University of santa cruz - extension

Trouble for Scios

The FDA vs. a pharmaceutical company

Sandra Forrer and Tim O’Heron

4/24/2013

The following pages look at FDA violations committed by a pharmaceutical company comparing the violations against the Quality section of CFR Title 21, part 820. Additional details will include the ethical, financial and ultimate impact the violations had on the company.

The year is 2001. The pharmaceutical community, health care stakeholders and editorials in bio-med

journals such as the New England Journal of Medicine and the Journal of American Medicine association,

are excited about the new therapy for decompensated heart failure. Natrecor-Nesiritide is on scene.

Approved by the FDA for inpatient, intravenous use, all reports look promising for the “recombinant

human B-type” natriuretic peptide device. Promising for both patients seeking relief from

decompensated heart failure, and for its creator and maker, Scios, Inc. for generating profit and building

back a broken reputation from past attempts of go-no-where drugs and frustrated investors in a span of

20 years. Analysts predict that Natrecor will bring in sales of 750 million dollars taking into account that

50 million people worldwide chronically suffer from the disease of which 5 million reside in the United

States. After 20 painful years, Scios made the grade with Natrecor when the FDA approved it for market

thus putting the company on the ‘pharmaceutical map’. As investor pushed its shares 295 percent in a

12-month period study, the San Francisco Chronicle put Scios on their top 500 company list. Scios was

happy to report that the Journal of American Medicine “support the use of the company's flagship

product, Natrecor(R) (nesiritide), for the treatment of acutely decompensated congestive heart failure in

patients with shortness of breath at rest or with minimal activity”

The current success though, did not come without agonizing and frustrating years for stockholders,

stakeholders and for the competent, research team who were the recipients of poor leadership and low

morale. In the first 20 years of its operation, one CEO was replaced with another, time, and time again;

each one not able to bring a product to market. One report even stated that one of the CEOs had been a

banker with no background in the science that he was leading resulting in a lack of ability to prioritize

projects and being somewhat insensitive to the needs of the research staff.

There was a lot riding on the future success of Natrecor, the stakes were high, pressure was on for the

current CEO, Richard Brewer and stockholders were holding their proverbial breath. In a case study,

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published by the Kellogg School of Management, Northwestern University, its author had this two say

about Richard Brewer’s taking control of the helm of a deflated company that Scios appeared to be:

“Brewer inherited a legacy management team. For years, the Scios team had proceeded forward with

“no anticipatory plans for success, nor contingency plans for failure.” The problem was that no one in

management had experienced any success in developing and marketing new drugs, and therefore, there

were no coaches or mentors within the firm. Another issue was that the management team was

oblivious to what they did not know. They had a self-contained culture and, as a result, they did not seek

outside advice…”

Back to 2001, business appeared to be looking up for Scios. Profits were soaring and alliances were

forming between Scios and other pharmaceutical companies. Even Johnson and Johnson believing Scios

would boost their purses had purchased them from Brewer for the mere price of 2.3 Billion dollars.

However, in 2005, the news about Natrecor began to take on a darker tone and many were questioning

Natrecor efficacy and concerned that it was contributing to a rise in patient kidney failure and even

mortality. To add insult to injury, at $500.00 per injection, professionals in the medical community were

also questioning its value when compared to cheaper solutions. Since profits were mostly generated by

the off-label market, a concern that Scios had been aggressively pushing the off-label market was

becoming known in the medical community. While it is legal for physicians to prescribe a drug for off-

label use, it is not legal for manufacturers of any product to encourage or otherwise sell for the purpose

of off-label. This led to greater trouble for Scios and J&J as they became the target of both the FDA, who

charged them with label violations in the form of a warning letter and ordered corrective action and

under investigation by the U.S. Department of Justice after two criminal law suits were filed against

them and court settlements. Before those lawsuits, J&J shut down Scios operations along with their

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sister company, Alza after a reduction in force took place and a consolidation between the two

companies.

The early days of Scios

The focus of this paper is to compare the legal troubles that Scios had gotten in to against the CFR

quality guidelines of Title 21, part 820. To assist us in accomplishing this comparison study, at least in

answering the question “why” did they do what they did it might be helpful to look, at least somewhat

superficially at the first 20 years before the arrival of Natrecor.

Scios has its beginnings with a power house of individuals

When E.F. Hutton talks, every one listens. Such was the case in 1982 when Dr. John McCarthy, vice

president of scientific affairs, University of California and Dr. John Baxter, a faculty

member at UCSF, at the urging of executives at the brokerage firm E.F. Hutton started a pharmaceutical

company with an eye on developing proteins to fight cardiovascular disease. Dr. Baxter was a specialist

in the field of cardiovascular research, known as the pioneer of biotechnology who also had a vision for

financial capitalization from those developments was just the person to go to. Baxter was indeed a

visionary who had already proved his worth after working with Monsanto and Genentech in the area of

growing synthetic hormones and generating 350 million dollars to the university from both of those

companies. It only seemed right for Dr. Baxter to create this new company and with a $25 million

backing from several partners at E.F. Hutton and Company, and Dr. Baxter’s influence and know-how

California Biotechnology, Inc. (aka Scios)., was born with former E.F. Hutton investor, Alfred Scheid at

the Helm as Cal Bio’s first CEO. E.F. Hutton also assembled an independent advisory board that

included Dr. Donald Frederickson, former director of the National Institutes of Health

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(at the time the biggest single sponsor of genetic engineering in the United States),

and Dr. Jere Goyan, former director of the FDA.

The original intent of Cal Bio was to leverage its output from research in the area of gene cloning -

specifically in the area of cardiovascular disease. The founders believed that they had a product in gene

cloning that would benefit the pharmaceutical community and therefore had no intentions in becoming

a drug developer but instead tapping into the commercial market as a clone generating facility. While

this proved to be a viable market for Cal Bio, but eventually, its longevity was coming into question since

the market regarding cloning had changed. “The genetic engineering game had evolved. It was no longer

sufficient to clone and sequence genes—gene-cloning companies also had to demonstrate function and

biological activity. Thus, it became necessary for companies either to show biological utility of their

genes sequences or to move to a different technology platform.” (case study)

Cal Bio was fortunate to have the talent pool of scientific researchers to help them go down their new

path looking for products to market. The talent provided the company with a promising future of three

potential products in the pipeline. Auriculin was a drug developed for kidney failure, Fiblast was

dedicated to reducing strokes, and the discovery of b-type natriuretic peptide (BNP) for potential

cardiovascular therapies, that became Natrecor, was the drug to beat. Wall Street viewed Cal Bio as a

company with huge potential.

Despite the pipeline and the enthusiasm by Wall Street, and after spending millions of dollars on

research projects, it was becoming very clear to investors that these great projects were not turning into

products and they became concerned if they would ever see a return on their money. In the end, and a

tragic end it was for Auriculin and Fiblast after the company spent 350 million dollars, by executive

order, both projects halted and stocks negatively influenced.

The pipeline began to show promise, but in 1997 Scios had to halt trials of Auriculin, a drug for kidney failure, when it failed in late-stage testing. In 1998 it dumped Fiblast, a stroke drug that was ineffective.

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Scios shares dropped from $12 to $5. Some shareholders tried to force a sale, and the board responded by ousting chief Richard Casey and hiring Brewer from Genentech. One of his first acts: to dump or license nearly all of Scios' development portfolio, which had too many unpromising drugs. (New York Times)

Other research projects had been sought after but because of poor management decisions and off-

target explorations, Cal Bio became a disappointment to Wall Street. California Biotechnology, a

company now in trouble with falling stock prices needed a restart. Then CEO Richard Casey attempted to

restart the business with a forward-looking, company name change. He chose “Scios” because it means

to “look ahead” and wanted to promote his company as “a company that innovates”.

The company also felt the need to beef up their portfolio so later in the same year a merger had formed

between themselves and Nova. This merger turned out to be a key move for Scio’s as the selling of an

anti-psychotic drug that they inherited from Nova became their only selling drug in the years before

Natrecor. At the time of the merger, there were skeptics who did not believe a strong company would

come out of this union. Executives at both companies insisted that the merger was good for business

and “would combine complementary strengths” but, according to an article in the May, 1992 edition of

the New York Times, “… analysts were critical of the deal, which they said merely united two relatively

weak companies. Stocks Decline Shares in each company fell 12 percent today. In over-the-counter

trading, Scios stock closed at $11.625, down $1.625, while Nova shares were off 62.5 cents to close at

$4.50.” The report then went on to say, "Scios stock is going to get murdered," said Jeffrey Casdin, an

analyst with Oppenheimer & Company, who termed the deal a "bailout" for Nova. "There's nothing

compelling there in terms of a clear product opportunity." Wall Street also did not believe this was a

good idea. Cynthia Robbins-Roth, an editor the biotechnology magazine, Bio Venture View wrote,

“These are two companies with reputations for being unable to get products into the marketplace….At

the end of the day, the merger seemed to be a diluting event for Scio’s investors”

Scios files for FDA Approval

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In 1998, management at Scios believed that Natrecor had endured the rigorous testing of trials and

were confident that their drug was ready for commercial use. They were confident with the results of

the clinical trials and proceeded to file an NDA (???) with the FDA.

Management at Scios had such a high level of surety that Natrecor would gain approval that they were

forming alliances with companies who they felt would strengthen their business. Abbot Laboratories

became the first Alliance with Scios and that production of Natrecor would be take place in Abbotts’

Kansas facilities. Scios’ reasons for choosing Abbot because they felt that their Kansas facilities met the

requirements specified in CFR Title 21, part 820.1 for Good Manufacturing Practice. The Bayer Company

also paid Scios a reported $60 million dollars to market Natrecor if the FDA approval went through. The

“if” was the key word because, at least for now, the FDA did not approve it at this time and stocks fell

60% in one day as a result, and Bayer backed out of the deal.

Natrecor gains FDA approvalIn 2001, soon after the FDA rejected Natrecor, Scio’s executives immediately turned back to clinical

trials. After six additional months of trials, they were ready to again, submit an NDA to the Food and

Drug Administration. This time Scios saw success for Natrecor and the FDA had finally approved it.

Things looked up for Scios and the question may have been asked – Is the twenty year nightmare for

Scios over? Even with the high cost confidence remained high for the product. The Forbes article said,

“Still, high hopes for Natrecor have sent Scios' shares up more than fivefold in the past year to $26, a

ten-year high….Natrecor could surpass $200 million in sales by 2004, says Lehman Brothers analyst

Rachel Leheny. She argues the stock could hit $38. …”

In 2003, Natrecor was looking to be a real moneymaker; alluring to larger pharmaceutical companies,

there were talks of buyouts and takeovers. According to Sandra Forrer, Scios approached Johnson and

Johnson and the two companies worked out a deal and purchased Scios for $2.3 Billion. Up until this

point, Scios had earned $400 million in sales from Natrecor so, seemed like a good deal for J&J.

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The medical community begins to question the efficacy and safety of Natrecor-Nesiritide

In and round 2005, not so positive reports on Natrecor and Scios were beginning to surface. Not only

was the efficacy coming into question but questions about its safety were also being asked since some

data revealed a possible rise of kidney failure and a higher mortality rate for patients who had been

injected with Natrecor. Another concern was in how Natrecor was mostly being administered and what

Scios was doing with regard to its administered use. Two reports came from two well-known medical

journals. According to Dr. Topal of the New England Medical Journal, “How can a drug that is

associated with higher rates of both renal dysfunction and death than placebo — and that costs 50

times as much as standard therapies and for which there are no meaningful data on relevant clinical end

points — be given to more than 600,000 patients and be promoted throughout the United States for

serial outpatient use, an indication not listed on the label?... is the subject of an aggressive marketing

campaign by the manufacturer, Scios, which is encouraging physicians to start their own “infusion

centers” for whose services they can bill Medicare as if they were providing chemotherapy. But when

Nesiritide was approved by the Food and Drug Administration (FDA) in 2001, it was designated for the

treatment of acute, decompensated congestive heart failure.” The New England Journal of Medicine

who said that they could not recommend the drug and other medical journals were reporting that

Natrecor was not an “added value” drug.

(Find a JAMA quote)

In response to medical community articles (NEJM and JAMA) Scios answers back with their own investigators who become a problem for them

Intending to do some damage control, Scios needed to offset the negative reports that were coming out

against their big, moneymaking product. The best way to go about this, they felt was to offset a bad

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report with a good one. To accomplish this, they convened their own panel of distinguished members of

the medical community to perform their own investigation into Natrecor efficacy and safety and the

executive management believed this is what the panel would do. Instead, they were dumbfounded with

the results of the report. The investigating team, led by Dr. Braunswald of Harvard Medical School and

his team of 10, instead were concerned about Scios marketing of Natrecor for off-label use. The

committee, in several written letters suggested to Scios management that they stop doing this……

Committee members “were flabbergasted” in the way Scios responded to their recommendations.

According to Dr. Braunswald, Scios basically came out with their own press release and hi-lighted the

low points of the report and down played the high and not so positive points of their recommendations

“Flags” were raised regarding Scio’s marketing activities and soon received the attention of the FDA.

The FDA, in fact, sent Scios a warning letter indicating that they were in violation of the FDCA for mis-

labeled, promotional material. The letter describes a pen and a mouse pad having incorrect and missing

information in addition to a graphic representation that suggests what population of patients would use

this and what state their health was and according to the letter, both text and graphics were in violation.

Scios was ordered to remove all material and the FDA expected a plan in writing how they were going to

proceed in rectifying the mis-labeled material. The following is a quote comes from the warning letter

and explains, in further detail, the nature of the violation.

“…The Division of Drug Marketing, Advertising, and Communications (DDMAC) of the U.S. Food and Drug Administration (FDA) has reviewed a mouse pad (P071 0400) and pen (P071 0500) submitted under cover of Form FDA-2253 by Scios Inc. (Scios). These pieces are violative because, although they have the form of reminder labeling, which is exempted by regulation from the requirements under the Federal Food, Drug, and Cosmetic Act (Act) for the disclosure of risk and other information, for the reasons set forth below, we have determined that your promotional materials are not appropriate reminder labeling. Therefore, the pieces misbrand Natrecorl1 in violation of the Act, 21 U.S.C. 352(f)(1), 352(a), & 321 (n) and FDA's implementing regulations, 21 CFR 201.1 00(f) & 1.21, as they fail to include, among other things, the drug product's indication as well as information addressing the risks associated with Natrecor…”

Meanwhile, two separate lawsuits had surfaced between the United States Justice System and Scios.

The first law-suit was filed by two former Scios sales representatives who alleged that Scios was

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aggressively marketing Natrecor for off-label use and also that they were encouraging doctors to file

claims to Medicare. The allegations regarding the claims to Medicare were that they were false claim

reporting since the claims were related to off-label sale. The suit also alleges that Scios CEO Richard

Brewer was made aware of the marketing plans to promote the off-label use and that he did not stop

the plan. Regarding top executive knowledge of this plan, a report by (xxxxx) indicates also that Weldon,

the Johnson and Johnson CEO was also aware of the plan and that he did not put an end to it as well.

This same report states that Weldon had a track record for unethical activity calling him “the most

unethical CEO” that this century has seen.

The second suit alleges violations against the Food, Drug and Cosmetic Act (FDCA). In October of 2011,

well after Scios and Alza had been closed, a US Department of Justice Press Release says that “Scios, Inc.,

a subsidiary of Johnson and Johnson plead guilty to a misdemeanor violation against the FDCA for

introducing into interstate commerce its heart failure drug, Natrecor, for a use that was not approved by

the FDA). Scios/J&J agreed to pay 85 million dollars as a court settlement.

Natrecor will not by covered by Medicare for off-label use

One by-product that came as a real blow to Scios was of the results to the exposure now that Scios had

been pushing the off-label use was that they were also prompting health care providers in how to file for

Medicaid.

Natrecor sales plummet due to bad press

Natrecor, given intravenously, was one of the first drugs for congestive heart failure when it was approved in 2001, and in 2004 it generated $230 million in revenue. Sales plummeted to less than $100 million in 2006 after reviews of its use in less than 1,000 patients tied the medicine to worsening kidney function and higher death rates.

Johnson and Johnson reports they will be laying off and closing Alza and Scios

Scios violations:

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1. Intended Natrecor to be used off-label for infusing chronic (non-acute) CHF patients on a

scheduled, serial basis (Scios understood that this was not an approved use of the drug).

2. Labeling for Natrecor did not contain any directions for this, scheduled, serial use to treat

chronic (non-acute) patients.

3. Introduced misbranded drugs into interstate commerce (possible violation of CFR 820.16 - CFR

820.16 clearly states that the manufacturer shall distribute their product in a manner that is in

keeping within the FDA approved intent and Scios did not do this when they encouraged an off-

label sell)

4. CFR 820.1: Current good manufacturing practice (CGMP) requirements are set forth in this quality system regulation. The requirements in this part govern the methods used in, and the facilities and controls used for, the design, manufacture, packaging, labeling, storage, installation, and servicing of all finished devices intend for human use. The requirements in this part are intended to ensure that finished devices will be safe and effective and otherwise in compliance with the Federal food, Drug, and Cosmetic Act (the act).

5. 6. From reading reports, Scios, from a business perspective did not have a healthy project

management system in place. From my understanding, they probably did not have a Quality System in place either. While they themselves did not seem to establish a quality system, they understood the need for one which was made evident by a report that they teamed up with Abbot Labs in Kansas that Abbot had a manufacturing facility there that was based on GMP. It is very likely that by the time Natrecor was in the works…(In order for the FDA to have approved Natrecor, Scios must have had a certain level of understanding of Quality Control)…...My original point to this paragraph was that I was going to suggest that Scios failed to even meet the requirements of this first part of 820.1

7. 8. (Side note: There is a report (see case study reference a few lines down) of Top management

lacking true leadership experience (i.e. a CEO was a banker who was leading scientists. ) This case study makes claims that most (or all) of the CEO's came to Scios without having much previous success bringing drugs/devices to market. I also read a report that (post Scios), Richard Brewer steps down from his position a director with a Seattle firm, after a private investor drafts a lengthy letter suggesting that he step down. This could all factor in to the fact that Scios struggle from life to death).

9. 10. This part establishes basic requirements to finished devices. If a manufacturer engages in only

some operations subject to the requirements in this part, and not in others, that manufacturer need only comply with those requirements applicable to the operations in which it is engaged.

11.

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12. Scios was engaged in making a product that was fit for public safety; public safety may have been compromised over profit. (This gets into the ethics issue) Since they did not have strong leadership who were focused on maintaining the GMP principles of life cycle management, (I read reports that Scios was a week company as well as Nova) when the temptation to push Natrecor in its off-label sales, management did not have what was needed to find that balance between money and a continual need for quality.

13. 14. (Side note: The case study below claims that investors were become extremely impatient and

frustrated that Scios was not making money for them that when Richard Brewer showed up, he was under incredible pressure to perform. I am sure that this pressure played into Scios temptation to off-label market. (Ref "Pigs can fly" when Brewer states, "I'd rather go down in a ball of flames then to get rejected again (he was commenting about not passing the FDA the first time), but I can only imagine he had that though all the Natrecor journey.

DEPARTMENT OF HEALTH & HUMAN SERVICESPublic Health Service - Food and Drug Administration - Rockville, MD 20857TRANSMITTED BY FACSIMILEDirector, Regulatory Affairs, Scios Inc. - 1900 Charleston Road - Mountain View, CA 94043-1218RE: NDA # 20-920 - NatrecorCI (nesiritide) for Injection - MACMIS 10 # 15669Dear Dr. …:The Division of Drug Marketing, Advertising, and Communications (DDMAC) of the U.S. Food and Drug Administration (FDA) has reviewed a mouse pad (P071 0400) and pen (P071 0500) submitted under cover of Form FDA-2253 by Scios Inc. (Scios). These pieces are violative because, although they have the form of reminder labeling, which is exempted by regulation from the requirements under the Federal Food, Drug, and Cosmetic Act (Act) for the disclosure of risk and other information, for the reasons set forth below, we have determined that your promotional materials are not appropriate reminder labeling. Therefore, the pieces misbrand Natrecorl1 in violation of the Act, 21 U.S.C. 352(f)(1), 352(a), & 321 (n) and FDA's implementing regulations, 21 CFR 201.1 00(f) & 1.21, as they fail to include, among other things, the drug product's indication as well as information addressing the risks associated with Natrecor.BackgroundThe INDICATIONS AND USAGE section of the approved product labeling (PI) for Natrecor states:Natrecor (nesiritide) is indicated for the intravenous treatment of patients with acutely decompensated congestive heart failure who have dyspnea at rest or with minimal activity. In this population, the use of Natrecor reduced pulmonary capillary wedge pressure and improved dyspnea. Natrecor is associated with numerous risks. For example, the PI contains a warning for patients suspected of having, or known to have, low cardiac filling pressures. The PI also contains precautions regarding administration to patients for whom vasodilating agents are not appropriate, azotemia in susceptible individuals, hypotension, and use in older individuals. Furthermore, the Adverse Reactions section of the Pi presents 30-day and 180-day mortality data collected from clinical studies. In seven clinical studies, through 30 days, Inappropriate Reminder Labeling/Omission of Indication and Risk Information According to FDA regulations, reminder labeling is labeling that calls attention to the name of

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the drug product, but does not include its indication or dosage recommendations or other representations or suggestions relating to the drug product. See 21 CFR 201.1 00(f). Although the promotional materials cited above do not state the drug product's indication, the image presented on the materials nevertheless makes a representation or suggestion about Natrecor. Specifically, the mouse pad and pen present an image of a distressed older male patient in a hospital bed. The patient is submerged up to his shoulders in water and is connected to a heart monitor and a nasal cannula. Simply put, the image evokes the concept of a sedentary hospital patient drowning. The combination of this image with the Natrecor logo that is imprinted on the promotional materials suggests that Natrecor is indicated for seriously ill patients who have difficulty breathing while at rest because of fluid accumulation within the lungs, a suggestion that is consistent with Natrecor's indication, in part (see background section). The image, in conjunction with the Natrecor logo, suggests that Natrecor treatment would be appropriate for this patient and others like him. Reminder pieces may not include, among other things,representations or suggestions concerning effectiveness or patient population. Because this image makes these implications, the pieces cited above are not considered reminder labeling and appropriate indication and risk information need to be included. However, these pieces fail to include this information. Conclusion and Requested Action For the reasons discussed above, the promotional materials misbrand Natrecor under the Act, 21 U.S.C. 352(f)(1), 352(a), & 321 (n) and FDA's implementing regulations. 21 CFR 201.100(f) & 1.21. DDMAC requests that Scios immediately cease the dissemination of violative promotional materials for Natrecor such as those described above. Please submit a written response to 3this letter on or before November 21,2007, stating whether you intend to comply with this request, listing all violative promotional materials for Natrecor such as those described above, and explaining your plan for discontinuing use of such materials. Please direct your response to me at the Food and Drug Administration, Center for Drug Evaluation and Research, Division of Drug Marketing, Advertising, and Communications, 5901-B Ammendale Road, Beltsvile, MD 20705, facsimile at 301-796-9878. In all futurecorrespondence regarding this matter, please refer to MACMIS ID # 15669 in addition to the NDA number. We remind you that only written communications are considered official. The violations discussed in this letter do not necessarily constitute an exhaustive list. It is your responsibility to ensure that your promotional materials for Natrecor comply with each applicable requirement of the Act and FDA implementing regulations.

United States Department of Justice - United States Attorney Melinda HaagNorthern District of California - 11th Floor, Federal Building - 450 Golden Gate Avenue, Box 36055San Francisco, California 94102 -(415) 436-7200 - FAX: (415) 436-7234FOR IMMEDIATE RELEASE - OCTOBER 5, 2011WWW.USDOJ.GOV/USAO/CANCONTACT: Jack Gillund - (415) 436-6599 -Jack.Gillund@usdoj.govJOHNSON & JOHNSON SUBSIDIARY, SCIOS, PLEADS GUILTY TO MISBRANDING HEART FAILURE DRUG NATRECOR California-Based Company Will Pay $85 Million Criminal FineSAN FRANCISCO – Scios Inc., a subsidiary of pharmaceutical giant Johnson & Johnson, pleaded guilty today to amisdemeanor violation of the Food, Drug and Cosmetic Act (FDCA) for introducing into interstate commerce its heart failure drug, Natrecor, for a use that was not approved by the Food and Drug Administration (FDA), the Justice Department announced. The district court also sentenced Scios, which is based in Fremont, Calif., to pay an $85 million criminal fine in accordance with the plea agreement between Scios and the United States.Under the FDCA, a company must specify the intended uses of a drug in its new drug application to the FDA. Before approval, the FDA must determine that the drug is safe and effective for the uses proposed by the company in its application. Once the drug is approved, if the manufacturer intends a different use and then introduces the drug into interstate commerce for that unapproved use, the drug becomes misbranded and the introduction into commerce is a criminal violation. The unapproved use is also known as an “off-label” use because it is not included in the drug’s FDA-approved labeling.In 2001, FDA approved Natrecor for “the intravenous treatment of patients with acutely decompensated congestive heart failure [CHF] who have dyspnea [shortness of breath] at rest or with minimal activity.” The approved labeling for Natrecor did not list any other use, and the drug was not approved by FDA for any other use. Natrecor must be administered intravenously to patients. It is a vasodilator and opens up the blood vessels, which reduces the heart’s workload and may help to improve the acutely decompensated patient’s shortness of breath .

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As part of its plea today, Scios admitted that it intended Natrecor to be used off-label for infusing chronic (non-acute) CHF patients on a scheduled, serial basis and that it understood that this was not an approved use of the drug. Scios also admitted that the FDA-approved labeling for Natrecor did not contain any directions for this scheduled, serial use to treat chronic (non-acute) patients. “Putting misbranded drugs into interstate commerce is serious because it undercuts the FDA’s role in keeping our medicines safe and effective,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “This criminal plea by a major pharmaceutical company and the significant criminal fine imposed demonstrate the Justice Department’s commitment to fighting health care fraud wherever we find it.”In addition to this criminal matter, the United States has sued Scios and Johnson & Johnson in an on-going relatedcivil case under the False Claims Act in the Northern District of California (U.S. ex rel. Strom v. Scios, Inc. andJohnson & Johnson, No. C 05-3004 CRB). In that action, the United States alleges that the companies’ promotion of the scheduled, serial use of Natrecor to treat non-acute heart failure patients caused false claims to be submitted to Medicare and other federal healthcare programs for this unapproved use of Natrecor because it was not a medically accepted and effective use of the drug. The criminal case was prosecuted by the U.S. Attorney’s Office for the Northern District of California, and the JusticeDepartment’s Civil Division, with the assistance of the FDA Office of Chief Counsel. The case was investigated byFDA’s Office of Criminal Investigation, the FBI, the Office of Inspector General of the Department of Health andHuman Services, the Department of Veterans Affairs, and the Office of Personnel Management.Further Information:Case #: CR 11-461 CRB - A copy of this press release may be found on the U.S. Attorney’s Office’s website at

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http://www.bloomberg.com/news/2011-07-09/j-j-s-scios-unit-charged-in-misbranding-of-natrecor-drug-1-.html

J&J Unit Agrees to $85 Million Fine for Misbranding DrugBy Karen Gullo & Joel Rosenblatt - Sep 14, 2011 2:25 PM PT

Johnson & Johnson (JNJ)’s Scios unit agreed to pay an $85 million fine and plead guilty to misbranding the heart drug Natrecor, the U.S. said.Scios was charged in July with misbranding the medicine because its labeling lacked adequate directions for use. Under a plea agreement reached after months of negotiation with prosecutors, Scios will be placed under organizational probation for three years in addition to paying the fine, Assistant U.S. Attorney Jonathan Schmidt said in a filing today in federal court in San Francisco. A hearing is scheduled for Sept. 28.

The U.S. agreed not to prosecute Scios or Johnson & Johnson for other offenses related to the marketing and sale of Natrecor, according to the filing. That exemption doesn’t apply to False Claims Act liability, according to the filing.

The Justice Department charged Scios Inc. with a “single misdemeanor violation of the Food, Drug and Cosmetic Act” and the agreement is “pending approval by the court,” Shaun Mickus, a spokesman for New Brunswick, New Jersey-based Johnson & Johnson, said in an e-mailed statement. He declined to comment further.

Natrecor, given intravenously, was one of the first drugs for congestive heart failure when it was approved in 2001, and in 2004 it generated $230 million in revenue. Sales plummeted to less than $100

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million in 2006 after reviews of its use in less than 1,000 patients tied the medicine to worsening kidney function and higher death rates.Study Last YearA Johnson & Johnson study reported last year at the American Heart Association meeting in Chicago found the drug to be safe, and that it slightly improved shortness of breath, a symptom of worsening heart failure. The benefit, though, didn’t last, the study found.The plea agreement doesn’t release Johnson & Johnson from claims brought by the Justice Department in a separate pending civil suit, according to today’s filing.In that False Claims Act case, the U.S. alleges Johnson & Johnson illegally marketed Natrecor for off-label “serial outpatient infusions” not approved by the Food and Drug Administration. The practice led to the submission of false claims, costing the government-run health insurance program Medicare “substantial amounts,” according to the complaint, which was filed in federal court in San Francisco.Last month, Johnson & Johnson reached an agreement to settle a misdemeanor federal criminal charge related to marketing of its antipsychotic drug Risperdal, according to a regulatory filing.The criminal case is U.S. v. Scios, 11-cr-461, U.S. District Court, Northern District of California(San Francisco). The civil case is Strom v. Scios, 05-3004, U.S. District Court, Northern District of California (San Francisco).To contact the reporters on this story: Karen Gullo in San Francisco federal court atkgullo@bloomberg.net. Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net;To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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