Ireland’s Elan Corp says it will pay out $203.5 million to the US government to settle an investigation into how it marketed the epilepsy drug Zonegran which it divested in 2004 to Eisai.

The Dublin-headquartered group has reached an agreement in principle with the US Attorney's Office for the District of Massachusetts after a Department of Justice investigation into sales and marketing practices for Zonegran (zonisamide). As part of the settlement, Elan’s US subsidiary expects to plead guilty to a misdemeanour violation of the US Federal Food, Drug and Cosmetic Act.

The company noted that it will enter into a corporate integrity agreement with the Office of Inspector General of the US Department of Health and Human Services. Elan has already established a reserve of $206.3 million for the expected settlement and related costs, but noted that the Zonegran investigation “could give rise to other litigation by state government entities or private parties”.

Ian Hunter, an analyst at Dublin stockbroker Goodbody, said that although the investigation and potential fine has been well flagged by Elan, “the size of the settlement is well above expectations”. The company generated total revenue of $219 million from Zonegran over a five-year period and so the fine represents 93% of that total.

However, Mr Hunter notes that two cases have been concluded this year on the marketing of similar epilepsy/anti-convulsant drugs. Novartis was fined $185 million for off-label promotion of Trileptal (oxcarbazepine), which represented 7% of five-year sales. Johnson & Johnson paid $81.5 million to settle a case concerned its marketing practices for Topamax (topiramate), just 0.8% of five-year sales.

The analyst said that at the end of the first quarter, Elan reported cash reserves of $863 million “so it can absorb this level of fine. It does, however, undoubtedly, reduce flexibility and see the focus remain on cost saving rather than business development”.

Three more cases of PML with Tysabri
Meantime, in their monthly update, Elan and partner Biogen Idec announced that there were a further three cases of the brain infection progressive multifocal leukoencephalopathy confirmed in June linked to use of their multiple sclerosis blockbuster Tysabri,(natalizumab). This brings the total to 58.

This is a lower number of cases than the previous month (six), however, one more patient has died, bringing that total up to 12. Interestingly, Mr Hunter noted, the incidence rate in patients on the drug for two years or over has moderated slightly this month, slipping to 1.71 per 1,000 for patients that have received 24 or more infusions (down from 1.76) and 1.46 (was 1.50) for patients on 30 or more infusions.

He added that for the first time, the companies have been able to provide data on patients on 42 or more infusions, where the rate is 1.07 per 1,000, but with “very wide confidence intervals (0.29 to 2.74), undoubtedly because of low patient numbers”. He concluded that this is a more encouraging set of data points than last month, with the increase in cases lower than average and incidence rate dipping.