He's Just Being Frank - Pharmaceutical Executive


He's Just Being Frank
Cephalon's boss brought Provigil to market, runs his biotech like a Big Pharma, and mouths off at you-know-who. Now he's going global with plans to corner cancer. The really scary thing is, Baldino, 53, hasn't even peaked.

Pharmaceutical Executive

While Baldino deserves to laugh all the way to the bank, he may not have the last laugh. In the year since Cephalon's triumph, reverse-payment deals have come under increasing scrutiny from the FTC, which is seeking a test case, while Congress is eyeing a bill to ban generic payoffs. Meantime, Bernard Sherman, the 64-year-old Canadian owner of Apotex who made his $4 billion fortune challenging US drug patents, has filed suit alleging that Cephalon "paid the generic defendants to maintain its monopoly on Provigil."

Cephalon's general counsel, John Osborn, emphasizes that the company's agreements don't qualify as reverse payments because they involve partnerships of one kind or another. As entertaining as it might be to witness a showdown between two tough-talking scientist-entrepreneurs like Baldino and Sherman—whose legal machinations over Plavix resulted in the ouster of BMS CEO Peter Dolan last year—most legal experts agree that Cephalon's deals were so creative (it even gave rights to Actiq, its narcotic lozenge on a stick, to Barr) as to be sue-proof.

Off Label and in the Hot Seat

A second legal entanglement, long in the making, may rain on Cephalon's parade. Off-label prescriptions for Provigil and Actiq have always been essential to the company, in some years accounting for 80 percent of annual revenues. As analysts like Tracy have marveled, one reason Cephalon's deals can look so unexpected at first but so inevitable—not to mention lucrative—in retrospect is that they manage to maximize market penetration of its entire portfolio.

This volume of off-label uptake was bound to attract suspicion. In 2004, the US attorney general in Philadelphia began looking into Cephalon's marketing of Provigil. More recently, sales practices of Actiq also came under scrutiny. The state of Connecticut is conducting an investigation triggered by the fatal overdose of a 20-year-old Connecticut woman who got the "perc-a-pop" from a local drug dealer, and including data showing that less than 3 percent of all prescriptions for this cancer-pain treatment are written by oncologists and pain specialists.

When asked about the investigations, Bob Roche, Cephalon's executive vice president of worldwide pharmaceutical operations, said, "This will ultimately be resolved in our favor. I am 100 percent comfortable with our sales practices and in full agreement with the attorney general that our sales reps cannot discuss off-label use of Actiq."

Off-label criminal investigations are almost routine in the industry, but something more than a business-as-usual response may be required from the biotech. "This is serious stuff—a powerful narcotic that is very addicting with a narrow application and very wide use," says Ross Pearlson, a former prosecutor now at Cummis Epstein & Gross. "It could lead to criminal charges, a false-claims case, a corporate integrity agreement, substantial fines, even exclusion from Medicare programs." Prosecutors appear to be probing patterns of prescribing and sales calls rather than direct evidence like marketing materials, he says. "Given that the company's products have such a high level of off-label prescribing, I would recommend that Cephalon respond preemptively, with a compliance program that has teeth in it," Pearlson says.

At press time, trashy TV newsmags dishing up round-the-clock coverage of Anna Nicole Smith's death were reporting "breaking news": Two of the drugs found by the cops in the virtual pharmacy that was the celeb's hotel room were identified as Actiq and Provigil. While this has no substantive bearing on the case, such name-in-the-mud headlines can make a prosecutor's week.


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