Zoladex

WILMINGTON, Del. -- AstraZeneca Pharmaceuticals pleaded guilty Friday to violating a federal drug marketing law and will pay $355 million to settle allegations of illegal pricing and marketing of the prostate cancer drug Zoladex.

The Wilmington-based company, a subsidiary of London-based AstraZeneca PLC, pleaded guilty in U.S. District Court to conspiring to violate the marketing law by giving free samples of the drug to urologists, who then submitted claims for payment for the prescriptions to Medicare, Medicaid and other federally-funded insurance programs, federal prosecutors said.

The claims created a loss of nearly $40 million for those programs, they said.

The Food and Drug Administration said AstraZeneca engaged in a "massive conspiracy" by illegally pricing and marketing Zoladex.

"FDA will not tolerate criminal conduct that exploits patients, plunders the national treasury, and adds to the cost of health care," said FDA Commissioner Mark B. McClellan.

The federal investigation did not find any evidence that implicated top AstraZeneca executives in criminal conduct, said Richard Andrews, the first assistant U.S. attorney.

"That's why it's appropriate to resolve this case with a corporate guilty plea," Andrews said.

Assistant U.S. Attorney Beth Moskow-Schnoll said the scheme appeared to be driven "from the bottom up" by AstraZeneca sales representatives. Prosecutors said they distributed thousands of free samples and knew many doctors would seek reimbursement from the federal government for the drugs.

AstraZeneca said in a statement that it accepted responsibility for "any improper sampling conduct that took place in the mid-1990s and have taken steps within our new company to prevent such activities from happening again."

The FDA said AstraZeneca employees used several illegal methods to stimulate demand for Zoladex. In addition to giving Zoladex to physicians who charged patients and insurance programs for the samples, the FDA said the company inflated the price of Zoladex reported to Medicare as the basis for reimbursement while deeply discounting the actual price charged to the doctors.

The company previously noted in its 2002 annual report and in a filing with the Securities and Exchange Commission that it had set aside $350 million to cover the costs of an expected settlement of the case.

As part of a plea agreement, AstraZeneca agreed to pay a $63.9 million criminal fine for violating the federal Prescription Drug Marketing Act.

AstraZeneca also agreed to pay the federal government $266 million to resolve allegations that the company caused false and fraudulent claims to be filed with the Medicare, TriCare, Department of Defense and Railroad Retirement Board Medicare programs as a result of its fraudulent drug pricing schemes and sales and marketing misconduct, according to the U.S. Attorney's Office.

"We disagree with the government with respect to the civil allegation, but in the best interest of moving on and putting the investigation behind us, we have chosen to settle with the government," said AstraZeneca spokeswoman Rachel Bloom-Baglin.

The company will pay another $24.9 million to the federal government and the states to settle civil liabilities to the Medicaid program regarding the allegations that it caused false and fraudulent claims to be filed with the states as a result of pricing and marketing misconduct.

AstraZeneca said it had put "robust" training, compliance and accountability policies in place for all employees.

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