Not a Lexis+ subscriber? Try it out for free.

Financial Fraud Law

Lidoderm Settlement Costs Endo Pharmaceuticals $192.7 Million

 Pharmaceutical company Endo Health Solutions Inc. and its subsidiary Endo Pharmaceuticals Inc. have agreed to pay $192.7 million to resolve criminal and civil liability arising from Endo’s marketing of the prescription drug Lidoderm for uses not approved as safe and effective by the Food and Drug Administration (FDA).   

The resolution includes a deferred prosecution agreement and forfeiture totaling $20.8 million and civil false claims settlements with the federal government and the states and the District of Columbia totaling $171.9 million.   

Endo Pharmaceuticals Inc. is a Delaware corporation headquartered in Malvern, Pa.  

In a criminal information filed in the Northern District of New York, the government charged that, between 2002 and 2006, Endo Pharmaceuticals Inc. introduced into interstate commerce Lidoderm that was misbranded under the Federal Food, Drug and Cosmetic Act (FDCA). The FDCA requires a company, such as Endo Pharmaceuticals Inc., to specify the intended uses of a product in its new drug application to the FDA.   Once approved, a drug may not be introduced into interstate commerce for unapproved or “off-label” uses until the company receives FDA approval for the new intended uses.  

During the period of 2002 to 2006, Lidoderm was approved by the FDA only for the relief of pain associated with post-herpetic neuralgia (PHN), a complication of shingles.   The information alleges that, during the relevant time period, the Lidoderm distributed nationwide by Endo Pharmaceuticals Inc. was misbranded because its labeling lacked adequate directions for use in the treatment of non-PHN related pain, including low back pain, diabetic neuropathy, and carpal tunnel syndrome.   These uses were intended by Endo Pharmaceuticals Inc. but never approved by the FDA, according to prosecutors.   

The information further alleges that certain Endo Pharmaceuticals Inc. sales managers provided instruction to certain sales representatives concerning how to expand sales conversations with doctors beyond PHN and encouraged promotion of Lidoderm in workers’ compensation clinics.

In a deferred prosecution agreement to resolve the charge, Endo Pharmaceuticals Inc. admitted that it intended that Lidoderm be used for unapproved indications and that it promoted Lidoderm to health care providers for those unapproved indications.  Under the terms of the deferred prosecution agreement, Endo Pharmaceuticals Inc. will pay a total of $20.8 million in monetary penalties and forfeiture.   Endo Pharmaceuticals Inc. further agreed to implement and maintain a number of enhanced compliance measures, including making publicly available the results of certain clinical trials and requiring an annual review and certification of its compliance efforts by the chief executive officer of its parent company, Endo Health Solutions.   

The deferred prosecution agreement will not be final until accepted by the U.S. District Court for the Northern District of New York.

In addition, Endo agreed to settle its potential civil liability in connection with its marketing of Lidoderm.  The government alleged that, from March 1999 through December 2007, Endo caused false claims to be submitted to federal health care programs, including Medicaid, a jointly funded federal and state program, by promoting Lidoderm for unapproved uses, some of which were not medically accepted indications and, therefore, were not covered by the federal health care programs.   Of the $171.9 million Endo has agreed to pay to resolve these civil claims, Endo will pay $137.7 million to the federal government and $34.2 million to the states and the District of Columbia.  

Also as part of the settlement, Endo Pharmaceuticals Inc. has agreed to enter into a corporate integrity agreement (CIA) with the Department of Health and Human Services Office of Inspector General that requires Endo to implement measures designed to avoid or promptly detect conduct similar to that which gave rise to this resolution. Among other things, the CIA requires Endo to implement an internal risk assessment and mitigation program and requires numerous internal and external reviews of promotional and other practices. The CIA also requires key executives and individual board members to sign certifications about compliance, and it requires the company to publicly report information about its financial arrangements with physicians.   

The civil settlement resolves three lawsuits pending in federal court in the Eastern District of Pennsylvania under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private citizens to bring civil actions on behalf of the government and to share in any recovery.  The actions were filed by Peggy Ryan, a former Lidoderm sales representative, Max Weathersby, another former Lidoderm sales representative, and Gursheel S. Dhillon, a physician.  The whistleblowers’ share of the settlement has not been determined.  

The civil lawsuits are captioned United States ex rel. Ryan v. Endo Pharmaceuticals Inc.,  Civil Action No. 05-cv-3450, United States ex rel. Weathersby, et al. v. Endo Pharmaceuticals Inc., et al, Civil Action No. 10-cv-2039 and United States ex rel. Dhillon v. Endo Pharmaceuticals, Civil Action No. 11-cv-7767, all docketed in the Eastern District of Pennsylvania.

 Contact the author at

For more information about LexisNexis products and solutions connect with us through our corporate site.