Salix Pharmaceuticals has agreed to a $54 million settlement of a whistleblower lawsuit alleging that it paid speaking fees and provided lavish entertainment to physicians who prescribed its gastroenterology drugs.
The charges were initially brought in lawsuits filed by two Philadelphia-area firms, McEldrew Young and Joseph Trautwein & Associates. The Justice Department, which announced the settlement Thursday, conducted an investigation and later filed its own complaint under the False Claims Act.
"Drug and medical-device companies have paid billions of dollars to doctors as speakers, researchers, and consultants," said Eric L. Young, a partner at McEldrew Young. "Salix crossed the line and those payments became kickbacks when its speaker programs stopped focusing on education and instead rewarded doctors for writing prescriptions."
Preet Bharara, the U.S. attorney in Manhattan, said the company had engaged in kickback schemes to boost sales of Xifaxan, Apriso, Relistor, MoviPrep, and other drugs from 2009 through 2013, the period covered by the Justice Department investigation.
Salix, of Raleigh, N.C., was bought in 2015 by Valeant Pharmaceuticals, which faced a scandal in the last year over price hikes and accounting at its now defunct unit, Hatboro-based Philidor RX Services.
The allegations in the settlement against Salix date from before it was acquired by Valeant.
Salix arranged thousands of so-called speaker programs, typically at high-end restaurants, where the company invited physicians who either prescribed large volumes of its medications, or were thought to have the potential to be high-volume prescribers.
Many of the events were primarily social in nature; some physicians treated them as happy hours for their staffs. Many physicians repeatedly attended the same presentations even though there was little information value after the first program, Bharara said.
The company also paid physicians to give talks at these events, although Bharara said that typically little work was done. And physicians who were paid to speak sometimes gave no presentation at all. Other events involved video presentations, but often the videos were played on a laptop in a place where they could be easily ignored, Bharara said, if played at all.
Physicians who were paid speaker fees typically were among the heaviest prescribers of Salix drugs. A dozen were paid fees totaling more than $50,000 each. Several physicians were paid more than $100,000.
The government's complaint said that a physician and four former Salix employees had provided information on Salix's fraudulent practices. In all, Salix spent about $25 million on speakers' fees and entertainment during the period under investigation.
The McEldrew firm declined to say how much its clients would receive as a result of the settlement. But under the False Claims Act, which seeks to root out government fraud by encouraging whistleblowers to come forward, people who provide information in whistleblower lawsuits can receive from 10 percent to 25 percent of the amount recovered by the government.
As part of a stipulation included in the settlement, Salix agreed to cooperate with the government's ongoing investigation of its marketing practices.