Ex-Pfizer VP Peter Rost Takes On Goliath

May 9, 2006

Evelyn Pringle

Beginning in 1997, Pharmacia, currently a subsidiary of Pfizer, sought to boost its sales of the drug Genotropin. To that end, the company illegally marketed the drug to spur growth in short children and as an anti-aging drug for adults looking for the fountain of youth.

In a nutshell, the off-label marketing scheme included: (1) direct payments to doctors; (2) all-expense paid junkets for doctors; (3) financial incentives to distributors: and (4) phony consultant contracts to funnel payments for the off-label promotion.

As a result of the scheme's success, sales of the Genotropin sky-rocketed and over the years, Medicaid and other public healthcare programs paid millions of dollars for its improper use. The full amount of damage to health care programs is not yet known.

"But this much is certain," former Pfizer Vice President turned whistleblower, Dr Peter Rost, says, "Pharmacia turned Genotropin into a cash cow by illegally peddling a dangerous drug to make short kids tall and their grandparents young."

Genotropin is a man-made human growth hormone approved to treat a limited range of hormonal deficiencies. The FDA has never approved the drug to spur growth for children without hormonal deficiencies or to prevent aging.

Genotropin has serious side effects according to the National Institute of Health: "If growth hormone is given to children or adults with normal growth, who do not need growth hormone, serious unwanted effects may occur because levels in the body become too high. These effects include the development of diabetes; abnormal growth of bones and internal organs such as the heart, kidneys, and liver, arteriosclerosis; and hypertension."

Dr Rost joined Pharmacia in June of 2001 as a VP of Marketing Endocrine Care. One of his primary responsibilities was to oversee the marketing of Genotropin but he did not handle day-to-day marketing activities.

A group of about 70 people reported to Dr Rost, among them a US marketing director with a group of about 22 people under him. The marketing people who sold Genotropin throughout the US reported to the Endocrine Care sales director.

A few days after Dr Rost came on board he received a copy of a letter from his supervisor that discussed the off-label sale of Genotropin and stated that Pharmacia would not promote or encourage the use of the drug outside approved uses.

Dr Rost said he found the letter unusual because "any marketing director would be well aware that it is illegal to promote drugs for off-label indications." When he asked about it he was told that there had been some problems in the past, but that the issue had since been resolved.

In the fall of 2001, Dr Rost became aware that the company was paying for between 600 and 800 doctors and their spouses to attend an annual meeting at a posh Caribbean resort as part of its marketing of Genotropin. When he expressed concerns, he was assured that the company's legal department had approved this type of trip.

In early 2002, Dr Rost conducted a profitability analysis of the Genotropin franchise and became uneasy when the senior director of marketing would not disclose key sales and marketing information related to the audit.

During the analysis, Dr Rost learned that Pharmacia paid cash incentives to sales reps for each new patient who was prescribed Genotropin and that 16 of the top 20 earning territories came from the adult team, in spite of the fact that adult sales accounted for only about 10% of total sales. He also learned that they received incentives regardless of whether treatment was on-label or off-label.

Dr Rost then decided to track every new patient to determine exactly how many new anti-aging patients were signed on each month. Based on high number in his analysis, Pharmacia agreed to change the incentive payment plan and exclude payments for any patients from physicians known to engage in off-labeling prescribing.

Later in February 2002, Dr Rost learned that Pharmacia had numerous contracts to sell Genotropin directly to doctors specializing in the anti-aging field, as well as contracts with wholesalers who specialized in servicing the off-label Genotropin market.

Around this same time, he decided to delve deeper into the marketing practices and it soon became clear that his subordinates knew that off-label marketing was illegal, and they were not forthcoming. For instance, the payments to physicians were not revealed until a manager left the company and doctors started to call and ask about their payments.

Dr Rost first approached Pharmacia management in the fall of 2001, and in February 2002, the company started an internal investigation. In March, the firm's Associate General Counsel informed Dr Rost that she had found that marketing director, Carl Worrell, had engaged in gross misconduct relating to the off-label promotion and that he was not forthcoming during the investigation. Based on their concerns, a decision was made to terminate Worrell's employment in April 2002.

After he left, Dr Rost discovered documents that showed that Pharmacia had been actively engaged in the off-label marketing since at least 2000. In one example, Dr William Abelove, an anti-aging doctor at a longevity center, had sent a letter to Pharmacia CEO, Fred Hassan, in 2000, and wanted to purchase Genotropin at a discount rate. Mr Hassan forwarded the letter to the marketing departments and by May 1, 2000, Worrell had signed a consulting contract with Dr Abelove to assist in the promotion of Genotropin.

In an effort to ensure that the off-label promotion was terminated, Dr Rost sent an email to the associate director of marketing and her product managers and explained his concerns about continued payments and consultancy agreements, and instructed them not to approve any additional payments without seeing him first.

In May 2002, Pharmacia cancelled contracts that gave rebates to anti-aging doctors and wholesalers who supplied anti-aging clinics but continued to sell to these doctors and wholesalers.

The same month, Dr Rost received a short debriefing of the internal legal review and was assured that appropriate corrective action had been taken.

In July 2002, Pfizer announced the friendly take-over of Pharmacia. With this merger, it became clear to Mr Rost that he would have to address his concerns with Pfizer's management team. To prepare, Dr Rost started to research the legal statutes related to growth hormones and the False Claims Act, and other laws Pharmacia may have violated.

During the time period of July through September 2002, Dr Rost continued to receive reports about discoveries of kick-backs paid to doctors.

On October 28, 2002, Mr Rost and several marketing directors participated in a meeting with Pfizer that included employees from Pfizer's medical, marketing, regulatory and legal department, as well as Judith Tytel, Pharmacia's Senior Corporate Counsel.

The meeting was intended to be an opportunity for Pharmacia employees to provide information to their Pfizer counterparts. At the meeting Dr Rost and his team disclosed that Pharmacia was sponsoring all-expense paid junkets for physicians and that Pharmacia maintained a data base, known as the Bridge Program, that contained detailed information regarding the 30,000 patients who received Genotropin prescriptions.

They also explained that payments were being made to US doctors and discussed how the Bridge Program supplied new patients with free Genotropin for several months while the company assisted in seeking reimbursement.

Following the meeting, several Pfizer executives asked for more information and on November 8, 2002, Dr Rost and several directors, and Associate General Counsel, met with Pfizer representatives and lawyers and reviewed the Bridge Program.

During this time, Dr Rost continued to discuss his concerns with executives and lawyers at Pharmacia and believed that the company was concerned about the potential legal exposure related to the off-label sale of Genotropin.

In response to continued reports indicating illegal activities, Dr Rost repeatedly tried to implement corrective measures. However, he learned that the corporate culture at Pharmacia made it impossible to eliminate illegal conduct because of the financial incentives that drove sales reps to continue it.

Through further investigation, Dr Rost learned that the illegal activities started long before he arrived, and as far back as 1997. He came to conclude that at times, company officers condoned the activities despite knowing that they were illegal.

On April 16, 2003, the merger between Pfizer and Pharmacia was final. Pharmacia directors and officers realized enormous financial benefits. CEO Fred Hassan, received a $9.9 million severance package, 9 other directors received packages worth, in the aggregate, $31.6 million, and company directors were able to obtain early vesting of approximately 6.7 million in stock options.

Pharmacia's sales were also a shot in the arm to Pfizer. According to Pfizer's 2003 Annual Report: "Revenues increased 40% to $45,188 million in 2003... Revenue increases in 2003 were primarily due to the inclusion of Pharmacia products," it said.

The off-label sales paid off extremely well. Between 1997 and 2003, Genotropin generated more than $550 million in sales in the US alone and the company's database shows that about 60% of adult sales, and 25% to 30% of pediatric sales, were for off-label use.

On May 22, 2003, Dr Rost became aware of the pervasive nature of ongoing illegal activity when he met with a manager of the Bridge Program and was shown documents that confirmed that a massive number of patients were listed with an off-label diagnosis.

In fact, 25% to 30% of the pediatric prescriptions were for off-label use. Dr Rost understood that pediatric patients received significant funding from Medicaid and other government programs.

He was alarmed at the extent of pediatric use - a staggering number, he says, not only due to the medial implications to children but also because it demonstrated that a great percentage of the cost was reimbursed by Medicaid or other governmental programs.

Disturbed by these findings, he decided to file a lawsuit and with Attorney Erika Kelton, and another Phillips & Cohen attorney, started drafting a complaint.

On June 3, 2003, Ms Kelton, informed an assistant US Attorney that Dr Rost would be filing a qui tam action alleging fraud relating to the off-label marketing of Genotropin and delivered a copy of the complaint to the US Attorney's Office on June 4, 2003.

In the Complaint, Dr Rost provided details of a complex scheme including the nature of the fraud - where it occurred, how it occurred, when it occurred and the persons responsible for its commission. The following is a summary of the complaint's specific factual allegations:

Approximately 60% of adult sales and 25% of its pediatric sales were for off-label uses.

Pharmacia bribed 16 named distributors to promote off-label usage of Genotropin.

Under the pretext of participating in a "study," Pharmacia paid doctors $200 for every patient they prescribed to, including off-label subscriptions, and paid doctors an additional $200 for every year that such patients continued to use Genotropin.

Pharmacia sponsored junkets for physicians and their spouses and awarded substantial "honoraria" as inducements/kickbacks to promote the off-label usage of Genotropin.

Pharmacia provided discounts to doctors working exclusively in the anti-aging area, knowing that they would sell Genotropin off-label for anti-aging treatment and least 18 named doctors signed contracts for such price discounts.

Through contracts and "retainer" agreements, Pharmacia hired persons and entities, some named in the Complaint, to promote off-label use of Genotropin and such "consultants" provided no other services.

The false claims were submitted from 1997 to June 5, 2003 across the US and included false claims and statements made by dozens of named distributors and doctors, and Pfizer's Bridge Program lists the patients for which the false claims were submitted.

But come to find out, off-label marketing seems to habitual with Pfizer. At the same time that Dr Rost reported the illegal activities, Pfizer was fighting off a whistleblower lawsuit arising out of the off-label marketing of the drug Neurontin, by another company acquired through a merger, in promoting the drug for pain control and Attention Deficit Disorder.

In the end, Pfizer settled the lawsuit and a related criminal case for $430 million.

In a motion filed in attempt to dismiss Dr Rost's lawsuit, Pfizer states: "After investigating for more than two years, the Justice Department recently declined to intervene in this qui tam complaint." The inference being that the DOJ does not consider this to be a serious case.

However, a decision by the DOJ not to intervene means nothing. According to a study by the Government Accounting Office, the DOJ has declined to intervene in 72% of all qui tam actions initiated between 1987 and 2005.

A review of Pfizer regulatory filings reveals an ongoing affair with the DOJ. In its Form 10-K for 2003, filed with the SEC on March 10, 2004, Pfizer disclosed the following:

"The company recently was notified that the US Department of Justice is conducting investigations relating to the marketing and sale of Genotropin and Bextra, as well as certain managed care payments."

In its Form 10-K for 2004, filed with the SEC on February 29, 2005, Pfizer disclosed that: "In late 2003, we received a request for information and documents from the US Department of Justice concerning the marketing of Genotropin as well as certain managed care payments."

Nine months later, in a Form 10-Q filed on November 9, 2005, Pfizer revealed that: "The U.S. Department of Justice has informed us that it is investigating Pharmacia's former contractual relationship with a health care intermediary."

And make no mistake, Pfizer's legal troubles are far from over. According to Dr Rost's attorney, Mark Labaton, "a grand jury in Boston is investigating the illegal promotion and marketing of Genotropin based on an investigation conducted by the US Attorney's office."

In addition, according to news reports, the US Attorney in the Eastern District of New York also has an active criminal investigation involving Pfizer's off-label promotion of Lipitor, he says.

Mark Labaton, is a partner at the firm Kreindler & Kreindler, LLP, with offices in New York and LA. The firm handles cases including securities and consumer class actions, and FCA whistleblower, antitrust, and consumer cases.

His resume includes 7 years as an Assistant US Attorney for the Central District of California, where he prosecuted white-collar fraud cases, including whistleblower actions.

Pfizer is the largest pharmaceutical company in the world, and according to Mr Labaton, "Like most large pharmaceutical companies, it is financially and politically powerful."

"Litigating against such companies is not for the faint-hearted," he warns.

"But whistleblower lawyers are inspired by their clients," Mr Labaton says. "Warts and all, these clients are a strong, determined, and courageous lot."

He claims that "off-label promotion of drugs is a form of quackery that victimizes vulnerable individuals who take these drugs with serious and dangerous side effects for purposes never intended and approved by the FDA."

"That's exactly what happened in our case," he notes.

"Pharmacia and its successor company, Pfizer," Mr Labaton says, "generated hundreds of millions in revenue by peddling Genotropin to spurt growth in short children and as an anti-aging drug for adults seeking eternal youth."

"Genotropin was never intended to make short kids tall and their grandparents young," he said.

In some whistleblower cases, he says, there is one victim - "the taxpayer who foots the bill for the fraud."

It costs law firms a fortune to go up against the giant drug makers. In the Pfizer Neurontin lawsuit, "the civil/whistleblower plaintiffs in that case took more than 20 depositions and obtained thousands of pages of documents in discovery," Mr Labaton reports.

But he says he's not complaining. "The costs to us as lawyers and to our firms can be substantial," he says, "but these costs pale when compared to what whistleblowers, like Dr. Rost, have to endure."

"So far," he points out, "Pfizer has used its muscle to reactively and vigorously oppose Dr. Rost and to make his life tough."

Dr Rost is indeed being hit from all sides.

On December 30, 2005, he was officially nominated for the "Whiny Whistleblower of the Year" award by a Pharm-backed front group and won. In truth, whether he knows it or not, it is a top honor, when considering that he competed against two of the nation's most beloved whistleblowers, Dr David Graham of Vioxx fame from the FDA, and Dr Eric Topol, of the Cleveland Clinic.

Dr Rost's award was announced by Gilbert Ross, MD, who bills himself as a doctor and Executive and Medical Director of the American Council on Science and Health.

That in itself is amazing being that Doctor Ross' own achievement of ripping off Medicaid to the tune of $8 million was only given the recognition that it deserved last fall.

"Ross actually had to abandon medicine on July 24, 1995, when his license to practice as a physician in New York was revoked by the unanimous vote of a state administrative review board for professional misconduct," according to the November/December issue of Mother Jones Magazine.

"Instead of tending to patients," Jones reports, "Ross spent all of 1996 at a federal prison camp in Schuylkill, Pennsylvania, having being sentenced to 46 months in prison for his participation in a scheme that ultimately defrauded New York's Medicaid program of approximately $8 million."

For its part, the American Council on Science and Health stopped disclosing its corporate donors in the early 1990s, according to Integrity in Science on its [web site].

However, the companies noted as contributors in ACSH's 1991 annual report and ACSH's list of Corporate Donors for 1997 include: Pfizer, Abbott Laboratories, American Cyanamid, Bristol-Myers Squibb, Ciba-Geigy, Eli Lilly, Hoffman-La Roche, Johnson & Johnson, Rhone-Poulenc, Sandoz, Searle, Syntex, Warner-Lambert, Upjohn, and Pharmaceutical Manufacturers Association.

For too many years, off-label marketing offenses resulted in nothing more than a slap on the wrist to drug makers, if that.

The FDA regulated the industry and when it found "off-label" marketing, the agency sent the company a warning letter. Sometimes companies were required to sign a consent degree, but they did not face fines.

In 1991, all that changed. Pharmaceutical giant Genentech started the False Claims ball rolling when the company was caught selling another growth hormone, Protropin, off-label by influencing doctors to prescribe it to children who did not suffer from hormone deficiency.

Genentech was prosecuted under the FCA and paid $50 million to settle the case.

Since then, the government has used the FCA in 15 cases that were settled out of court, but according to Taxpayers Against Fraud, a non-profit advocacy group that assists whistleblowers, 150 more cases are currently pending.

The FCA has become effective in large part due to the reward for whistleblowers who can receive between 15% and 30% of the amount recovered in the lawsuit with the average award being $120,000, according to Taxpayers Against Fraud.

In most cases, off-label marketing is usually not a jailable offense; but it is with Genotropin.

"Growth hormone is different from any other drug," Dr Rost explains, "distributing the drug for off-label purposes is a crime."

"Not even a doctor is allowed to prescribe growth hormone for off-label use," he says.

The Controlled Substances Act states in part: "...whoever knowingly distributes, or possesses with intent to distribute, human growth hormone for any use in humans other than the treatment of a disease or other recognized medical condition, where such use has been authorized by the Secretary of Health and Human Services ... and pursuant to the order of a physician, is guilty of an offense punishable by not more than 5 years in prison.

"None of us who became employed by Pharmacia asked to be put into an incriminating situation," Dr Rost points out.

The criminal penalties were a result of the 1988 and 1990 amendments to the Food, Drug and Cosmetic Act, that made off-label sale of human growth hormone to treat age-associated illnesses illegal, according to a report in the October 26, 2005 Journal of the American Medical Association.

In the JAMA article, authors Dr Thomas Perls, director of the New England Centenarian Study at Boston Medical Center; Dr Neal Reisman, clinical professor of plastic surgery at Baylor College of Medicine, who is also an attorney; and S. Jay Olshansky, professor of epidemiology at the University of Illinois at Chicago School of Public Health discuss the little known law.

According to the article, human growth hormone can be legally prescribed for only 3 conditions: HGH deficiency-related syndromes that cause short stature in children, adult deficiency due to rare pituitary tumors and their treatment, and muscle-wasting disease associated with HIV/AIDS.

According to Dr Olshansky, "off-label use for many drugs is a normal and accepted practice in medicine, but that is not true for growth hormone. According to laws instituted by Congress more than 10 years ago, HGH can only be distributed for indications specifically authorized by the Secretary of Health and Human Services, and aging and its related disorders are not among them."

"The use of HGH as an alleged anti-aging intervention is a major public health concern not just because it is illegal," Dr Olshansky explains, "but also because its provision for anti-aging is not supported by science and it is potentially harmful."

People are spending a fortune on HGH under the belief that it reverses aging. "On the contrary, responsibly conducted and peer-reviewed science indicates that HGH could in fact accelerate aging and shorten lifespan," according to Dr Perls.

"It is associated with very high rates of serious adverse effects," he advised, "and long-term use could increase one's risk of cancer."

In 2004, sales of HGH totaled $622 million (nearly 213,000 prescriptions) not including sales on anti-aging Web sites. "These data suggest that a very large proportion of HGH sales are for illegal uses," Dr Perls noted.

Logically, the vast majority of prescriptions should be for children, but according to the study, 74% of prescriptions in 2004 were for people 20 and older, and 44% were for people between the age of 40 and 59.