March 5, 2013 / 4:40 PM / in 5 years

UPDATE 3-U.S. drugmaker admits misbranding AIDS appetite medicine

* $45 mln payout includes criminal, civil penalties

* Par accused of marketing drug for off-label use

* TPG Capital bought Par for $1.9 bln in September

By Linda Federico-O‘Murchu and Jonathan Stempel

March 5 (Reuters) - Par Pharmaceutical Cos, a generic drugmaker, has pleaded guilty to improperly marketing a medication intended to address appetite loss in AIDS patients, and agreed to pay $45 million to resolve a federal criminal probe and related civil litigation.

The company pleaded guilty to a misdemeanor charge for misbranding the drug Megace ES for uses not approved by the U.S. Food and Drug Administration, at a hearing before U.S. Magistrate Judge Madeline Cox Arleo in Newark, New Jersey.

Private equity firm TPG Capital LP bought Par for $1.9 billion in September.

Federal prosecutors said Megace ES was meant to treat anorexia and other weight loss in AIDS patients, but that Par deliberately promoted it for off-label uses, such as for elderly nursing home residents who were losing weight.

“The conduct of this company was in some real measure flagrant,” U.S. Attorney Paul Fishman in New Jersey said in an interview at his office. “The company was told on at least two occasions in 2005 that it did not have permission from the FDA to market this drug as appropriate for senior citizens, and it chose to ignore that. And it made the wrong choice.”

Par and its lawyer did not immediately respond to several requests for comment.


Tuesday’s settlement includes an $18 million fine, a $4.5 million criminal forfeiture, and $22.5 million to resolve civil litigation against the Woodcliff Lake, New Jersey-based company.

It also resolves three whistleblower lawsuits brought under the federal False Claims Act, which lets private parties sue on behalf of the United States and share in the government’s recoveries.

Par also agreed to enter a five-year “corporate integrity agreement” with the U.S. Department of Health and Human Services. This agreement requires the company to improve oversight, and permits it to take back bonuses from executives who engage in significant misconduct.

The U.S. Department of Justice announced the settlement and the guilty plea, which it said was entered by Par Chief Executive Paul Campanelli on the company’s behalf.

At a press conference, Fishman said he was unaware of patients who may have been harmed by the improper off-label use of Megace ES, but that this did not excuse Par’s marketing.

“A company looking out too much for profits can lose its perspective and its moral compass,” Fishman said in the interview. “And that places the public at risk.”


Par pleaded guilty to a charge of introducing a misbranded drug into interstate commerce.

The alleged improper marketing took place between July 2005 and 2009, according to a court filing describing the government case over Megace ES, whose chemical name is megestrol acetate.

Sales representatives and management at Par “knew that they called on very few, if any, facilities with AIDS patients and very few practitioners that treated AIDS patients,” the court filing said.

Par also held contests to spur Megace ES sales, awarding prizes such as Rolex watches and trips to Cabo San Lucas in Mexico to successful sales representatives, the filing said.

Last September, the company said it had set aside $45 million for a possible settlement over Megace ES.

The case is U.S. v. Par Pharmaceutical Cos, U.S. District Court, District of New Jersey.

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