ISTA Pharmaceuticals, Inc. Plead Guilty to Federal Felony Charges; Will Pay $33.5 Million to Resolve Criminal lLability and False Claims Act Allegations

BUFFALO - U.S. Attorney William J. Hochul, Jr. announced today that pharmaceutical company ISTA Pharmaceuticals, Inc. pleaded guilty to conspiracy to introduce a misbranded drug into interstate commerce and conspiracy to pay illegal remuneration in violation of the Federal Anti-Kickback Statute before U.S. District Court Judge Richard J. Arcara. The guilty pleas are part of a global settlement with the United States in which ISTA agreed to pay $33.5 million to resolve criminal and civil liability arising from its marketing, distribution and sale of its drug Xibrom, one of the largest settlements ever in the Western District of New York.

According to Assistant U.S. Attorney MaryEllen Kresse, who handled the case, ISTA conspired to illegally introduce a misbranded drug, Xibrom, into interstate commerce. Under the Food, Drug and Cosmetic Act (FDCA), it is illegal for a drug company to introduce into interstate commerce any drug that the company intends will be used for uses not approved by the Food and Drug Administration (FDA). Xibrom is an ophthalmic, nonsteroidal, anti-inflammatory drug that was approved by FDA to treat pain and inflammation following cataract surgery. In order to expand sales of Xibrom outside of its approved use, ISTA conspired to introduce misbranded Xibrom into interstate commerce.

"Today's resolution sends a clear message that pharmaceutical companies cannot put profit ahead of people, by disregarding laws designed to protect the health of the American public," said United States Attorney William J. Hochul, Jr.

Between 2005 and 2010, some ISTA employees promoted Xibrom for unapproved new uses, including the use of Xibrom following Lasik and glaucoma surgeries, and for the treatment and prevention of cystoid macular edema.  Continuing medical education programs were used to promote Xibrom for uses that were not approved by the FDA as safe and effective, and post-operative instruction sheets for unapproved uses were paid for by some company employees and provided to physicians. The evidence also showed that ISTA employees were told by management, in an effort to avoid detection, not to memorialize in writing certain interactions with physicians regarding unapproved new uses, and not to leave certain printed materials in physicians' offices relating to unapproved new uses.

In addition, ISTA pleaded guilty to conspiracy to offer and pay remuneration to physicians in order to induce those physicians to prescribe Xibrom, in violation of the federal Anti-Kickback Statute.  Under the law, it is illegal to offer or pay remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to physicians to induce them to refer individuals to pharmacies for the dispensing of drugs, for which payments are made in whole or in part under a Federal health care program.  In this matter, certain ISTA employees, with the knowledge and at the direction of ISTA, offered and provided physicians with free Vitrase, another ISTA product, with the intent to induce such physicians to refer individuals to pharmacies for the dispensing of the drug Xibrom. In addition, ISTA provided other illegal remuneration, including a monetary payment to sponsor an event of a non-profit group associated with a particular physician, a golf outing, a wine-tasting event, paid consulting or speaker arrangements, and honoraria for participation in advisory meetings which were intended to be marketing opportunities, with the intent to induce physicians to refer individuals to pharmacies for the dispensing of the drug Xibrom.

U.S. Attorney Hochul further stated,  "The fact that ISTA offered doctors illegal inducements - such as a wine tasting, golf outing, and payments to attend what were in essence marketing sessions - makes the company's illegal conduct particularly deserving of the hefty penalty ISTA has agreed to pay."

Under the terms of the plea agreement, ISTA will pay a total of $18.5 million, including a criminal fine of $16,125,000 for the conspiracy to introduce misbranded Xibrom into interstate commerce, $500,000 for the conspiracy to violate the Anti-Kickback Statute, and $1,850,000 in asset forfeiture associated with the misbranding charge.

ISTA also entered into a civil settlement agreement, under which, according to Assistant U.S. Attorney Kathleen A. Lynch, the company agreed to pay $15 million to the federal government and to individual states in order to resolve claims arising from its marketing of Xibrom. ISTA's conduct caused false claims to be submitted to government health care programs. The civil settlement resolved allegations that ISTA promoted the sale and use of Xibrom for certain uses that were not FDA-approved and not covered by the Federal health care programs. The United States further alleged that ISTA's violations of the Anti-Kickback Statute resulted in false claims being submitted to federal health care programs.  The federal share of the civil settlement is $14,609,746.16, and the state Medicaid share of the civil settlement is $390,253.84. The civil settlement resolves two lawsuits filed in the Western District of New York under the whistle blower provisions of the False Claims Act. Such provisions permit private parties to file suit on behalf of the United States for false claims and obtain a portion of the government's recovery.

Except as admitted in the plea agreement, the claims settled by the civil settlement agreement are allegations only, and there has been no determination of liability as to those claims. In addition to the criminal fines and asset forfeiture, ISTA's parent company, Bausch+Lomb, Inc., which acquired ISTA in June 2012, has agreed to maintain a Compliance and Ethics Program. Upon conviction for the criminal charges described above, ISTA will face mandatory exclusion from Federal health care programs.

Assistant U.S. Attorneys MaryEllen Kresse and Kathleen A. Lynch, who handled the Criminal and Civil aspects of the case respectively, stated that "the civil and criminal penalties imposed today fully redressed the misconduct engaged in by ISTA prior to its acquisition by Bausch + Lomb, Inc."