May 13 (Bloomberg) -- Blowing the whistle on drugmakers is becoming a habit for a salesman and a psychiatrist splitting a $45 million award after AstraZeneca Plc settled claims of illegally marketing a schizophrenia drug.
James Wetta, a former company sales representative, sued in 2004 claiming AstraZeneca marketed Seroquel to children, prisoners and the elderly for uses not approved by regulators. Stefan Kruszewski, a psychiatrist, sued two years later, saying the company misrepresented Seroquel’s risks and benefits.
The U.S. Justice Department joined their cases and settled April 27 with the company for $520 million under the False Claims Act. The men received payments after years of waiting. Each previously won awards in such litigation, an event that attorney Erika A. Kelton said is growing more common.
“Repeat whistleblowers exist in the pharma industry because off-label marketing is so prevalent,” said Kelton, of Phillips & Cohen LLP, a Washington law firm that successfully represented about 70 such clients over 15 years. “Sales reps do jump from company to company, so they may be exposed to a number of similarly illegal practices.”
The False Claims Act lets private citizens sue on behalf of the government and share in any recovery. Whistleblowers were paid $2.39 billion from 1987 to 2009, or 16 percent of the $15.19 billion collected in False Claims lawsuits in which the U.S. government joined the case, according to the Justice Department.
Kruszewski said he reluctantly sued, to push companies to change how they describe the benefits and risks of their drugs.
‘Minimized or Obfuscated’
“I don’t believe the science should be misrepresented, that effectiveness should be embellished, or that adverse effects should be minimized or obfuscated by drug companies,” said Kruszewski, 59, who has a private practice in Harrisburg, Pennsylvania. He also has advised lawyers suing drugmakers.
Kruszewski earlier sued Pfizer Inc. over claims about Geodon, an antipsychotic. He said he’ll get $14.5 million from a settlement last year in which Pfizer agreed to pay $2.3 billion to resolve claims over drugs that included Geodon.
Wetta marketed the antipsychotic Zyprexa at Eli Lilly & Co. before joining AstraZeneca. He sued Indianapolis-based Lilly in 2003 over sales practices and was one of nine whistleblowers who split about $100 million when the company paid $1.42 billion last year to settle state and federal claims. Wetta joined AstraZeneca before the Lilly case was made public.
The False Claims Act was passed by Congress in 1863 and strengthened three times since 1986. Citizens file so-called qui tam cases that stay under seal as the Justice Department investigates the claims and decides whether to join the suit. Twenty-five U.S. states have their own versions of the law.
Most Cases Settled
The U.S. government rejects about 80 percent of the federal cases, leaving it to whistleblowers to continue on their own or drop the suit. Government participation leads to settlements 98 percent of the time, said John T. Boese, a lawyer who has defended companies in such cases for 20 years.
Whistleblowers who battle on their own lose more than 95 percent of the time, he said.
The work of whistleblowers is “tremendously important to the development of the cases” in disclosing practices that lead to false claims and providing direct evidence to investigators, said Brian C. Elmer, an attorney at Crowell & Moring LLP in Washington who defends companies.
Whistleblowers collect as much as 30 percent of recoveries, and over two decades three-fourths were in health-care suits.
Boese said whistleblowers are overpaid.
“Every dime we give a whistleblower is money that’s supposed to go to the government and doesn’t,” said Boese, of Fried, Frank, Harris, Shriver & Jacobson LLP in Washington. “Would a whistleblower be willing to bring a case for 5 percent or 10 percent? Do we really have to give out that kind of money to people? They’d do the same thing for far less money, so they’re unjustly enriched.”
Qui tam cases also drain government resources, said Boese, author of the book “Civil False Claims and Qui Tam Actions.”
“They have to spend an enormous amount of time and resources to investigate the 80 percent of cases in which they don’t intervene,” he said.
Health-care settlements announced this year are “just the tip of the iceberg,” said Kelton, the Washington lawyer who represents whistleblowers and has written about the False Claims Act. She didn’t represent Wetta or Kruszewski.
“There are many, many dozens of pharmaceutical cases under seal,” she said. “They concern not only marketing but illegal pricing and manufacturing practices.”
Law on Prescriptions
Under federal law, doctors can prescribe medicines for any purpose, while drugmakers can promote them only for uses approved by the Food and Drug Administration. Drug settlements often involve reimbursement claims to Medicaid and other government programs for off-label uses that the government says were caused by illegal marketing, which the companies deny.
Whistleblowers face three certainties, according to Patrick Burns, a spokesman for Taxpayers Against Fraud, a Washington-based advocacy group. They lose their jobs, face industry blackballing, and endure “tension and turmoil” since the cases are sealed and they can’t discuss them with anyone, he said.
They commonly don’t intend to seek whistleblower damages when first complaining about corporate behavior, according to a study of informants in health fraud cases published yesterday in the New England Journal of Medicine. Most “fell into” the process after seeking lawyers for other reasons, such as unfair employment practices or encouragement from friends or family to sue, the study said.
Every informant “stated that the financial bounty offered under the federal statute had not motivated their participation in the qui tam lawsuit,” wrote the authors, led by Aaron Kesselheim, a researcher at Harvard Medical School.
The informants studied received a median award of $3 million, ranging from $100,000 to $42 million. Many reported stress-related illnesses or marital problems while their claims were being investigated. “The prevailing sentiment was that the payoff had not been worth the cost,” the study found.
Whistleblowers often make reward-sharing agreements among themselves, so court records don’t show how the money is split. Legal fees come from the whistleblower’s award.
Wetta, a California resident, was one of several Lilly employees who sued in 2003 before he left. He then joined AstraZeneca, where he learned the company was marketing Seroquel outside its approved uses for schizophrenia and bipolar disorder, according to a suit he filed in 2004.
He became “uncomfortable and upset” with marketing practices and complained to managers, he said in a complaint in federal court in Philadelphia. He said he suffered “debilitating anxiety and depression” and quit by late 2005.
Wetta will keep more than half of the $45 million award, said Kruszewski, an expert on addictions and the diagnosis of psychiatric illnesses. He said he doesn’t know Wetta.
Kruszewski declined to discuss the impact of the awards on his life. Wetta declined to comment through his lawyer, Brian J. McCormick Jr. of Sheller PC in Philadelphia.
Tony Jewell, a U.S. spokesman for London-based AstraZeneca, the U.K.’s second-largest drugmaker, declined to comment on Wetta and Kruszewski. The company denied allegations of illegal marketing and settled the case to avoid “the delay, uncertainty and expense of protracted litigation,” Glenn Engelmann, U.S. general counsel, said in a statement.
Chris Loder, a spokesman for New York-based Pfizer, the world’s biggest drugmaker, declined to comment on Kruszewski. He said the company didn’t admit wrongdoing in marketing Geodon.
Kruszewski, a graduate of Princeton University and Harvard Medical School, said he didn’t intend to be a whistleblower as he built a career around his private practice and academic appointments. He was hired by drugmakers, including Pfizer and Lilly, to lecture his peers from 1987 to 2000.
His outlook changed during two years as a consultant for the Pennsylvania Public Welfare Department, he said. He supervised the treatment of children and adults receiving psychiatric care in inpatient and residential treatment facilities.
Kruszewski was fired in 2003 in a dispute that spawned years of litigation. In a lawsuit against his supervisors and drugmakers the following year, he claimed his superiors violated his right to speak out about off-label use of drugs, the deaths of children under the state’s care, and fraudulent billing.
He dropped the drugmakers from the case and settled some of his claims against the welfare department for $369,000, he said.
He filed his first whistleblower case in 2005 against a residential treatment facility and its owner. The defendants settled last year for $150,000, with Kruszewski getting $22,500.
“I saw people being harmed in multiple ways and the Pennsylvania Medicaid system being defrauded,” Kruszewski said. “That was not tolerable.”
The other whistleblower cases followed.
Kruszewski, retained by AstraZeneca to discuss Seroquel with other doctors for up to $1,500 per appearance, found he was required to use a prepackaged slide show that contained “false and misleading information” about the drug’s efficacy, he said in his complaint.
He accused the company of promoting the drug for unapproved uses and misleading the FDA, doctors and the public about the safety of the drug and its superiority to other medicines.
The Pfizer suit grew out of his experience as a practicing psychiatrist. He said company salespeople encouraged him to write off-label Geodon prescriptions for his patients. He was awarded $14.5 million of Pfizer’s settlement last fall.
Kruszewski’s work against drugmakers extends beyond whistleblowing. He consulted and testified in suits over Pfizer’s epilepsy drug Neurontin, Johnson & Johnson’s antipsychotic Risperdal, Lilly’s Zyprexa and Purdue Pharma LP’s OxyContin painkiller.
Kruszewski said his whistleblowing has made him unpopular with many colleagues.
“Many professionals, including psychiatrists, don’t even want to hear about issues pertaining to scientific misconduct or that a drug is being misrepresented by the company or in clinical trials,” he said. “I get terrible feedback from doctors who are actively promoting psychopharmaceuticals.”
He said that despite the millions of dollars he’s made, his legal work as a whistleblower has been painful.
“It would have been far nicer and better for me if all of this had never happened,” he said. “I don’t find it fun being a whistleblower. People have no clue -- except other whistleblowers -- how difficult this has been.”
The Seroquel case is U.S. ex rel. Kruszewski v. AstraZeneca Pharmaceuticals, 06-4004, U.S. District Court, Eastern District of Pennsylvania (Philadelphia).
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