Cell Therapeutics to pay $10.5 million to settle feds' suit

Cell Therapeutics of Seattle wooed physicians with expensive dinners, cocktail parties at resort facilities and payments of up to $1,500 to get them to prescribe its cancer drug for unapproved uses, according to a lawsuit unsealed yesterday by the U.S. Attorney's Office.

The company, without admitting any wrongdoing, has agreed to pay $10.5 million to settle the government's claims. A preliminary settlement was announced three months ago, but the government's case had been under seal until now.

The suit says that under the guise of "consulting agreements," the biotech company paid physicians between $500 and $1,000 to attend dinners or conferences and listen to presentations about ways to prescribe its drug Trisenox.

Cell Therapeutics also paid doctors who were high-volume prescribers of Trisenox up to $1,500 in "illegal kickbacks," for speaking at meetings promoting the drug, according to the U.S. Attorney's Office in Seattle.

The suit alleges Cell Therapeutics improperly marketed the drug to doctors for uses that weren't approved by the U.S. Food and Drug Administration (FDA), leading doctors to submit "tens of thousands" of false claims to Medicare.

Cell Therapeutics' promotional efforts increased the sales of Trisenox but "caused the Medicare Program to pay millions of dollars for the administration of a drug with no proven medical value," according to the lawsuit.

"They misled a lot of doctors by telling them that the drug was medically accepted," said Peter Winn, assistant U.S. attorney in Seattle.

The drug was approved for one very narrow group of patients. Doctors can use an approved drug in other "off-label" applications, but the manufacturer can't promote such uses through its marketing.

Cell Therapeutics has blamed any missteps in the Medicare billing on a consulting firm, and in January sued that firm, Lash Group, a unit of pharmaceuticals distributor AmerisourceBergen. Lash denies the company's allegations.

Trisenox was approved by the FDA in 2000 for acute promyelocytic leukemia, which afflicts about 400 patients in the United States each year.

To expand the market, the company tested the drug against multiple myeloma and myelodysplastic syndrome, a pre-leukemic condition.

While the company never sought FDA approval for those diseases, it told investors that because doctors could prescribe the drug "off-label," annual sales might reach $100 million.

Sales reached $26.6 million in 2004. The following year, Cell Therapeutics sold Trisenox to Cephalon for a net price of about $30 million to finance other drug development.

James Bianco, chief executive of Cell Therapeutics, said in an interview that Cell's former director of sales was responsible for any kickbacks the company may have awarded to doctors.

Peter Sportelli resigned from Cell Therapeutics amid allegations that he had embezzled money from the company, according to a suit Cell filed against him and another former employee, James Marchese, in 2003.

Sportelli later pleaded guilty in federal court to mail fraud and served two months in jail, according to the U.S. Attorney's Office.

Ironically, it was Cell Therapeutics' suit against Sportelli and Marchese that initiated the federal investigation into its practices, said Winn.

Marchese, who was the company's oncology account manager, provided early information to the U.S. Attorney on the company's kickbacks and off-label marketing, and later filed a lawsuit against the company himself, said Winn.

Parts of that suit are still pending. Marchese could not be reached for comment Tuesday.

Cell Therapeutics stock fell 1.85 percent to $5.85 Tuesday. The settlement was announced before the markets closed.

Kirsten Orsini-Meinhard: 206-464-2391 or kmeinhard@seattletimes.com

Information in this article, originally published April 18, 2007, was corrected May 2, 2007. A previous version of this story incorrectly attributed comments about Cell Therapeutics' settlement of a lawsuit by the U.S. Attorney's Office to Peter Keisler, assistant attorney general for the Justice Department's Civil Division. The comments were made by Peter Winn, assistant U.S. attorney in Seattle.