Drug maker Cephalon Inc. (CEPH) announced Monday that it has agreed to pay $425 million in settlement of allegations related to off-label marketing with various government authorities. The lawsuits were brought by former Cephalon employees and filed under the qui tam provisions of the False Claims Act. The Justice Department said Cephalon will enter a criminal plea and pay the amount to resolve claims that it marketed three drugs for uses not approved by the Food and Drug Administration.
The lawsuits alleged Cephalon marketed three of its products including Gabitril, Actiq and Provigil, for uses not approved by the FDA. As a result of Cephalon's off-label marketing campaign, false claims for payment were submitted with federal insurance programs such as Medicaid and the Federal Employee Health Benefits Program, which did not provide coverage for such off-label uses, the lawsuits said.
One of the drugs, Actiq, which received FDA approval for use only in opioid-tolerant cancer patients, was allegedly marketed by Cephalon for maladies including migraines and injuries between 2001 and 2006.
Gabitril was approved by the FDA for use as an anti-epilepsy drug in the treatment of partial seizures, while Cephalon allegedly promoted the drug as a remedy for anxiety, insomnia and pain.
Provigil was first approved to treat excessive daytime sleepiness associated with narcolepsy, and later expanded the label to include treatment of excessive sleepiness associated with sleep apnea and shift work sleep disorder, the authorities said. Cephalon allegedly promoted Provigil as a non-stimulant drug for the treatment of sleepiness, tiredness, decreased activity, lack of energy and fatigue.
Cephalon undertook its off-label promotional practices through a variety of techniques, such as training its sales force to disregard restrictions of the FDA-approved label, and to promote the drugs for off-label uses, the authorities said.
The company employed sales representatives and retained medical professionals to speak to doctors about off-label uses of the three drugs. The company also funded continuing medical education programs, through millions of dollars in grants, to promote off-label uses of its drugs, in violation of the FDA's requirements.
A criminal information filed by the Justice Department alleges that, between approximately January 2001 and 2006, Cephalon also promoted the drugs for uses other than what the FDA approved.
In a plea agreement with the United States, Cephalon agreed to pay $50 million to resolve this information, of which $40 million will be applied to a criminal fine, and $10 million will be applied as substitute assets to satisfy the forfeiture obligation.
In a separate civil settlement executed contemporaneously with the guilty plea agreement, Cephalon will pay $375 million, plus interest, to resolve False Claims Act allegations arising from claims to Medicaid, Medicare and other federal programs. The state Medicaid programs of California, Delaware, Florida, Hawaii, Illinois, Louisiana, Massachusetts, Nevada, New Hampshire, New Mexico, Texas, Tennessee, Virginia and the District of Columbia will share $116 million of the civil settlement.
The civil settlement resolves four qui tam actions filed in the Eastern District of Pennsylvania. Three of those cases were filed by former Cephalon sales representatives. Relator Paccione will receive $46.47 million from the federal share of the settlement amount, and those proceeds will be shared by plaintiffs under a separate agreement.
As part of the resolution of these allegations, the HHS Inspector General and Cephalon have entered into a five year Corporate Integrity Agreement, which requires Cephalon to send doctors a letter advising of this resolution, that it post payments to doctors on its web site and that its board and top management regularly certify that the company is in compliance with all applicable requirements.
Cephalon also settled its two outstanding state government investigations for a total of $6.85 million.
In a settlement with the Connecticut Attorney General and Commissioner of Consumer Protection, Cephalon agreed to pay $6.15 million, which includes a contribution of $3.8 million to the Connecticut Department of Public Health to fund state cancer initiatives and $200,000 to fund an electronic prescription monitoring program.
The company also agreed to pay $700,000 to settle an investigation with the Attorney General of the Commonwealth of Massachusetts, of which $450 thousand will be used to benefit consumers in Massachusetts and for comprehensive cancer initiatives.
Agencies involved in the investigation included U.S. Attorney's Office in Philadelphia, the Justice Department's Civil Division, the FDA's Office of Criminal Investigation, the Department of Health and Human Services' Office of the Inspector General, the Postal Service Office of the Inspector General, and the Office of Personnel Management Office of Inspector General.
CEPH is currently trading at $79.53, down up 35 cents on a volume of 1.56 million shares.
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May 08, 2026 15:50 ET Manufacturing and services sector survey results and labor market data from main economies were the highlight on the economics news front this week. Factory orders and jobs report dominated the news flow in the U.S. Similarly, industrial production data from German garnered attention in Europe. In Asia, purchasing managers’ survey results from China and the central bank decision from Australia were in focus.