New York Regulator Issues Insurance Fraud Action Against Two Opioid Manufacturers

August 20, 2020

The New York State Department of Financial Services (DFS) has filed charges and initiated administrative proceedings against Teva Pharmaceutical Industries Ltd. and its subsidiaries, as well as Allergan PLC and its subsidiary Allergan Finance LLC, in connection with the opioid crisis.

These charges are the third set to be filed in DFS’s ongoing investigation into the entities that created and perpetuated the opioid crisis.

Teva Pharmaceutical Industries Ltd.’s subsidiaries include Teva Pharmaceuticals USA Inc., Cephalon Inc., Watson Laboratories Inc., Actavis Pharma Inc., Actavis LLC and Actavis Elizabeth LLC.

Teva has been a manufacturer of opioids in the U.S., manufacturing approximately 20% of the opioid products that flooded New York from 2006 to 2014. It manufactured both its own branded opioids as well as generic opioids through its Actavis subsidiaries. Allergan also manufactured opioid products from 2006 to 2014.

“New York will continue to aggressively investigate the bad actors that caused the opioid crisis – an American tragedy that has taken too many lives and caused irrevocable harm to communities in our state and across the country,” New York Governor Andrew Cuomo said in a DFS press release. “Everyone who has been affected by opioids deserves justice, and we will make every effort to deliver it to them by pursuing the companies that defraud the public and holding them accountable to the fullest extent of the law.”

The DFS Statement of Charges alleges that, like other opioid manufacturers, Teva and Allergan each knowingly furthered false narratives to legitimize dangerously powerful opioid products as appropriate for a broad spectrum of pain. In particular, the companies’ messaging greatly downplayed the drugs’ long-known addictive nature and risks, according to the charges.

The charges contend that this effort by the opioid industry caused an increased acceptance of opioids as medically legitimate, necessary and appropriate painkillers by both patients and medical professionals. As a result, demand for opioids soared to unprecedented levels as did the crisis of addiction and abuse that resulted from overprescribing, the charges state.

DFS’ allegations include the following:

  • Contrary to Federal Drug Administration (FDA) prescribing guidelines, Teva through its subsidiary Cephalon intentionally marketed its branded fentanyl drugs for off-label use – meaning any use not specified in an application and approved by FDA — and misrepresented their risks while doing so. Fentanyl is a powerful opioid that is 100 times more potent than morphine. The FDA approved Cephalon’s first fentanyl drug, Actiq, only for the treatment of cancer pain. Through the off-label marketing strategy, however, Actiq sales skyrocketed from $16 million in 2000 to an excess of $590 million by 2006, at which time only 8% of patients were taking the drug for cancer pain. After Actiq was retired, Cephalon continued off-label promotional practices with its new fentanyl lozenge, Fentora.
  • Teva through its Cephalon subsidiary also crafted template “letters of medical necessity” for doctors to send to insurers to justify off-label use and get the prescriptions reimbursed. These letters were used by sales representatives to further entice healthcare providers into prescribing these opioids to patients for increasingly broader use.
  • Allergan also misrepresented its drugs in marketing materials. In 2010, the FDA sent the company a warning letter concerning brochures the company had released for its drug Kadian. The FDA warned Allergan about the brochures’ omission and minimization of risk information, its failure to state the drug’s full indication, as well as unsubstantiated claims of efficacy and superiority over other opioid drugs.
  • Both Teva and Allergan used various third party “front groups” and doctors called “key opinion leaders” to disseminate unbranded and misleading messaging regarding the safety and efficacy of opioids in general. These communications included medical education courses as well as pamphlets, websites and books that targeted both patients and prescribers. Among other things, these materials downplayed the risks of addiction of opioids, labelled legitimate concerns by prescribers over those risks as “opiophobia,” and dismissed patients’ clear signs of addiction as “pseudoaddiction.”

According to DFS’s Statement of Charges, Teva and Allergan violated two New York Insurance Laws. Section 403 of the New York Insurance Law prohibits fraudulent insurance acts and carries with it penalties of up to $5,000, plus the amount of the fraudulent claim for each violation. DFS alleges that each fraudulent prescription constitutes a separate violation.

Section 408 of the Financial Services Law prohibits intentional fraud or intentional misrepresentation of a material fact with respect to a financial product or service, which includes health insurance, and carries with it penalties of up to $5,000 per violation. DFS also alleges in this case that each fraudulent prescription constitutes a separate violation.

The hearing will be held at the office of the New York State Department of Financial Services beginning on October 26, 2020.

Source: New York State Department of Financial Services

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