A Seattle Times investigation Pharma's Windfall: Part 2 How a drug for few patients was turned into $81 million in sales

Orphan drugs, approved for rare diseases, can become big sellers. One Seattle biotech’s drug provides a case study in how the chase for profits can turn into accusations of unlawful marketing.

Best known in the popular imagination as a poisonous murder weapon — “inheritance powder,” it was once called — arsenic also has a storied history of therapeutic use, embraced by healers in China for more than two millennia.

Thirteen years ago, science caught up to folklore: A small Seattle biotech announced that it had turned the heavy metal into a lifesaving cure.

Developing a drug — and getting it to market — takes money, time and luck. But in the fall of 2000, Cell Therapeutics, Inc. pulled it off. The company won approval for arsenic trioxide, a compound it would market as Trisenox and price at about $22,000 for a year of treatment.

That was the good news. The bad news was the market’s size.

The government approved Trisenox only for relapsed or refractory APL (acute promyelocytic leukemia), a subset of a subset of an already rare disease. In the United States, the number of new patients was maybe 400 a year.

Because Trisenox was approved for a rare disease, it was designated an “orphan drug.” That meant Cell Therapeutics, or CTI, would receive an array of financial breaks from the federal government, including seven years of market exclusivity.

But how could a drug good for only a few hundred patients become a moneymaker?

In the United States, a drug’s reach isn’t limited to its approved use. Although the government prohibits drugmakers from marketing a drug off-label — that is, for unlicensed uses — doctors can prescribe a drug however they wish. So for pharma, the challenge becomes getting doctors to embrace a product, without slipping into illegal promotion.

James Bianco, Cell Therapeutics’ chief executive officer, would tell potential investors that Trisenox showed promise “in a whole host of blood cell-related cancers” with a “market opportunity” exceeding 100,000 patients a year.

Another Cell Therapeutics officer would tell shareholders: “There’s an old saying in the business that marketed products are like gold.”

4th quarter, 2000 $502,000 Trisenox’s cumulative revenue

In time, CTI’s sales of Trisenox would provide a case study in how drugmakers can boost an orphan drug’s off-label revenue. Moneywise, the example’s scale is small. Trisenox produced tens of millions in sales, while other orphan drugs have generated hundreds of millions or more. But the practices used by CTI — some of which would prompt the federal government to cry foul — have posed a big problem industrywide, according to court records and medical-journal articles.

Since 2005, the Department of Justice has negotiated more than a dozen settlements with pharmaceutical companies accused of illegally marketing orphan drugs for unapproved uses.

In a recent interview, Bianco said CTI took pains to comply with federal guidelines, hiring outside experts to help navigate the company’s first foray into the marketplace. He also said the company put “patients ahead of profits,” offering its drug at a modest price compared to the six-figure amounts that some orphan drugs now command.

The government, meanwhile, says CTI put profits ahead of patients, accusing it of off-label sales tactics that created false hope while diverting patients, seriously ill, from other drugs that might have helped them.

In the fourth quarter of 2000 — Trisenox’s first full quarter on the market — CTI’s revenues from the drug were only $502,000.

But as the company tried different approaches to expand Trisenox’s reach, it would watch the drug’s cumulative revenue climb.

2nd quarter, 2001 $3,331,280 Trisenox’s cumulative revenue

Securing ties with patient groups

For drugmakers, patient-advocacy groups can be a valuable partner in spreading the word about a drug’s potential uses.

Early on, CTI targeted multiple myeloma as a possible market for Trisenox. While cases of relapsed or refractory APL numbered in the hundreds, multiple myeloma accounted for about 15,000 new cases a year, making it the country’s second most prevalent blood cancer.

In May 2001, hundreds of leaders in multiple myeloma research flocked to the Banff Springs Hotel — the so-called “Castle in the Rockies,” in Alberta, Canada — for a five-day workshop. The International Myeloma Foundation, a patient-advocacy group based in North Hollywood, Calif., helped organize the conference.

Through an educational grant, CTI funded a pre-workshop symposium on using arsenic trioxide to treat multiple myeloma. The symposium faculty included Dr. Mohamad Hussein from Cleveland; Dr. James Berenson from Southern California; and Dr. Carolyn Paradise, CTI’s vice president of clinical development.

The presenters spoke of how much promise Trisenox showed, based on preliminary studies. Hussein called the data “very encouraging,” while Paradise, quoted in a CTI news release, said: “Myeloma patients currently have few viable treatment options. The Trisenox studies presented here today, therefore, were designed to offer them new hope.”

The Multiple Myeloma Research Foundation, another patient-advocacy group, set up an interview with Hussein and posted the transcript online. “Absolutely,” Hussein said, when asked if it was “just a matter of time” before Trisenox proved effective. “Yes, yes,” he said, when asked if the drug was “relatively” safe.

For CTI, the Banff conference brought together groups and individuals who would figure prominently in the biotech’s efforts to tap the multiple myeloma market.

A company document, a slide titled “Action Step,” paired doctors with “Targets,” with one of the pairings being: “Hussein — [Multiple Myeloma].” Another document listed Berenson among six doctors tapped to speak about Trisenox, calling him: “Expensive but worth it.”

And patient-advocacy groups helped promote Trisenox. While thanking CTI for its support, the Multiple Myeloma Research Foundation produced a webcast of Hussein calling arsenic trioxide an “attractive drug” for myeloma. The foundation also posted a CTI news release touting the drug’s potential.

The International Myeloma Foundation, in its publication Myeloma Today, summarized the Banff symposium under the headline: “Trisenox Shows Early Promise.” It also posted newspaper stories about arsenic trioxide and a brochure, “Understanding Trisenox,” which was “sponsored by an unrestricted educational grant” from CTI.

In October 2001, the IMF presented Bianco, Cell Therapeutics’ CEO, with its “Ribbon of Hope Award.” CTI issued a news release, quoting the foundation’s president saying Trisenox’s testing in multiple myeloma had “opened a new door” and was creating “new hope in the lives of many patients.”

4th quarter, 2001 $6,635,280 Trisenox’s cumulative revenue

Getting Medicare reimbursement

Trisenox’s sales would be more likely to take off if the drug’s off-label prescriptions were reimbursed by Medicare, the federal health insurance program for the elderly and disabled.

Medicare will pay for a drug’s off-label use if it is medically accepted. Acceptance can be determined by referring to what are called compendia, comprehensive drug summaries compiled by experts and consulted by the government.

Instead of using compendia, which are voluminous and expensive, many cancer doctors used to rely on a free, privately published bulletin that was supposed to act as an abridged version for oncology drugs.

The U.S. Justice Department provides this account in court records:

James Marchese, an oncology accounts manager for CTI on the East Coast, struck a deal with this bulletin’s publisher: CTI would pay $10,000 a year — an “educational grant,” it was called — for an online ad on the bulletin’s website, the objective being to raise awareness about Trisenox.

But when the November 2001 bulletin was published, its listing for Trisenox included a mistake. The bulletin made it appear that Trisenox was medically accepted for four diseases, instead of just one. Subsequent issues added three more diseases, leaving the false impression that Trisenox was accepted and reimbursable for seven diseases in all.

Marchese understood that a mistake in the bulletin could lead states to reimburse for unaccepted uses. He emailed the company’s sales director: “How pretty are those Compendia bulletins!!! … [M]an do I like working the system. I figure even if 1 state doesn’t check its [sic] a bonus!!”

To which the director responded: “[E]ven if it works in one state, it’s a HUGE win! … Getting rich is a very good thing and it can’t happen soon enough!”

Medicare states Source: U.S. Department of Justice Kelly Shea / The Seattle Times

A consultant hired by CTI to help with reimbursement issues sent the bulletins to Medicare carriers, private companies that process claims for states. An accompanying letter said Trisenox should now be covered for diseases beyond APL.

Had the carriers checked the compendia, they would have discovered this wasn’t true. But at least five failed to check. One carrier’s medical director claimed to do so — “I have confirmed that these indications are included in the compendia,” he wrote back — but if he did, he misread what was there.

In the end, the Medicare carriers for 16 states, including Washington, agreed to reimburse for off-label prescriptions.

The bulletin was produced by the Association of Community Cancer Centers, based in Maryland. Christian Downs, the association’s executive director, said he was surprised that so many carriers failed to consult the compendia: “It’s like me picking up the CliffsNotes version of ‘War and Peace’ and trying to do a dissertation on it.”

After being notified by the federal government, the association corrected its listing for Trisenox. The association no longer publishes the bulletin. “It’s difficult to keep up with all this off-label stuff in an accurate manner,” Downs said.

The Justice Department alleged that “CTI’s illegal scheme” cost taxpayers an estimated $15.8 million. While it was “bad enough” that patients were given false hope, the department wrote, “what is even worse is that the patients and their physicians were diverted from prescribing other medications that may have been effective.”

2nd quarter, 2002 $10,535,280 Trisenox’s cumulative revenue

Wining and dining the doctors

In May 2002, 16 physicians gathered at the W San Francisco Hotel, a luxurious urban retreat with panoramic views of the city. They were greeted by CTI sales and marketing personnel, who presented the doctors with information about Trisenox, including its off-label uses.

The federal government would allege in court records that CTI hosted a series of these “advisory board” meetings at resort settings, saying it worked like this: The doctors, called consultants, would arrive Friday evening for cocktails, eat breakfast Saturday while getting pitched on Trisenox, then spend the rest of the weekend however they desired. CTI picked up the tab — for food, drinks, travel — and sometimes threw in a $1,000 honorarium.

Sometimes CTI would pay doctors simply to attend a dinner and discuss Trisenox, according to the government. A dinner in Boston paid $400. One at Philadelphia’s Ritz Carlton paid $500.

CTI monitored return on investment, tracking how much the doctors who were paid $1,000 later billed Medicare for off-label prescriptions of Trisenox, according to the government. One recipient who attended a meeting at the Sawgrass Marriott in Ponte Vedra Beach, Fla. — home to one of the country’s most recognizable golf courses, with a signature island green — billed Medicare for $42,356. Another recipient billed $104,748. A third billed $370,202.

At one advisory board meeting, in Chicago, CTI’s presentation didn’t go over as anticipated, according to the government. Referring to myelodysplastic syndrome — one of the drug’s off-label uses — a CTI employee wrote in an internal email: “A few physicians were somewhat confused as to why we had a talk on MDS when we have no data to speak of!”

The company’s outreach extended beyond doctors. The Broward Oncology Nursing Society, in Florida, thanked CTI for sponsoring its Winter 2004 newsletter, which included a nurse’s article on her “great results” using Trisenox on MDS patients.

2nd quarter, 2003 $27,635,280 Trisenox’s cumulative revenue

Hiring a doctor as speaker and investigator

A pharmaceutical sales representative can’t approach a doctor and begin touting a drug’s off-label uses. But doctors talk among themselves — in private, at conferences, through medical literature — so drug companies often enlist physicians as speakers.

Trisenox sales By the first quarter of 2003, the vast majority of Trisenox sales were off-label. Only 10 percent were for relapsed or refractory acute promyelocytic leukemia (APL), the drug’s indicated use. Most sales were for myeloma or myelodysplastic syndrome (MDS). Source: Cell Therapeutics

In May 2003, Dr. James Berenson spoke at an international workshop in Salamanca, Spain, where he chaired a session, sponsored by Cell Therapeutics, on using arsenic trioxide in multiple myeloma.

Preliminary data was presented at the conference from a half-dozen studies using Trisenox, including two in which Berenson was investigator. One of his studies had 13 evaluable patients, the other seven. Berenson described Trisenox’s initial results as “encouraging.”

Berenson, a multiple-myeloma expert in Southern California, had various ties to CTI, according to financial disclosure statements he filled out over the years. He received research grants from CTI, served as a consultant, and was on the company’s speakers’ bureau.

He would travel about, telling other doctors about his studies of multiple-myeloma patients treated with arsenic trioxide, alone or in combination with other drugs. CTI would issue news releases, quoting him on the studies’ results. Before Salamanca, there was Banff. After Salamanca, his data was presented at health-care conferences in Chicago (the study results: “very encouraging”), San Diego (“impressive”), Geneva, Switzerland (“encouraging”), and Sydney, Australia (“impressive”).

Berenson also discussed arsenic trioxide in a continuing medical-education course, courtesy of an “unrestricted educational grant” from CTI, and in an “expert interview” on a medical-information website, for which CTI provided an “independent educational grant.”

“The results early on look very, very promising,” he said in the interview, of arsenic trioxide’s potential to attack myeloma cells.

In addition to CTI, Berenson has disclosed having a financial relationship with at least 19 other pharmaceutical or medical companies.

He’s hardly alone. Drug companies have paid billions to doctors — and Berenson’s list is short compared to some. In 2008, Dr. Lee Simon, a former FDA division chief, disclosed being a consultant or adviser to CTI. At the same time, he listed ties to 76 other companies.

In court records, the federal government would allege that CTI “embarked on a scheme” to use clinical studies conducted by Berenson and other doctors to boost sales of Trisenox.

CTI paid physicians to perform “Investigator Sponsor Clinical Trials” in which Trisenox was used off-label, the government said. Under federal regulations, CTI was supposed to provide the drug free or at cost. Instead, “numerous” doctors, including Berenson, were required to purchase Trisenox commercially — and thereafter submitted Medicare claims for reimbursement, the government alleged.

The company, according to court records, paid Berenson $715,950 to conduct studies of Trisenox; Berenson, in turn, billed Medicare for $415,015.

Berenson, in an interview, said he doesn’t remember how payment was set up for those specific trials. Bianco said he doesn’t recall, either. Both said there was nothing improper about the setup.

Berenson spoke highly of Trisenox — “I think it’s a very good drug, I’ll tell you that” — and said his research advanced its use, providing a “godsend for patients, not only mine, but around the country.”

By speaking at conferences, he helps educate other doctors about a valuable drug, Berenson said. He doesn’t remember what CTI paid him, but said he loses money when speaking because of the time spent away from his practice.

His relationship with CTI ended years ago, Berenson said. Asked about the company’s description of him as “expensive but worth it,” he said: “I’m expensive for everything. … You have to understand that physicians have to get paid for their time, and my time is valuable.”

4th quarter, 2003 $40,135,280 Trisenox’s cumulative revenue

Creating buzz

When it comes to clinical trials and medical literature, it doesn’t take a large, double-blind study and publication in a prestigious journal for a drug company to create buzz.

CTI, like many biotechs and pharmaceutical companies, showcased data at medical conferences, presenting preliminary results from research that might involve as few as six patients. Often, the company used posters and abstracts to synopsize and highlight. Typically, these materials tout early data and are rarely peer-reviewed. A medical-journal article calls poster reproductions “an ideal form of stealth marketing.”

CTI’s presentations frequently addressed Trisenox’s off-label applications, including multiple myeloma and types of leukemia other than APL.

At the American Society of Hematology meeting in December 2003, CTI had 25 presentations on Trisenox. At the same meeting the year before, there were 37 abstracts and presentations.

The company poured money into researching alternative uses for Trisenox, conducting clinical trials and pursuing orphan-drug status for at least seven other rare diseases.


By early 2003, off-label prescriptions accounted for about 90 percent of the drug’s sales, with myeloma and myelodysplastic syndrome leading the way, according to CTI’s figures.

When used as approved, Trisenox saved lives. “We can claim that we cure about 50 percent of the patients who’ve had relapsed/refractory APL,” Bianco said in November 2003. However, the FDA required a black-box warning — one of the agency’s strongest measures short of pulling a drug — because of Trisenox’s link to two potentially fatal reactions, including a syndrome characterized by fever and heart problems.

Beyond the posters and abstracts there were news releases — and lots of them. “Trisenox Sales Increase 71%,” the Oct. 21, 2003, CTI news release said. Two days later CTI issued another release, headlined: “Drug May Treat Previously Incurable Brain Cancer, Say Stanford Researchers.”

The releases hit those themes time and again — Trisenox’s sales (“85 Percent Increase” … “Up 130 Percent” … “Sales Grow More Than 240 Percent”), and its potential uses beyond APL: “May Prove Useful” … “May Fill an Unmet Need” … “May Represent a Promising Treatment.”

In 2003, a public-relations firm hired by CTI accidentally emailed journalists a report summarizing interviews it had conducted of CTI managers and outside analysts. The report cited “skepticism” and “outright cynicism” about the company, both inside and outside; one analyst called CTI “very promotional,” with a tendency to “over-promise and under-deliver” with its clinical results.

1st quarter, 2005 $72,735,280 Trisenox’s cumulative revenue

Education as a marketing tool

To remain licensed, doctors must take continuing medical-education courses, often referred to as CMEs. The requirement’s benefit is obvious: Healthcare professionals keep current with medical developments.

Through an independent or unrestricted educational grant, CTI helped fund CMEs in which arsenic trioxide’s off-label uses were discussed. Three were released in January 2005 as online courses: one on the drug’s potential in treating multiple myeloma; another on myelodysplastic syndrome, and a third on newly diagnosed APL.

Medical-education industry grows Continuing medical-education courses, or CMEs, have become a billion-dollar industry, thanks largely to commercial support from pharmaceutical companies and biotech, which have been accused of using the courses to market their products. Source: Accreditation Council for Continuing Medical Education

While industry funding of CMEs can be viewed as philanthropic, Congress and the Justice Department have come to see something else — an educational enterprise converted into a marketing opportunity. And with about a million hours of instruction offered annually, the size of that opportunity is enormous.

Beginning in 1998, industry support for CMEs quadrupled over 10 years; by 2007, that funding reached $1.2 billion.

The federal government accused a Warner-Lambert division, which became part of Pfizer in 2000, of using CMEs attended by thousands of doctors to market Neurontin, an epilepsy drug, for pain relief and bipolar disorder. “Medical education drives this market!!” an internal business plan said. In litigation, it surfaced that Pfizer’s sales team referred to Neurontin as “snake oil.” In 2004, Warner-Lambert pleaded guilty to criminal charges and agreed to pay $430 million.

Other drugmakers, including Allergan, Serono and Orphan Medical, have also settled cases in which they were accused of using CMEs to market orphan drugs off-label.

Testifying before a Senate committee in 2009, Steven Nissen, a Cleveland doctor and past president of the American College of Cardiology, called CMEs an “insidious vehicle for the aggressive promotion of drugs and medical devices.”

Amid increased scrutiny from Congress and others, industry funding of CMEs has tapered off in recent years, although it still exceeds a half-billion dollars annually.

3rd quarter, 2005 $81,335,280 Trisenox’s cumulative revenue

Selling, suing and being sued

By the summer of 2005, Trisenox had produced $81.3 million in cumulative revenue for CTI. In July, the Seattle biotech sold the drug to Cephalon, an international biopharmaceutical company. From the sale, CTI received about $29 million.

Under the sale’s terms, CTI also stood to make up to an additional $100 million, depending on how Cephalon fared with the drug.

Soon after, CTI’s fortunes turned. In 2006, Marchese, who had been fired from CTI, filed a whistle-blower lawsuit against the company, accusing it of illegally promoting Trisenox off-label. The federal government later joined the suit.

In 2007, CTI agreed to pay the United States $10.5 million to resolve the allegations. In a Department of Justice news release, an assistant attorney general said: “Cell Therapeutics essentially subverted a regulatory system designed to assure that patients receive only those drugs that have been proven to be effective for their illness.”

Bianco told The Seattle Times that when CTI settled, the company was close to insolvency and couldn’t afford to fight. He defended CTI’s handling of Trisenox and expressed pride about certain decisions — for example, the drug’s price.

Cell Therapeutics could have charged more than $22,000, Bianco said. But having seen patients lose their homes and savings in pursuit of expensive care, he and other medical professionals at the company wanted a price they could “live with — and people can live with, too.”


Bianco cited other orphan drugs — ones, like Trisenox, licensed for few patients — that have used six-figure prices to generate extraordinary revenues: “As a health-care provider, I find it totally obscene. As a pharmaceutical executive, I find it damaging to the industry in the long run.”

With Trisenox being CTI’s first commercial product, the company took steps to ensure it stayed within the lines when it came to promotion and sales, Bianco said. The company tapped a former FDA chief counsel to review the company’s promotional materials, and hired a consultant to help with reimbursement issues.

But a couple of “rogue” sales employees violated company policies, Bianco said, and the consultant offered lousy advice on pursuing Medicare reimbursement. CTI sued the consultant — and the consultant settled, agreeing to pay $11 million.

The Justice Department argued Marchese was culpable in CTI’s off-label marketing and should be denied a share of the government’s settlement. A judge disagreed, saying Marchese’s interpretation of reimbursement law was “honest, albeit flawed.” But she did reduce the amount he could recover, saying he should have come forward sooner about CTI’s off-label practices. For the suit against Cell Therapeutics, he received $1.6 million.

Marchese, in an interview, said he acted as soon as he could, given what he knew. “I did the right thing,” he said.

Federal allegations of illegal marketing At least 13 times since 2005, drugmakers have settled when accused by the federal government of improperly promoting or marketing orphan drugs licensed for rare diseases. After the FDA approves a drug as safe and effective for a specified use, any promotion by the manufacturer for other uses — known as “off-label” uses — renders the product misbranded. Year Company Drug Settlement Source: U.S. Department of Justice 2005 Serono; RJL Sciences Serostim $704 million 2010 Allergan Botox $600 million 2007 Bristol-Myers Squibb; Apothecon Pharmaceuticals Abilify; assorted drugs $515 million 2006 Schering-Plough Intron A; Temodor $435 million 2008 Cephalon Provigil; Gabitril; Actiq $425 million 2010 Novartis Pharmaceuticals Trileptal, Diovan, Zelnorm, Sandostatin, Exforge and Tekturna $420 million 2010 Ortho-McNeil Pharmaceutical; Ortho-McNeil-Janssen Pharmaceuticals Topamax $81 million 2010 Novartis Vaccines and Diagnostics; Novartis Pharmaceuticals TOBI $72.5 million 2011 Serono Laboratories; EMD Serono; Merck Serono; Ares Trading Rebif $44.3 million 2006 InterMune Actimmune $36.9 million 2011 Novo Nordisk NovoSeven $25 million 2007 Jazz Pharmaceuticals (Orphan Medical) Xyrem $20 million 2007 Cell Therapeutics Trisenox $10.5 million

The CTI settlement paled in comparison to those reached by other companies accused of illegally promoting orphan drugs for off-label uses: Novartis, $420 million; Bristol-Myers Squibb, $515 million; Allergan, $600 million; and Serono, $704 million.

In the last six years, CTI’s finances have staggered along. As of June, the company’s accumulated deficit was $1.9 billion. Shareholders sued the company, accusing it of making misleading public statements about one of its drugs. While admitting no wrongdoing, CTI agreed to settle in 2012 for $19 million.

Twenty-two years after it was incorporated, CTI has never posted a profit.

James Berenson, the doctor who did speaking and consulting for CTI, has done extensive work for Cephalon, the company that bought Trisenox and which is now a subsidiary of Teva Pharmaceuticals. He’s head of a corporation that, since 2010, has received $272,000 from Cephalon for clinical research, according to ProPublica, a journalism nonprofit that has tracked industry payments to doctors. During the same time, Novartis, another drugmaker, has paid Berenson $150,000 for speaking, meals and travel.

And Trisenox, even with its new owner, has continued to raise concerns. In 2011 the FDA sent a warning letter to Cephalon, saying its website minimized the drug’s risks while overstating its uses.

To this day, Trisenox has not been licensed for anything but the rare disease that first put it on the market.