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Drug Maker Schering-Plough Faces Probe

Al Musella's Comments: (This is his personal views and are not necessarily the views of the Musella Foundation!)


Posted on: 05/31/2003

Drug Maker Schering-Plough Faces Probe


Associated Press Writer

May 31, 2003, 8:09 AM EDT

TRENTON, N.J. -- A federal grand jury is investigating whether drug maker Schering-Plough Corp. engaged in illegal marketing practices, overcharged the government for medicines and destroyed documents related to the case, the company announced.

Schering-Plough believes the government has substantial evidence and will pursue a criminal indictment, the Kenilworth-based company said Friday.

The U.S. Attorney's Office for the District of Massachusetts sent the company a letter this week informing it of the investigation, which focuses on the subsidiary running U.S. operations, Schering Corp., said spokeswoman Denise Foy.

"The company is continuing to cooperate with the U.S. Attorney's Office on this matter," Foy said.

The U.S. Attorney's Office in Boston would neither confirm nor deny the investigation, said spokeswoman Samantha Martin.

The company said investigators have alleged that it offered incentives to physicians, managed care organizations and others to induce them to purchase or prescribe its pharmaceutical products under federal health care programs. The incentives under investigation include providing drug samples, grants for clinical trials, and other items or services.

Schering-Plough said it also has been accused of selling drugs for unapproved medical conditions, giving the government false or incomplete information on average wholesale pricing of its drugs or inflating prices paid for those drugs by Medicaid.

Finally, the company said, investigators accuse it of destroying documents and obstruction of justice relating to the investigation.

Schering-Plough had previously disclosed that federal prosecutors in Boston were probing its practices regarding sales, marketing and funding for testing of its medicines on people.

Schering-Plough said it has implemented "certain changes to its sales, marketing and clinical trial practices and is continuing to review those practices to ensure compliance with relevant laws and regulations."

It also said the U.S. Attorney's Office has advised the company that it will have a chance to respond to the allegations.

The U.S. Attorney's Office originally subpoenaed Schering-Plough in March 2001, seeking documents about pricing and marketing practices for hepatitis drugs Intron A and Rebetron, and Temodar for brain tumors.

The company said in a recent filing with the Securities and Exchange Commission that the investigation could result in substantial fines, penalties or injunctions. The filing noted that the U.S. Departments of Justice and Health and Human Services also are investigating company practices on wholesale pricing.

Schering-Plough was fined a record $500 million by the Food and Drug Administration in 2001 for deficiencies at four manufacturing plants in New Jersey and Puerto Rico. The FDA had been warning the company about deficient paperwork and inadequate testing of drugs since 1998.

The SEC is also looking into meetings that recently retired chief executive officer Richard Jay Kogan held with some investors last September.

In addition, the U.S. Attorney's Office in Philadelphia is investigating whether the company broke federal anti-kickback laws by giving deeply discounted drugs or services to managed care organizations and prescription benefit managers to get or keep major products on their list of covered drugs. That case began in October 1999.

In February, the company added $150 million to its litigation reserves because of the federal cases in Boston and Philadelphia.

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