Exhibit 10.73
STATE SETTLEMENT AGREEMENT AND
RELEASE
I. PARTIES
This Settlement Agreement
(“Agreement”) is entered into by State of [
] and InterMune, Inc. (“InterMune”), a Delaware
Corporation with its principal place of business in Brisbane,
California, hereinafter collectively referred to as “the
Parties.”
II. PREAMBLE
As a preamble to this Agreement, the
Parties agree to the following:
A. WHEREAS, at all relevant times,
InterMune distributed, marketed and sold pharmaceutical products in
the United States, including a drug it sold under the trade name
Actimmune®;
B. WHEREAS, on or about July 9,
2004, Relator Joan Gallagher filed a qui tam action
in the United States District Court for the Eastern District of
Pennsylvania, captioned United States of America ex rel. Joan
Gallagher v. InterMune, Inc. , Civil Action No. 04 CV 3249
(E.D. Pa.). On October 7, 2004, the qui tam
action was transferred to the United States District Court for the
Northern District of California, now captioned United States of
America ex rel. Joan Gallagher v. InterMune, Inc. ,
C 04-4323 MHP (N.D. Cal.)(the “Civil
Action”);
C. WHEREAS InterMune has agreed to
enter into a Deferred Prosecution Agreement (“DPA”)
with the United States Attorney for the Northern District of
California. The United States has filed an Information in the
United States District Court for the Northern District of
California (the “Court”) charging InterMune with One
Count of doing an act, with intent to defraud or mislead, with
respect to a drug while the drug was held for sale after shipment
in interstate commerce that results in the drug being misbranded,
in violation of Title 21, United States Code, Section 331(k)
(the “Information”);
D. WHEREAS, the United States and
InterMune will file with the Court the DPA, which states that the
Department of Justice will recommend to the Court that prosecution
of InterMune for the conduct charged in the Information be deferred
for a period of 2 years from the date the Court approves the DPA
and that the Department of Justice will seek dismissal with
prejudice of the Information thereafter if InterMune is in
compliance with all of its obligations under the DPA;
E. WHEREAS, InterMune has entered
into or will be entering into separate settlement agreements
(“Medicaid State Settlement Agreements”) with the
States which will be receiving settlement funds from InterMune
pursuant to Paragraph 1(c) below for the Covered Conduct described
in Paragraph G below (hereinafter referred to as the
“Medicaid Participating States”);
F. WHEREAS, the United States and
the Medicaid Participating States allege that InterMune caused to
be submitted claims for payment for Actimmune to Medicaid Programs,
established pursuant to or in connection with Title XIX of the
Social Security Act, 42 U.S.C. §§ 1396-1396v (the
“Medicaid Program”); and the United States further
alleges that InterMune caused to be submitted claims for payment of
Actimmune to the Medicare Program, 42 U.S.C. §§
1395-1395hhh, TRICARE Program (formerly known as the Civilian
Health and Medical Program of the Uniformed Services
(“CHAMPUS”)), 10 U.S.C. §§ 1071-1110, which
is administered by the Department of Defense through TMA, and to
the Federal Employees Health Benefits Program (“FEHBP”)
and that InterMune caused purchases of Actimmune by the Department
of Veterans Affairs (“DVA”), and the United States
Department Defense, Defense Logistics Agency (“DLA”),
on behalf of the Defense Supply Center - Philadelphia
(“DSCP”) (collectively, “the United
States”);
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G. WHEREAS, the United States
contends that it has claims under the False Claims Act, 31 U.S.C.
§§ 3729-3733, and that it and the Medicaid Participating
States (hereinafter collectively referred to as the
“Government”) have certain other civil claims against
InterMune for allegedly engaging in the following conduct with
respect to the marketing, promotion and sale of
Actimmune:
(i) The Government contends that
between January 2001, and June 30, 2003, InterMune knowingly
and willfully promoted the sale and use of Actimmune for the
treatment of idiopathic pulmonary fibrosis (“IPF”), a
use for which Actimmune had not been approved by the United States
Food and Drug Administration (“FDA”), and knowingly
caused the submission of claims to the Government as described in
subparagraph (v), below. Actimmune has only been approved by the
FDA to treat two rare diseases, chronic granulomatous disease and
severe, malignant osteopetrosis;
(ii) The Government contends that
notwithstanding the fact that InterMune’s Phase III clinical
trial of Actimmune for the treatment of IPF failed to establish
statistically significant benefits on its primary endpoint or any
of its secondary endpoints, including overall survival, certain
former InterMune employees encouraged InterMune sales force
personnel to inform physicians that Actimmune demonstrated a
survival benefit in mild to moderate IPF patient populations, and
certain former sales force personnel did so;
(iii) The Government contends that
InterMune’s promotion of Actimmune for IPF violated the Food,
Drug, and Cosmetic Act, 21 U.S.C. §§ 331(a) &
(d);
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(iv) The Government further contends
that the use of Actimmune for IPF was not a “medically
accepted indication” pursuant to 42 U.S.C. §
1396r-8(k)(6);
(v) The Government further contends
that the conduct described in the foregoing subparagraphs
(i) through (iv) resulted in claims for Actimmune being
submitted to the Medicaid, Medicare, FEHBP and TRICARE programs,
and in DVA and DSCP purchasing Actimmune for dispensing to patients
for an unapproved indication, between January, 2001, and
June 30, 2005, in violation of the False Claims Act, 31 U.S.C.
§§ 3729-3733.
InterMune’s conduct as
described in the Civil Action, the DPA and in Preamble Paragraph G
of this Agreement is hereafter referred to as the “Covered
Conduct.”
H. WHEREAS, the United States and
the Relator have reached an agreement with respect to the
Relator’s claim of entitlement under 31 U.S.C. § 3730(d)
to a share of the proceeds of this Agreement (no award as to the
State share of Medicaid);
I. WHEREAS, this Agreement is
neither an admission of facts or liability by InterMune (with the
exception of such admissions as InterMune makes in connection with
the DPA referenced in Paragraph C above and accepted by the Court)
nor a concession by the State that its claims are not well founded;
and
J. WHEREAS, to avoid the delay,
expense, inconvenience and uncertainty of protracted litigation of
these claims, the Parties mutually desire to reach a full and final
settlement as set forth in this Agreement.
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III. TERMS AND CONDITIONS
NOW, THEREFORE, in reliance on the
representations contained herein and in consideration of the mutual
promises, covenants, and obligations in this Agreement, and for
good and valuable consideration, receipt of which is hereby
acknowledged, the Parties agree as follows:
1. As previously agreed between
InterMune and the United States, InterMune shall pay to the United
States and the Medicaid Participating States, collectively, the sum
of thirty-six million, nine hundred forty-four thousand,
forty-three dollars ($36,944,043), plus any interest that may have
accrued between November 1, 2006 and the Effective Date of
this Agreement at a rate of 5% per annum (“Settlement
Amount”). On the Effective Date of this Agreement, as defined
in paragraph 19 herein, this sum shall constitute a debt due and
immediately owing to the United States and the Participating
States. InterMune shall discharge its debt to the United States and
the Medicaid Participating States under the following terms and
conditions:
a. As previously agreed between
InterMune and the United States, InterMune shall pay to the United
States the principal sum of $30,249,229 (the “Federal
Settlement Amount”). InterMune shall pay the Federal
Settlement Amount, plus interest accrued thereon at the rate of
5% per annum, in accordance with the payment schedule attached
hereto as Exhibit A (“Payment Schedule”). Within 10
days after the Effective Date of this Agreement, InterMune shall
pay the United States the initial fixed payment in the amount of
$4,093,925 (“Initial Federal Payment”), plus any
interest that may have accrued between November 1, 2006 and
the Effective date, and thereafter make principal payments with
interest according to the schedule in Exhibit A.
b. As previously agreed between
InterMune and the United States, all payments set forth in this
Paragraph 1(a) shall be made to the United States by electronic
funds transfer pursuant to written instructions provided by the
Office of the United States Attorney for the Northern District of
California. The entire principal balance of the Federal Settlement
Amount or any portion thereof, plus any interest accrued on the
principal as of the date of any prepayment, may be prepaid without
penalty.
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c. InterMune shall pay to the
Medicaid Participating States the sum of $6,694,814
(“Medicaid State Settlement Amount”). InterMune shall
pay the Medicaid State Settlement Amount, plus interest accrued
thereon at the rate of 5% per annum, in accordance with the
Payment Schedule found at Exhibit A. Within 10 days after the
Effective Date of this Agreement, InterMune shall pay $906,075,
plus any interest that may have accrued between November 1,
2006 and the Effective date and $906,075.00 plus any interest that
accrues between November 1, 2007 and the Effective date, into
a deposit account designated by the National Association of
Medicaid Fraud Control Units Settlement Team (the “NAMFCU
Team”) for distribution by the NAMFCU team to the Medicaid
Participating States. Upon reaching agreements with, and obtaining
a release from each of the Medicaid Participating States and making
the initial payment to the designated account for distribution by
the NAMFCU team to the Medicaid Participating States InterMune
shall thereafter make fixed pro rata payments to the Medicaid
Participating States according to the schedule in Exhibit A. These
fixed annual pro rata payments beginning November 3, 2008,
shall be paid by InterMune directly to the Medicaid Participating
States pursuant to written payment instructions from the NAMFCU
Team. The entire principal balance of the Medicaid State Settlement
Amount or any portion thereof, plus any interest accrued on the
principal as of the date of any prepayment, may be prepaid without
penalty.
d. The total portion of the
Settlement Amount obligated to be paid by InterMune in settlement
for alleged injury to the Medicaid Program for the State
of
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[
] is $ ,
consisting of an obligation to pay the State of [
] under this Agreement and another portion obligated to the federal
government as part of the Federal Settlement Amount. The individual
portion of the State Settlement Amount allocable to the State of [
], from the initial fixed payment, is $
(the
“Individual Initial State Settlement
Amount”).
e. The individual total State
Settlement portion to be paid over time allocable to the State of [
] is $ to
be paid in installments pursuant to the Payment Schedule found at
Exhibit A. InterMune shall send said installment amounts directly
to the State of [
]. The National Association of Medicaid Fraud Control Units shall
supply a revised address list of all States to InterMune prior to
each installment at InterMune’s request.
f. In addition to all other payments
and responsibilities under this agreement, InterMune agrees to pay
all reasonable travel costs and expenses for the NAMFCU Team.
InterMune will pay this amount by separate check or wire transfer
made payable to the National Association of Medicaid Fraud Control
Units after the Participating States execute this agreement or as
otherwise agreed by the parties.
2. If the Court does not accept the
DPA as described in Preamble Paragraph D or refuses to impose the
agreed upon disposition for whatever reason, this Agreement shall
be null and void at the option of either the United States or
InterMune. If either the United States and/or Participating States
or InterMune exercises this option, which option shall be exercised
by notifying all Parties, through counsel, in writing within ten
(10) business days of the Court’s decision, the Parties
will not object to the voiding of this Agreement and the Agreement
will be
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deemed rescinded. If this Agreement is
rescinded, InterMune will not plead, argue or otherwise raise any
defenses under the theories of statute of limitations, laches,
estoppel or similar theories, to any such civil or administrative
claims, actions or proceedings relating to the Covered Conduct
which are brought by the United States within 90 calendar days of
notification to all other Parties of that rescission, except to the
extent such defenses were available before the Effective Date of
this Agreement.
3. Subject to the exceptions in
Paragraphs 4 and 5, in consideration of the obligations of
InterMune set forth in this Agreement, conditioned upon
InterMune’s payment of the payment in full of the Settlement
Amount, subject to Paragraph 8 below (concerning bankruptcy
proceedings commenced within 91 days of the Effective Date of this
Agreement, as defined below), and subject to the Court’s
approval of the DPA described in Preamble Paragraph D, the State of
[
], on behalf of itself, and its officers, agents, agencies, and
departments, as set forth above, hereby fully and finally releases
InterMune, its predecessors, subsidiaries, corporate parents and
affiliates, successors and assigns, and current or former officers,
directors, and employees, except as excluded in Paragraph 4, below,
from any civil or administrative monetary claim that the State of [
] has against InterMune for claims submitted to the State Medicaid
Program for the Covered Conduct as set forth in paragraph
G.
4. No
