NEW YORK TIMES INVESTIGATION: Hugin & Celgene ‘By Far the Worst Offender’

 

NEW YORK TIMES INVESTIGATION: Hugin & Celgene ‘By Far the Worst Offender’

 

Time for Hugin to pay for sins at Celgene

 

New Brunswick, NJ – Pointing to an investigative report by the New York Times, Senator Menendez’s campaign today called on greedy drug company CEO Bob Hugin to use some of the blood money he made ripping off cancer patients to help patients pay the high cost of prescription drugs and support cancer research.  The investigative report published today in the New York Times looks into Bob Hugin’s reign as CEO of pharma giant Celgene, specifically his business practices that ran afoul of federal law and are the focus of mounting lawsuits against the company, including a Medicare whistle-blower fraud case Hugin settled last year for $280 million.

 

“Today’s New York Times report lays out in clear, black and white how Bob Hugin put profits over patients and gamed the system to get rich,” said Menendez for Senate Communications Director Steve Sandberg.  “Bob Hugin says he’s proud of all he did at Celgene.  Really?  Are you proud of jacking up the price of your cancer meds, putting patients at risk, and settling a Medicare fraud case for $280 million?  Cancer patients have suffered enough at the hands of Bob Hugin.  It’s time he pays for what he did by helping those he made a fortune ripping off.”

 

The report found:

 

·         “An examination of Celgene’s aggressive promotion of Revlimid and its predecessor, Thalomid, while Mr. Hugin was a top executive at the company, including its chief executive for six years, reveals many of the controversial financial and legal tactics that have tarnished the industry’s reputation, from marketing drugs for unapproved uses to raising prices and fighting off generic competitors.”

 

     “Celgene paid $280 million to settle a whistle-blower lawsuit claiming it had inappropriately promoted Revlimid and Thalomid to treat a range of cancers beyond what the Food and Drug Administration had approved. Several generic drug companies have sued the company claiming that Celgene denied them access to drug samples needed to make cheaper copies.”

 

     “The F.D.A.’s main goal was to keep the drug from harming infants, and it did so by requiring that Celgene set up a first-of-its-kind distribution system that would limit prescriptions to preapproved doctors and pharmacies.”

 

     “Drug companies are forbidden from promoting a drug for any unapproved uses, but doctors have broad discretion to prescribe a product for a range of diseases. Celgene appeared to exploit this distinction…“

 

     “Celgene has been repeatedly accused of restricting access to samples of its drugs, which generic companies need to test their competing product….  Congress expressly prohibited drug companies from using these programs to block or delay generic drug approval.  Yet, according to three lawsuits filed by generic drug companies, Celgene did just that…. ‘This is really concerning conduct and Celgene is by far the worst offender,’ Michael Carrier, a professor at Rutgers Law School who studies patent law, said of Celgene’s tactics to delay generic development.”

 

     “Introduced to the market in 2006, a month’s supply of Revlimid, a closely related derivative of thalidomide, initially cost about $6,000. By 2017, Celegene had raised the price of a month’s supply to more than $16,000.”

 

·         A drug it had hoped would be a breakthrough in treating Crohn’s disease failed to outperform a control group and Otezla, a psoriasis drug, badly missed sales expectations.  On the same day that Celgene announced it was scrapping the Crohn’s disease drug, it increased the price of Revlimid from $17,014 a bottle to $18,546….  It was the third price increase of Revlimid in 2017, representing a nearly 20 percent price increase for the drug from the previous year.

 

·         “I’m grateful to the drug companies, don’t get me wrong,” Ms. [Elaine] Kodish [a 76-year-old retiree and Revlimid patient] said. “However, they can’t be compensated on the backs of people who are dying.”

 

The full New York Times article is below:

 

A G.O.P. Senate Candidate Highlights His Drug Industry Career. Should He?

New York Times – By Katie Thomas and Nick Corasaniti – Sept. 24, 2018

 

When Bob Hugin joined Celgene in 1999 as its chief financial officer, the company was a struggling biotech that sold just one product — a leprosy drug — and faced a shaky future. By the time he stepped down as executive chairman in February to run for United States Senate, Celgene had become a pharmaceutical powerhouse with a market value of nearly $80 billion.

 

And that onetime leprosy drug? It had been transformed into Revlimid, a best-selling cancer drug that, with annual sales of $8.2 billion, made up nearly two-thirds of Celgene’s net sales in 2017.

 

Mr. Hugin, a Republican mounting a surprisingly strong challenge to Senator Robert Menendez in New Jersey, has made his career at Celgene a cornerstone of his campaign, with television advertisements boasting that he “chose a life of service” in the Marines and “leading a health care company that develops cancer medicine.”

 

In deeply blue New Jersey, few expected a real contest for Mr. Menendez’s seat. Yet anger stemming from Mr. Menendez’s federal corruption trial last year — a trial that Mr. Hugin’s campaign reminds television viewers in New Jersey about on a regular basis — has dampened his popularity among voters.

 

But Mr. Hugin’s professional career could also prove to be a liability — he is the sole pharmaceutical executive running for statewide office in 2018. Anger over high drug prices has risen and President Trump has vilified the industry. A 2017 Gallup poll found that just 33 percent of the country had a favorable view of the drug industry, the second-lowest of any sector. (The lowest was the federal government.)

 

An examination of Celgene’s aggressive promotion of Revlimid and its predecessor, Thalomid, while Mr. Hugin was a top executive at the company, including its chief executive for six years, reveals many of the controversial financial and legal tactics that have tarnished the industry’s reputation, from marketing drugs for unapproved uses to raising prices and fighting off generic competitors.

 

Last year, Celgene paid $280 million to settle a whistle-blower lawsuit claiming it had inappropriately promoted Revlimid and Thalomid to treat a range of cancers beyond what the Food and Drug Administration had approved. Several generic drug companies have sued the company claiming that Celgene denied them access to drug samples needed to make cheaper copies.

 

Mr. Hugin has also been targeted by a super PAC run by a cancer patient taking Revlimid that launched a $1.5 million advertising campaign criticizing steep price hikes of cancer drugs during Mr. Hugin’s tenure at Celgene. And the Menendez campaign has attacked him around drug prices, personal profits and the $280 million settlement.

 

Mr. Hugin has dismissed the criticism.

 

“New Jersey voters are a lot smarter than my opponent gives them credit for,” Mr. Hugin said in a statement. “They understand that it costs billions of dollars in research and development, and years of hard work by hundreds of researchers and scientists, to develop medicines that successfully treat and cure cancer.

 

Some experts are not so sure. Patrick Murray, director of the Monmouth University Poll, noted that despite the fact that many large drug companies are based in New Jersey, public opinion in the state likely mirrors the national attitude.

 

“Concern about being able to afford health care is the top issue mentioned by voters in our polling for this year’s midterm, in large part because of rising drug costs,” Mr. Murray said. “This provides an opening for Menendez.’’

 

Any broad swing in voter opinion could prove difficult for Mr. Hugin to overcome. Even with Mr. Menendez’s vulnerabilities, New Jersey has nearly 900,000 more registered Democrats than Republicans, and a number of competitive House races that have attracted national attention.

 

A once-notorious drug becomes a lucrative cancer weapon

When Mr. Hugin arrived at Celgene in June 1999, the company was struggling to figure out how to turn a profit on its only marketed drug, Thalomid, which had been approved a year earlier to treat a rare skin condition caused by leprosy.

 

Thalomid was Celgene’s brand name for thalidomide, an old drug that became notorious in the 1960s after it was traced to thousands of birth defects worldwide.

 

Thalidomide had fallen into obscurity until the 1990s, when new research suggested it could be useful for a variety of diseases. AIDS activists were smuggling it into the country and selling it through black-market “buyers clubs” after research suggested the drug could be used for AIDS wasting syndrome and Kaposi sarcoma, two serious complications of AIDS.

 

F.D.A. officials, alarmed that a notorious drug was being sold illicitly, took the unusual step of seeking out drug companies that might be willing to bring thalidomide to market legally.

 

Celgene, then a little-known New Jersey company that had never sold a drug, ultimately took up the challenge.

 

In 1998, Celgene’s application was approved to treat erythema nodosum leprosum, a complication of leprosy, which is extremely rare in the United States. In 2007, Celgene said that just 100 prescriptions a year were written to treat the skin condition.

 

But leprosy was hardly the point: The F.D.A.’s main goal was to keep the drug from harming infants, and it did so by requiring that Celgene set up a first-of-its-kind distribution system that would limit prescriptions to preapproved doctors and pharmacies.

 

Celgene, meanwhile, had ambitious plans. Thalidomide was generating intense excitement in the medical world, and from the start the company made clear it would not stop at treating leprosy. Celgene needed a finance executive to pitch its story to Wall Street. It settled on Mr. Hugin, a managing director at J.P. Morgan.

 

At the time, the company’s financial situation was perilous. Celgene had 200 employees and was getting by on less than six weeks of cash when Mr. Hugin joined, according to his campaign biography. A year later, the company warned investors that, “during the next several years, we will be very dependent on the commercial success of Thalomid,” while also acknowledging that the market for the only disease for which the drug was approved was “relatively small.”

 

Seeking a windfall by exploiting drug safety rules

Drug companies are forbidden from promoting a drug for any unapproved uses, but doctors have broad discretion to prescribe a product for a range of diseases. Celgene appeared to exploit this distinction almost as soon as Thalomid arrived on the market, according to company filings, public statements and internal documents included in the whistle-blower lawsuit Celgene settled in 2017.

 

The company hired a team of 60 sales representatives, many of whom had experience in oncology, according to financial filings, and just months after Thalomid arrived on the market, Celgene announced that it would pursue F.D.A. approval for multiple myeloma.

 

The F.D.A. reprimanded Celgene multiple times in those early years, telling the company that it had not adequately warned about thalidomide’s risks in its announcement about multiple myeloma, and calling a meeting in December 1998 to warn of its “strong concern” that Celgene was marketing Thalomid for unapproved uses.

 

In 2000, the agency issued a formal warning letter, saying that it had evidence the company was improperly marketing Thalomid for a variety of cancers as well as to promote a feeling of “general well-being” in cancer patients.

 

“Perhaps more than for any other available drug, the need to provide and distribute thalidomide responsibly is essential to the public health,” the agency wrote in the letter.

 

Over the next few years, however, Mr. Hugin and other top executives repeatedly referred to Thalomid — and later Revlimid — as the key to Celgene’s financial future, even though it would not get formal approval to market the drugs to treat certain cancers until 2005 and 2006. In 2001, the company reported that 92 percent of Thalomid’s prescriptions were being written to treat cancer, and at an investor conference in 2004, Mr. Hugin said, “Thalomid is important, because it is the financial engine that drives us.”

 

Celgene has denied that it engaged in illegal marketing, saying it settled the lawsuit in 2017 to avoid the uncertainty, distraction and expense of protracted litigation.”

 

The incredible demand for Thalomid, and later Revlimid, as promising treatments for multiple myeloma, a disease that affects more than 30,000 patients a year, was a windfall for Celgene.

 

Introduced to the market in 2006, a month’s supply of Revlimid, a closely related derivative of thalidomide, initially cost about $6,000. By 2017, Celegene had raised the price of a month’s supply to more than $16,000.

 

A brutal battle to fend off generic drug makers

The company was able to aggressively raise prices in part as a result of its legal monopoly. Under federal regulations, a pharmaceutical company can exclusively market a drug for up to seven years. Once that period expires, along with any patents, the market opens to generic competition and prices typically fall precipitously.

 

To protect the profits from Revlimid and Thalomid, Celgene mounted an aggressive campaign to extend its monopoly.

 

“They’ve gone to pretty great lengths to protect that drug and to build as many walls around it as they can,” said Michael Brzica, the vice president for federal government affairs at the Association for Accessible Medicines, the generic drug industry’s lobbying group.

 

Celgene has been repeatedly accused of restricting access to samples of its drugs, which generic companies need to test their competing products.

 

In restricting access to Revlimid and Thalomid, Celgene relied on a federal requirement that the distribution of those drugs be tightly regulated because of their dangerous side effects under a program known as Risk Evaluation and Mitigation System, or REMS.

 

Congress expressly prohibited drug companies from using these programs to block or delay generic drug approval.

 

Yet, according to three lawsuits filed by generic drug companies, Celgene did just that.

 

It began with a simple refusal to distribute samples of their drugs, citing REMS and demanding that generic drug companies provide written confirmation from the F.D.A. permitting Celgene to provide drug samples. In the case of Mylan, one of the generic drug companies that sued Celgene, this process took 19 months.

 

After the generic companies sent approval from the F.D.A., Celgene would request more information before agreeing to distribute the drug. But according to court documents in the Mylan case, these requests were laborious, irrelevant and time consuming.

 

The voluminous requests from Celgene became a rinse-and-repeat cycle for many of the generic drug companies, according to court documents. Two companies, Lannett and Barr Laboratories, settled with Celgene. Mylan’s suit will soon head to trial.

 

“This is really concerning conduct and Celgene is by far the worst offender,” Michael Carrier, a professor at Rutgers Law School who studies patent law, said of Celgene’s tactics to delay generic development.

 

Campaign attack ads over soaring drug prices

As the Senate race careens toward the final weeks, the Menendez campaign has seen some troubling signs in recent polling. Despite maintaining a six-point lead, a Quinnipiac poll in August found that 49 percent of New Jersey voters believed that Mr. Menendez “was involved in serious wrongdoing.”

 

Since Labor Day, Mr. Menendez’s campaign, perhaps in a sign of vulnerability, has aggressively ramped up its advertising campaign, with a majority of the political attacks accusing Mr. Hugin of raising drug prices to maximize profits.

 

In 2017, after Mr. Hugin had stepped down as chief executive and become executive chairman, the company suffered two major setbacks in its development pipeline: A drug it had hoped would be a breakthrough in treating Crohn’s disease failed to outperform a control group and Otezla, a psoriasis drug, badly missed sales expectations.

 

On the same day that Celgene announced it was scrapping the Crohn’s disease drug, it increased the price of Revlimid from $17,014 a bottle to $18,546, according to a report by Yatin Suneja, an analyst who follows the industry. It was the third price increase of Revlimid in 2017, representing a nearly 20 percent price increase for the drug from the previous year.

 

In financial filings, Celgene said these price hikes were a main reason the drug’s net sales increased in 2017 by about $1.2 billion over the previous year.

 

Ronny Gal, a securities analyst at Sanford C. Bernstein & Company who follows the pharmaceutical industry, said drug companies have generally been “tone deaf” when it comes to raising the price of their monopoly products. “Celgene clearly has been there, but has not been any worse than the main players,” he said.

 

The tactics can carry a human cost. Last year, Elaine Kodish, a 76-year-old retiree from Los Angeles, briefly stopped taking Revlimid after her Medicare drug plan required she pay more than $450 a month for the drug that keeps her multiple myeloma in check. Ms. Kodish said she bought stock in Celgene when she started taking Revlimid in 2016, as a way of supporting a company she believed was keeping her alive.

 

But after a series of price increases have exposed her to ballooning out-of-pocket costs — she has since returned to taking Revlimid, which now costs her about $785 per month — she said she recently sold her stake. “I’m grateful to the drug companies, don’t get me wrong,” Ms. Kodish said. “However, they can’t be compensated on the backs of people who are dying.”

 

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