transactions. The later case turned on which wholesaler payments and contract benefits entered AMP. The earlier package included inflated reimbursement prices and Serzone Best Price allegations.

A pharmacist brought the later case. The government declined to join, and the whistleblower continued it through the settlement. Once again, knowledge of the drug business supplied a way into the manufacturer’s reporting.

How Much Money Do Pharmaceutical Whistleblowers Get for Exposing Fraud?

The whistleblowers in the earlier resolution were allocated approximately $50 million collectively. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know the Deal Behind the Reported Price

If you know how a drug payment, sales instruction or customer discount became a government-paid claim or a reduced rebate, speak to one of our whistleblower experts. Our work with pharmaceutical whistleblowers combines your knowledge with our expertise to build your strongest case. We bring in pharmaceutical whistleblower lawyers who understand promotion and government pricing, and stay beside you throughout the case.