CORPORATE CRIME REPORTER

Cell Therapeutics to Pay $10.5 Million to Settle False Claims Act Case
21 Corporate Crime Reporter 17, April 18, 2007

Cell Therapeutics Inc., a biotech start-up based in Seattle, Washington, will pay $10.5 million to settle federal False Claims Act charges.

Federal officials alleged that the company illegally marketed the anti-cancer prescription drug Trisenox drug for various uses that were not approved by the Food & Drug Administration (FDA).

The alleged off-label uses caused doctors to prescribe Trisenox to treat various forms of cancer for which the drug was neither approved by the FDA nor proven to be either safe or effective.

As a result, doctors who prescribed Trisenox off-label unwittingly submitted false claims for reimbursement to the Medicare program from 2001 until 2005.

The False Claims Act case was originally filed in February 2006 by James Marchese, a former employee of Cell Therapeutics.

Marchese was represented by Robert Chadwell of McKay Chadwell in Seattle and Kirk Chapman of Milberg Weiss in New York.

Cell Therapeutics was represented by Stuart Gerson of Epstein Becker in Washington, D.C. and Harold Malkin of Yarmouth Wilson Calfo in Seattle.

The Assistant U.S. Attorney in Seattle handling the case for the government is Peter Winn.

Winn told Corporate Crime Reporter that Marchese’s share of the recovery has yet to be determined.

“We’re still in negotiation on that issue,” Winn said.

He said that his office declined to criminally prosecute the case.

In 2005, the company sold Trisenox to another company and the drug’s new owner halted the misleading off-label promotion campaign.

Medicare only paid only for anti-cancer drugs when prescribed for FDA-approved uses or uses that were determined to be medically accepted as published in certain specific pharmacological texts known collectively as the compendia.

Federal officials alleged that the company knew that Trisenox was FDA-approved for only one type of cancer and was not listed as a medically accepted treatment in the compendia for any other condition.

Despite this, the company falsely marketed the drug to doctors by suggesting that Trisenox was FDA-approved and listed as medically accepted in the compendia for other types of cancers.

“Cell Therapeutics enriched itself at taxpayer expense by aggressively marketing this drug to doctors for use in treating certain types of cancers even though the company knew that the drug had no proven medical benefit in the treatment of those cancers and had not been approved by the FDA for those uses,” said Jeffrey C. Sullivan, the U.S. Attorney in Seattle.

The government also alleged that the company used illegal kickbacks to induce physicians to prescribe Trisenox.

Under sham “consulting agreements” physicians were paid $500-$1,000 to attend dinners or conferences on the off-label uses of Trisenox. These meetings were held at expensive resorts and restaurants. Doctors who wrote large numbers of prescriptions for Trisenox for off-label uses were asked to speak at various events for additional financial bonuses.


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