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Press Release

Galena Biopharma Inc. to Pay More Than $7.55 Million to Resolve Alleged False Claims Related to Opioid Drug

For Immediate Release
U.S. Attorney's Office, District of New Jersey

NEWARK, N.J. – Galena Biopharma Inc. will pay more than $7.55 million to resolve allegations that it paid kickbacks to doctors to induce them to prescribe its fentanyl-based drug Abstral, Acting U.S. Attorney William E. Fitzpatrick and Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division announced today. The allegations arose from a whistleblower suit filed under the False Claims Act.

“The conduct alleged by the government and resolved by today’s settlement was egregious because it incentivized doctors to over-prescribe highly addictive opioids,” Acting U.S. Attorney Fitzpatrick said. “This settlement constitutes another example of the Department of Justice’s ongoing efforts to battle the opioid epidemic on every front.”

“Given the dangers associated with opioids such as Abstral, it is imperative that prescriptions be based on a patient’s medical need rather than a doctor’s financial interests,” Acting Assistant Attorney General Readler said. “The Department of Justice intends to vigorously pursue those who offer and receive illegal inducements that undermine the integrity of government health care programs.”

The settlement follows an investigation by the U.S. Attorney’s Office for the District of New Jersey and the Commercial Litigation Branch of the Justice Department’s Civil Division.

The United States contends that Galena Biopharma paid multiple types of kickbacks to induce doctors to prescribe Abstral, including providing more than 85 free meals to doctors and staff from a single, high-prescribing practice; paying doctors $5,000 honoraria, and speakers $6,000, plus expenses, to attend an “advisory board” that was partly planned, and was attended by, Galena sales team members; and paying approximately $92,000 to a physician-owned pharmacy under a performance-based rebate agreement to induce the owners to prescribe Abstral. The United States also contends that Galena paid doctors to refer patients to the company’s RELIEF patient registry study, which was nominally designed to collect data on patient experiences with Abstral, but acted as a means to induce the doctors to prescribe Abstral.

Galena Biopharma sold Abstral in November 2015 after booking net losses on Abstral in each year that it owned the drug, beginning in June 2013. During that period, Medicare, TRICARE, and the Federal Employees Health Benefits program paid $13.6 million for Abstral prescriptions; the settlement resolves Galena’s civil liability for causing false claims to be submitted to these programs. Galena Biopharma has not marketed any pharmaceutical drug since the end of 2015. It currently has a market capitalization of roughly $21 million. The company cooperated with the government’s investigation of certain individuals in connection with the conduct that is the subject of today’s settlement agreement; it also cooperated with the U.S. Attorney’s Office for the Southern District of Alabama’s investigation that led to the February 2017 conviction of two doctors, in the U.S. District Court for the Southern District of Alabama following a jury trial, of, among other counts, offenses relating to their prescriptions of Abstral.

The settlement resolves a lawsuit filed by relator Lynne Dougherty under the whistleblower provisions of the False Claims Act, which permit private parties to file suit on behalf of the United States and obtain a portion of the government’s recovery. As part of today’s resolution, Ms. Dougherty will receive more than $1.2 million. The matter remains under seal as to allegations against entities other than Galena.

Acting U.S. Attorney Fitzpatrick credited special agents from FDA-OIG, under the direction of Special Agent in Charge Jeffrey J. Ebersole, FDA Office of Criminal Investigations’ New York Field Office, as well as investigators from the U.S. Attorney’s Office for the District of New Jersey, for the investigation leading to the settlement.

The government is represented by Assistant U.S. Attorneys Charles Graybow and Brian Urbano of the Health Care and Government Fraud Unit, and David Dauenheimer, Deputy Chief, Civil Division, of the U.S. Attorney’s Office for the District of New Jersey, and by Trial Attorney Natalie Priddy of the Department of Justice’s Civil Division.

The U.S. Attorney’s Office reorganized its health care practice in 2010 and created a stand-alone Health Care and Government Fraud Unit to handle both criminal and civil investigations and prosecutions of health care fraud offenses. Since that time, the office has recovered more than $1.36 billion in health care and government fraud settlements, judgments, fines, restitution and forfeiture under the False Claims Act, the Food, Drug and Cosmetic Act, and other statutes.

The claims settled by this agreement are allegations only; there have been no admissions of liability.

Updated September 8, 2017

False Claims Act
Press Release Number: 17-336