Case 3-2 Amgen Whistleblowing Case
Amgen, a Thousand Oaks, California–based company, has been dealing with lawsuits
and whistle-blower claims for years over its marketing tactics. The following describes
the lawsuits, language from the legal filings against Amgen, and a statement made by the
company on October 24, 2012, about its settlements in its earnings announcement for the
third quarter of 2012.
Whistleblower Shawn O’Brien
In 2009, the company was embroiled in lawsuits filed by 15 states alleging a Medicaid
kickback scheme.i Two additional whistleblowing lawsuits were filed against the
company in Ventura County. Former employees who said they had uncovered
wrongdoing at the biotech giant and were terminated after they raised red flags to
superiors brought the whistleblowing complaints, which don’t appear related to the fraud
alleged by the group of states. One employee alleged the company violated federal law
by under-reporting complaints and problems with the company’s drugs after they hit the
market. The facts of that lawsuit are described below.
Former Amgen employee Shawn O’Brien sued Amgen for wrongful termination on
October 9, 2009, alleging he was laid off in October 2007 in retaliation for raising
concerns about how the company reported complaints and problems with drugs already
on the market. O’Brien worked as a senior project manager for Amgen’s “Ongoing
Change Program,” according to the lawsuit filed in Ventura County Superior Court. His
job was to improve Amgen’s “compliance processes with high inherent risk to public
safety, major criminal and civil liability, or both,” according to the lawsuit.
The lawsuit alleged that in April 2007, Amgen’s board of directors flagged the
company’s process for dealing with post-market complaints about drugs as a potential
problem. Federal law requires drug companies to track and report to the Food and Drug
Administration any problems with their drugs after they hit the market. In June 2007,
O’Brien was put on the case. He soon uncovered facts that Amgen was not adequately
and consistently identifying phone calls or mail related to post-marketing adverse events
of product complaints. That year, O’Brien warned the company about the seriousness of
the issues but, he claims, the company would not take any action or offer any support. In
August 2007, O’Brien took his complaint to a senior executive/corporate officer
(unnamed) and warned that Amgen’s process for dealing with post-market problems
wasn’t adequate.
In early September of 2007, O’Brien’s managers instructed him to stop all work and
not discuss the issues any further with anyone. Approximately four weeks later he was
informed that he was being terminated as part of Amgen’s October 12, 2007, reduction in
the work force.
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Whistleblower Kassie Westmoreland
On October 22, 2012, Amgen announced it had set aside $780 million to settle various
federal and state investigations and whistle-blower lawsuits accusing it of illegal sales
and marketing tactics. Amgen said it had reached an agreement in principle to settle
criminal and civil investigations that had been under way for several years by the United
States attorney offices in Brooklyn and Seattle.
The company said a settlement, which it expected to be concluded in three to four
months, would also resolve state Medicaid investigations and 10 whistle-blower lawsuits.
It was not clear at the time if the company would plead guilty to any criminal charges.
Most of the whistle-blower lawsuits remain under seal, but Amgen has said in regulatory
filings that the lawsuits “allege that Amgen engaged in a wide variety of illegal marketing
practices.”
The federal investigations, according to Amgen, seem to involve marketing, pricing
and dosing of its anemia drugs, Aranesp and Epogen, and its dissemination of
information about clinical trials on the safety and efficacy of those drugs. Numerous
current and former executives have received civil and grand jury subpoenas, the company
has said.
One whistle-blower lawsuit that was unsealed accuses the company of overfilling
vials of Aranesp, essentially providing doctors with free amounts of the drug to give
patients and then charge to Medicare, Medicaid or private insurers. The lawsuit said that
Amgen tried to persuade doctors to use Aranesp, rather than Procrit, a rival drug sold by
Johnson & Johnson, by pointing to the extra profits the doctors could make by using the
overfill and billing for it. The lawsuit was filed by Kassie Westmoreland, a former
Amgen sales representative and Aranesp product manager. The federal government
declined to join the lawsuit, but more than a dozen states did join, including New York
and California. Westmoreland would be entitled to part of any settlement under whistleblower statutes. In the past, Amgen has said the accusations were without merit.
During depositions in the case, five former Amgen executives invoked the Fifth
Amendment against self-incrimination, according to court documents. That case had
been scheduled to go to trial in the U.S. District Court in Boston on Oct. 17, 2012 but the
trial was then called off, apparently because a settlement was near. “We are very
encouraged by the agreement in principle and will comment further at the appropriate
time,” lawyers for Westmoreland said.
Legal filings
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The filing in the Kassie Moreland case includes the following statement by the court in
response to how Amgen dealt with warnings of the Federal Drug Administration about
the safety of its products:
In addition to causing damage to programs such as Medicare, Defendants’ actions have
also put patient safety and health at risk. The population of patients for whom Aranesp is
indicated is especially vulnerable. Though Amgen was aware of issues earlier, beginning
on or about March 9, 2007, the FDA issued a series of black box warnings for Aranesp
when used in kidney and cancer patients, the most serious warning available on a drug’s
label. The black box warned of increased risk of death, of serious cardiovascular or
thromboembolic events, and more rapid tumor progressions. The new warnings cautioned
physicians to administer the lowest dose possible in order to bring red blood cell counts
to the lowest level necessary to avoid blood transfusions. Concerns that, rather than
helping patients, Aranesp can increase the risk of tumor growth and shorten survival in
patients with cancer, and increase the risk of heart attack, heart failure, stroke, and blood
clots in other patients, led the FDA to impose a Risk Evaluation and Mitigation Strategy
on Amgen for Aranesp in February 2010.
One of Amgen’s responses to the black box warnings appears to have been to treat them
as humorous. A script for a July 2007 meeting of Amgen’s Nephrology Business Unit
from the files of Amgen Vice President of Sales Leslie Mirani included a joke about
“black box warnings,” following up on the FDA’s February 2007 warning about potential
harm from Aranesp.
Amgen Earnings Report for third quarter of 2012
Amgen revealed the agreement in its earnings announcement for the third quarter of
2012. It said the charge for the settlement reduced its third-quarter earnings by 77 cents a
share after taxes. What follows is and extract from the actual earnings announcement.
“The Company has reached an agreement in principle to settle allegations relating to its
sales and marketing practices arising out of the previously disclosed federal civil and
criminal investigations pending in the U.S. Attorney's Offices for the Eastern District of
New York and the Western District of Washington (the Federal Investigations). In
connection with the agreement in principle, the Company recorded a $780 million charge
in the third quarter of 2011, which, after taxes, reduced the Company's EPS and net
income in accordance with U.S. generally accepted accounting principles (GAAP) for the
third quarter of 2011 by $0.77 per share and $705 million, respectively. If the ongoing
settlement discussions are successfully concluded, Amgen expects that the proposed
settlement will resolve the Federal Investigations, the related state Medicaid claims and
the claims in U.S. ex rel. Westmoreland v. Amgen, et al. and the other nine qui tam
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actions [under the U.S. False Claims Act] previously described in the Company's periodic
filings with the U.S. Securities & Exchange Commission. The proposed settlement
remains subject to continuing discussions regarding the components of the agreement and
the completion and execution of all required documentation; until the proposed
settlement becomes final, there can be no guarantee that these matters will be resolved by
the agreement in principle.”
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