Amgen announces $780 million charge for claims settlement
Amgen has announced that it has earmarked and set aside $780 million for the purpose of resolving civil and criminal investigations into whether it engaged in improper sales of drugs.
THOUSAND OAKS, Calif.—Amgen has announced that it hasearmarked and set aside $780 million for the purpose of resolving civil andcriminal investigations into whether it engaged in improper sales of drugs. Thecompany noted that the money was recorded as a charge for the third quarter of2011, and that after taxes, it reduced Amgen's earnings per share by $0.77 pershare for the quarter, and its net income for the quarter by $705 million forthe quarter.
No mention has been made by company officials regardingadditional monies set aside for the settlement in addition to what has beenreported in the press release.
The $780 million was required to cover the costs related tosettling federal and state investigations into the company's sales andmarketing practices. According to a Bloomberg article, Amgen expects thesettlement to resolve 10 whistle-blower lawsuits, including one claimingfraudulent over-billing with relation to sales of Aranesp, Amgen's anemiamedication. At least 15 lawsuits have been filed against Amgen, claiming thatit encouraged providers to overbill third-party payers for Aranesp and alsoprovided sham consulting agreements.
"If the ongoing settlement discussions are successfullyconcluded, Amgen expects that the proposed settlement will resolve the FederalInvestigations, the related state Medicaid claims and the claims in U.S. exrel. Westmoreland v. Amgen, etal. and the other nine qui tam actions previously described in the Company'speriodic filings with the U.S. Securities & Exchange Commission," Amgennoted in a press release regarding its third quarter earnings and the effectthe settlement would have on said earnings. "The proposed settlement remainssubject to continuing discussions regarding the components of the agreement andthe completion and execution of all required documentation; until the proposedsettlement becomes final, there can be no guarantee that these matters will beresolved by the agreement in principle."
The whistle-blower lawsuit was filed by Kassie Westmoreland,a former sales representative and Aranesp product manager for Amgen. In it, sheclaimed that Amgen was overfilling vials of Aranesp, providing extra amounts ofthe drug that providers could give patients and then bill for, resulting inextra profits. More than a dozen states joined the lawsuit, includingCalifornia and New York.
While the case was scheduled to go to trial in the U.S.District Court in Boston on Oct. 17, the trial was called off, supposedlybecause a settlement was near. Lawyers for Westmoreland stated that they were"encouraged by the agreement in principle and will comment further at theappropriate time."
The case originally went to court last year in Boston, whena judge dismissed the claims. Westmoreland, along with many of the states thatwere part of the case the first time, appealed the ruling, and in turn, most ofthe claims were reinstated by an appellate court in July. In September, Amgenrequested that the U.S. Supreme Court review the ruling. Also last month, Amgenfiled court papers on Sept. 15 seeking to exclude references at trial to thefact that five of Amgen's employees invoked their constitutional right againstself-incrimination during pre-trial depositions.
So far, the settlement has not seemed to interest Amgen'sinvestors. An article by the New York Times noted that in a conference call onMonday, no questions regarding the settlement were posed by analysts.