Document:

Exhibit 10.2

 

CORPORATE INTEGRITY AGREEMENT

BETWEEN THE

OFFICE OF INSPECTOR
GENERAL

OF THE

DEPARTMENT OF HEALTH
AND HUMAN SERVICES

AND

CEPHALON, INC.

 

I.              PREAMBLE

 

Cephalon, Inc. (Cephalon) hereby enters into this
Corporate Integrity Agreement (CIA) with the Office of Inspector General (OIG)
of the United States Department of Health and Human Services (HHS) to promote
compliance with the statutes, regulations, and written directives of Medicare,
Medicaid, and all other Federal health care programs (as defined in 42 U.S.C. §
1320a-7b(f)) (Federal health care program requirements) and with the statutes,
regulations, and written directives of the Food and Drug Administration (FDA
requirements). Contemporaneously with this CIA, Cephalon is entering into a
Settlement Agreement with the United States. Cephalon will also enter into
settlement agreements with various States (Related State Settlement Agreements)
and Cephalon’s agreement to this CIA is a condition precedent to those
agreements.

 

Prior to the Effective Date of this CIA (as defined
below), Cephalon established a voluntary compliance program (known as “Global
Compliance” or “Global Compliance Program”) applicable to all Cephalon
employees including employees in Worldwide Pharmaceutical Operations. Cephalon’s
Global Compliance Program includes an Executive Vice President, Chief
Compliance Officer who reports directly to the Audit Committee of the Board of
Directors and to the CEO, and a Compliance Committee. The Global Compliance
Program also includes a Code of Conduct applicable to all employees that is
regularly reviewed and disseminated, written policies and procedures that, as
represented by Cephalon, promote high ethical standards, educational and
training initiatives that, as represented by Cephalon, help to ensure
compliance with applicable laws and regulations, a Disclosure Program that
allows for the confidential disclosure and investigation of potential
compliance violations and appropriate disciplinary procedures, screening
measures for Ineligible Persons, and regular internal auditing procedures.

 

Cephalon shall continue its Compliance Program throughout
the term of this CIA and shall do so in accordance with the terms set forth
below. Cephalon may modify its

 

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Compliance Program as appropriate, but, at a minimum,
Cephalon shall ensure that during the term of this CIA, it shall comply with
the obligations set forth herein.

 

II.            TERM AND SCOPE OF
THE CIA

 

A.    The period of the compliance obligations assumed by
Cephalon under this CIA shall be five years from the effective date of this
CIA, unless otherwise specified. The effective date shall be the date on which
the final signatory of this CIA executes this CIA (Effective Date). Each
one-year period, beginning with the one-year period following the first day of
the first calendar month following the Effective Date, shall be referred to as
a “Reporting Period.”

 

B.    Sections VII, IX, X, and XI shall expire no later
than 120 days after OIG’s receipt of: (1) Cephalon’s
final Annual Report; or (2) any additional materials submitted by Cephalon
pursuant to OIG’s request, whichever is
later.

 

C.             The scope of this CIA
shall be governed by the following definitions:

 

1.   “Covered
Persons” includes:

 

a. all owners who are natural persons (other than
shareholders who: (1) have an ownership interest of less than 5%; and (2) acquired
the ownership interest through public trading), officers, directors, and United
States-based employees of Cephalon; and

 

b. all contractors, subcontractors, agents, and
other persons who perform Promotional and Product Services Related Functions
(as defined below in Section II.C.4) on behalf of Cephalon.

 

Notwithstanding the above, this term does not include
part-time or per diem employees, contractors, subcontractors, agents, and other
persons who are not reasonably expected to work more than 160 hours per year,
except that any such individuals shall become “Covered Persons” at the point
when they work more than 160 hours during the calendar year.

 

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2.               “Relevant Covered Persons”
includes all Covered Persons whose job responsibilities relate to Promotional
and Product Services Related Functions.

 

3.               “Government Reimbursed
Products” refers to all Cephalon products that are reimbursed by Federal health
care programs. This term includes products that are promoted by Cephalon for
which it may not hold the New Drug Application.

 

4.               The term “Promotional and
Product Services Related Functions” includes: (a) the promotion,
marketing, and sale of Government Reimbursed Products; and (b) the
development or dissemination of materials or information about, or the
provision of services relating to, Government Reimbursed Products.

 

5.               The term “Third Party Educational
Activity” shall mean any continuing medical education (CME), independent
medical education (IME), disease awareness, or other scientific, educational,
or professional program, meeting, or event sponsored by Cephalon, including but
not limited to, sponsorship of symposia at medical conferences.

 

6.               The term “Third Party
Personnel” shall mean personnel of the entities with whom Cephalon has or may
in the future enter into agreements to co-promote a Government Reimbursed
Product in the United States or engage in joint promotional activities in the
United States relating to such a product. Cephalon has represented that: (1) the
Third Party Personnel are employed by other independent entities; (2) Cephalon
does not control Third Party Personnel; and (3) it would be commercially
impracticable to compel the compliance of Third Party Personnel with the
requirements set forth in this CIA. Cephalon agrees to promote compliance by
Third Party Personnel with Federal health care program and FDA requirements by complying
with the provisions set forth below in Sections III.B.2, V.A.3, and V.B.4
related to Third Party Personnel who meet the definition of Covered Persons.
Provided that Cephalon complies with the requirements of Sections III.B.2,
V.A.3, and V.B.4, Cephalon shall not be required to fulfill the other CIA

 

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obligations that would otherwise apply to Third Party
Personnel who meet the definition of Covered Persons.

 

III.         CORPORATE
INTEGRITY OBLIGATIONS

 

Cephalon shall establish and maintain a Compliance Program
throughout the term of this CIA that includes the following elements:

 

A. Compliance Responsibilities of Chief Compliance
Officer, Compliance Committee, the Board of Directors, and Management Certifications.

 

1.     Chief
Compliance Officer. Prior to the Effective Date, Cephalon appointed a Chief Compliance
Officer, and Cephalon shall maintain a Chief Compliance Officer during the term
of the CIA. The Chief Compliance Officer shall be responsible for developing
and implementing policies, procedures, and practices designed to ensure
compliance with the requirements set forth in this CIA and with Federal health
care program requirements and FDA requirements. The Chief Compliance Officer is
and shall continue to be a member of executive management of Cephalon, shall
make periodic (at least quarterly) reports regarding compliance matters
directly to the Audit Committee of the Board of Directors of Cephalon, and
shall be authorized to report on such matters to the Board of Directors at any
time. The Chief Compliance Officer shall not be or be subordinate to the
General Counsel or Chief Financial Officer. The Chief Compliance Officer shall
be responsible for monitoring the day-to-day compliance activities engaged in
by Cephalon as well as for any reporting obligations created under this CIA.

 

Cephalon shall report to OIG, in writing, any changes in
the identity or position description of the Chief Compliance Officer, or any
actions or changes that would affect the Chief Compliance Officer’s ability to
perform the duties necessary to meet the obligations in this CIA, within 15
days after such a change.

 

2.     Compliance
Committee.
Prior to the Effective Date, Cephalon established a Compliance Committee, and
Cephalon shall maintain a Compliance Committee during the term of this CIA. The
Compliance Committee shall, at a minimum, include the Chief Compliance Officer
and other members of senior management necessary to meet the requirements of
this CIA (e.g., senior managers of relevant departments, such as legal,
medical affairs, sales, marketing, human resources, and internal audit). The
Chief Compliance Officer shall chair the Compliance Committee and the Committee
shall support the Chief Compliance Officer in fulfilling his/her

 

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responsibilities (e.g., shall assist in the
analysis of the organization’s risk areas and shall receive reports on
compliance-related monitoring, audits, and investigations).

 

Cephalon shall report to OIG, in writing, any changes in
the composition of the Compliance Committee, or any actions or changes that
would affect the Compliance Committee’s ability to perform the duties necessary
to meet the obligations in this CIA, within 15 days after such a change.

 

3.             Board
of Directors. The Board of Directors (Board) or a Committee of the Board, if
applicable, shall be responsible for the review and oversight of matters
related to compliance with Federal health care program requirements, FDA
requirements, and the obligations of this CIA. The Board, or a Committee of the
Board, shall, at a minimum, be responsible for the following:

 

a.                meeting at least
quarterly to review and oversee Cephalon’s Global Compliance Program, including
but not limited to the performance of the Chief Compliance Officer and Global
Compliance department.

 

b.                for each Reporting Period
of the CIA, adopting a resolution (pursuant to the process outlined in the
bylaws for adopting resolutions) summarizing its review and oversight of
Cephalon’s compliance with Federal health care program requirements, FDA
requirements, and the obligations of this CIA. Each individual member of the
Board or, if applicable, each member of the Committee of the Board having
responsibility for compliance, shall sign a statement indicating that he or she
agrees with the resolution.

 

At minimum, the resolution shall include the following
language:

 

“The Board of Directors [or a Committee of the Board] has
made a reasonable inquiry into the operations of Cephalon’s Global Compliance
Program, including the performance of the Chief Compliance Officer and the
Global Compliance department. Based on its inquiry, the Board [or Committee]
has concluded that, to the best of its knowledge, Cephalon has implemented an
effective Global Compliance Program to meet the Federal health care program
requirements, FDA requirements, and the obligations of the CIA.”

 

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If the Board (or the Board Committee) is unable to provide
such a conclusion in the resolution, the Board (or Committee) shall include in
the resolution a written explanation of the reasons why it is unable to provide
the conclusion and the steps it is taking to implement an effective Compliance
Program at Cephalon.

 

Cephalon shall report to OIG, in writing, any changes in
the composition of the Board, or any actions or changes that would affect the
Board’s ability to perform the duties necessary to meet the obligations in this
CIA, within 15 days after such a change.

 

4.             Management
Accountability and Certifications: Cephalon represents that compliance is a
component of each employee’s performance objectives. In addition to the
responsibilities set forth in this CIA for all Covered Persons, certain
Cephalon employees (“Certifying Employees”) are specifically expected to
monitor and oversee activities within their areas of authority and shall
annually certify in writing or electronically that the applicable area of
authority is compliant with Federal health care program requirements, FDA
requirements, and the obligations of this CIA. The Certifying Employees
include, at a minimum, the following: Chairman and Chief Executive Officer,
Executive Vice President of Worldwide Medical and Regulatory Operations,
Executive Vice President of Worldwide Pharmaceutical Operations, all business
unit sales vice presidents, all business unit marketing vice presidents, all
business unit sales directors, all business unit marketing directors, the Vice
President of Worldwide Medical Affairs, and all medical directors of
communications and medical science liaisons (MSLs).

 

For each Reporting Period, each Certifying Employee shall
certify in writing or electronically that:

 

“I have been trained on and understand the
compliance requirements and responsibilities as they relate to [department or
functional area], an area under my supervision. My job responsibilities include
ensuring compliance with regard to the
           [insert name of
the department or functional area.] To the best of my knowledge, except as
otherwise described herein, the                [insert
name of department or functional area] of Cephalon is in compliance with all
applicable Federal health care program requirements, FDA requirements, and the
obligations of the CIA.”

 

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B.  Written
Standards.

 

1. Code of Conduct.
Prior to the Effective Date, Cephalon developed, implemented, and distributed a
written Code of Conduct to all Covered Persons. Cephalon currently requires all
newly employed persons to certify in writing or electronically that they have
received, read, understood, and shall abide by Cephalon’s Code of Conduct.
Cephalon shall continue to make the promotion of, and adherence to, the Code of
Conduct an element in evaluating the performance of all employees.

 

The Code of Conduct sets forth and shall continue to set
forth, at a minimum, the following:

 

a.      Cephalon’s commitment to full compliance with all
Federal health care program and FDA requirements, including its commitment to
market, sell, promote, research, develop, provide information about, and
advertise its products in accordance with Federal health program requirements
and FDA requirements;

 

b.      Cephalon’s requirement that all of its Covered
Persons shall be expected to comply with all Federal health care program and
FDA requirements and with Cephalon’s own Policies and Procedures as implemented
pursuant to Section III.B (including the requirements of this CIA);

 

c.      the requirement that all of Cephalon’s Covered
Persons shall be expected to report to the Chief Compliance Officer, or other
appropriate individual designated by Cephalon, suspected violations of any
Federal health care program and FDA requirements or of Cephalon’s own Policies
and Procedures;

 

d.      the possible consequences to both Cephalon and
Covered Persons of failure to comply with Federal health care program and FDA
requirements and with Cephalon’s own Policies and Procedures and the failure to
report such noncompliance; and

 

e.      the right of all individuals to use the Disclosure
Program described in Section III.E, and Cephalon’s commitment to
nonretaliation and to

 

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maintain, as appropriate,
confidentiality and anonymity with respect to such disclosures.

 

To the extent not already accomplished, within 120 days
after the Effective Date, the Code of Conduct shall be distributed to each
Covered Person and each Covered Person shall certify, in writing or
electronically, that he or she has received, read, understood, and shall abide
by Cephalon’s Code of Conduct. New Covered Persons shall receive the Code of
Conduct and shall complete the required certification within 30 days after
becoming a Covered Person or within 120 days after the Effective Date,
whichever is later.

 

Cephalon shall periodically review the Code of Conduct to
determine if revisions are appropriate and shall make any necessary revisions
based on such review. Any revised Code of Conduct shall be distributed within
30 days after any revisions are finalized. Each Covered Person shall certify,
in writing or electronically, that he or she has received, read, understood,
and shall abide by the revised Code of Conduct within 30 days after the
distribution of the revised Code of Conduct.

 

2.   Third
Party Personnel. Within 90 days after the Effective Date, and annually thereafter by the
anniversary of the Effective Date, Cephalon shall send a letter to each entity
employing Third Party Personnel. The letter shall outline Cephalon’s
obligations under the CIA and its commitment to full compliance with all
Federal health care program and FDA requirements. The letter shall include a
description of Cephalon’s Compliance Program. Cephalon shall attach a copy of
its Code of Conduct to the letter and shall request the entity employing Third
Party Personnel to either: (a) make a copy of Cephalon’s Code of Conduct
and a description of Cephalon’s Compliance Program available to its Third Party
Personnel; or (b) represent to Cephalon that it has and enforces a
substantially comparable code of conduct and compliance program for its Third
Party Personnel.

 

3.   Policies
and Procedures. Prior to the Effective Date, Cephalon implemented written Policies and
Procedures regarding the operation of the Compliance Program and Cephalon’s
compliance with Federal health care program and FDA requirements (Policies and
Procedures). To the extent not already accomplished, within 120 days after the
Effective Date, Cephalon shall ensure that the Policies and Procedures address
or shall continue to address:

 

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a.               the subjects relating to
the Code of Conduct identified in Section III.B.1;

 

b.              appropriate ways to
conduct Promotional and Product Services Related Functions in compliance with
all applicable Federal healthcare program requirements, including, but not
limited to the Federal anti-kickback statute (codified at 42 U.S.C. §
1320a-7b), and the False Claims Act (codified at 31 U.S.C. §§ 3729-3733);

 

c.               appropriate ways to
conduct Promotional and Product Services Related Functions in compliance with
all applicable FDA requirements;

 

d.              the mechanisms through,
and manner in which, Cephalon receives and responds to requests for information
about non-FDA approved (or “off-label”) uses of Cephalon’s products; the form
and content of information disseminated by Cephalon in response to such
requests; and the internal review process for the information disseminated.

 

The Policies and Procedures shall include a requirement
that Cephalon develop a database to track requests for information about
Cephalon’s products that are made to Cephalon’s Medical Services (MS)
department. This database shall be referred to as the “Inquiries Database.” The
Inquiries Database shall include the following items of information for each
unique inquiry (Inquiry) received for information about Cephalon’s products: 1)
date of Inquiry; 2) form of Inquiry (e.g., fax, phone, etc.); 3) name of
the requesting health care professional (HCP) or health care institution (HCI);
4) nature and topic of request (including exact language of the Inquiry if made
in writing); 5) nature/form of the response from Cephalon (including a record
of the materials provided to the HCP or HCI in response to the request); and 6)
the name of the Cephalon representative who called on or interacted with the
HCP or HCI. Any response from Medical Services to an HCP or HCI shall identify
whether the information provided addresses an indication that is part of the
approved

 

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product label. The status and findings of any follow-up
review conducted by Cephalon in situations in which it appears that the Inquiry
may have related to improper off-label promotion shall be maintained by Global
Compliance and the information shall be included in the Inquiry Reports further
discussed in Section III.A.2 of Appendix B;

 

e.               development of call plans
for field sales representatives who promote Government Reimbursed Products. For
each product, the Policies and Procedures shall require that Cephalon review
the call plans for the product and the bases upon which specified physician
specialties and institutional provider types are included in, or excluded from,
the call plans. The Policies and Procedures shall also require that Cephalon
modify the call plans as necessary to ensure that Cephalon is promoting its
products in a manner that complies with all applicable Federal health care
program and FDA requirements. The call plan reviews shall occur at least
annually and shall also occur each time the FDA approves a new or additional
indication for a Government Reimbursed Product;

 

f.                 consultant or other
fee-for-service arrangements entered into with HCPs or HCIs (including, but not
limited to, speaker programs, speaker training programs, advisory boards, or
any other financial relationship with an HCP or HCI) and all events and
expenses relating to such engagements or arrangements. These Policies and
Procedures shall be designed to ensure that the arrangements and related events
are used for legitimate and lawful purposes in accordance with applicable
Federal health care program and FDA requirements. The Policies and Procedures
shall include requirements about the content and circumstances of such
arrangements and events;

 

g.              programs to educate field
representatives, including preceptorships. These Policies and Procedures shall
be designed to ensure that the programs are used for legitimate and lawful
purposes in accordance with applicable Federal health care

 

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program and FDA requirements.
The Policies shall include requirements about the content and circumstances of
such arrangements and events;

 

h.              sponsorship or funding of
grants (including educational grants) or charitable contributions. These Policies
and Procedures shall be designed to ensure that Cephalon’s funding and/or
sponsorship complies with all applicable Federal health care program and FDA
requirements;

 

i.                  funding of, or
participation in, any Third Party Educational Activity. These Policies and
Procedures shall be designed to ensure that Cephalon’s funding and/or
sponsorship of such programs satisfies all applicable Federal health care
program and FDA requirements.

 

The Policies and Procedures shall require that: 1)
Cephalon disclose its financial support of the Third Party Educational Activity
and any financial relationships with faculty, speakers, or organizers at such
Activity; 2) as a condition of funding, the third party shall agree to disclose
Cephalon’s financial support of the Third Party Educational Activity and any
financial relationships that Cephalon might have with faculty, speakers, or
organizers at such Activity; 3) any faculty, speakers, or organizers at the
Third Party Educational Activity disclose any financial relationship with
Cephalon; 4) the Third Party Educational Activity have an educational focus; 5)
the content, organization, and operation of the Third Party Educational
Activity be independent of Cephalon control; 6) Cephalon support only Third
Party Educational Activity that is non-promotional in tone/nature; and 7)
Cephalon’s support of a Third Party Educational Activity shall be contingent on
the provider’s commitment to provide information at the Educational Activity
that is fair, balanced, accurate and not misleading;

 

j.                  review of promotional
materials by appropriate qualified personnel (such as regulatory, medical,
and/or legal personnel),

 

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and the review of other
materials and information intended to be disseminated outside Cephalon in a
manner designed to ensure that legal, regulatory, and medical concerns are
properly addressed during Cephalon’s review and approval process and are
elevated when appropriate. The Policies and Procedures shall be designed to
ensure that such materials and information, when finally approved, comply with
all applicable Federal health care program and FDA requirements;

 

k.               sponsorship or funding of
research or related activities. These Policies and Procedures shall be designed
to ensure that Cephalon’s funding and/or sponsorship complies with all
applicable Federal health care program and FDA requirements;

 

l.                  compensation (including
salaries and bonuses) for Relevant Covered Persons. These Policies and
Procedures shall be designed to ensure that financial incentives do not
inappropriately motivate such individuals to engage in improper promotion,
sales, and marketing of Cephalon’s products;

 

m.            disciplinary policies and
procedures for violations of Cephalon’s Policies and Procedures, including
policies relating to Federal health care program and FDA requirements.

 

To the extent not already accomplished, within 120 days
after the Effective Date, the relevant portions of the Policies and Procedures
shall be made available to all individuals whose job functions relate to those
Policies and Procedures. Appropriate and knowledgeable staff shall be available
to explain the Policies and Procedures.

 

At least
annually (and more frequently, if appropriate), Cephalon shall assess and
update, as necessary, the Policies and Procedures. Within 30 days after the
effective date of any revisions, the relevant portions of any such revised
Policies and Procedures shall be made available to all individuals whose job
functions relate to those Policies and Procedures.

 

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C.            Training
and Education.

 

Cephalon represents that it provides training to its
employees on a regular basis concerning a variety of topics. The training
required by this CIA need not be separate and distinct from the regular
training provided by Cephalon, but instead may be integrated fully into such
regular training so long as the training covers the areas specified below.

 

1. General Training.
Within 120 days after the Effective Date, Cephalon shall provide at least two
hours of General Training to each Covered Person. This training, at a minimum,
shall explain Cephalon’s:

 

a.   CIA
requirements; and

 

b.   Cephalon’s
Compliance Program (including the Code of Conduct and the Policies and
Procedures as they pertain to general compliance issues).

 

To the extent that Cephalon provided General Training to
Covered Persons during the 180 days immediately prior to the Effective Date
that satisfied the requirements set forth in Section III.C.1.b above, the
OIG shall credit that training for purposes of satisfying Cephalon’s General
Training obligations of Section III.C.1 for the first Reporting Period.
Cephalon may satisfy its remaining General Training obligations for the Covered
Persons who received the training described in the preceding sentence by
notifying them within 90 days after the Effective Date in writing or in
electronic format of the fact that Cephalon entered a CIA and providing an
explanation of Cephalon’s requirements and obligations under the CIA.

 

New Covered Persons shall receive the General Training
described above within 30 days after becoming a Covered Person or within 120
days after the Effective Date, whichever is later. After receiving the initial
General Training described above, each Covered Person shall receive at least
one hour of General Training in each subsequent Reporting Period.

 

2. Specific Training.
Within 120 days after the Effective Date, each Relevant Covered Person shall
receive at least three hours of Specific Training in addition to the General
Training required above.

 

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This Specific Training shall include a discussion of:

 

a.               all applicable Federal health care program requirements relating to
Promotional and Product Services Related Functions;

 

b.              all applicable FDA requirements relating to Promotional and Product
Services Related Functions;

 

c.               all Cephalon policies, procedures, and other requirements applicable to
Promotional and Product Services Related Functions;

 

d.              the personal obligation of each individual involved in Promotional and
Product Services Related Functions to comply with all applicable Federal health
care program and FDA requirements and all other applicable legal requirements;

 

e.               the legal sanctions for violations of the applicable Federal health care
program and FDA requirements; and

 

f.                 examples of proper and improper practices related to Promotional and
Product Services Related Functions.

 

To the extent that Cephalon provided Specific Training to
Relevant Covered Persons during the 180 days immediately prior to the Effective
Date that satisfied the requirements set forth in Section III.C.2 above,
the OIG shall credit that training for purposes of satisfying Cephalon’s
Specific Training obligations of this Section III.C.2 for the first
Reporting Period.

 

New Relevant Covered Persons shall receive this training
within 30 days after the beginning of their employment or becoming Relevant
Covered Persons, or within 120 days after the Effective Date, whichever is
later. A Cephalon employee who has completed the Specific Training shall review
a new Relevant Covered Person’s work, to the extent that the work relates to
Promotional and Product Services Related Functions, until such time as the new
Relevant Covered Person completes his or her Specific Training.

 

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After receiving the initial Specific Training described in
this Section, each Relevant Covered Person shall receive at least two hours of
Specific Training in each subsequent Reporting Period.

 

3.     Certification. Each
individual who is required to attend training shall certify, in writing or
electronically, that he or she has received the required training. The
certification shall specify the type of training received and the date
received. The Compliance Officer (or designee) shall retain the certifications,
along with all course materials. These shall be made available to OIG, upon
request.

 

4.     Qualifications of Trainer. Persons
providing the training shall be knowledgeable about the subject area of the
training, including applicable Federal health care program and FDA
requirements. The training and education required under this Section III.C
may be provided by supervisory employees, knowledgeable staff, Cephalon
trainers, and/or outside consultant trainers selected by Cephalon or may be
satisfied by relevant, accredited continuing education programs provided they
cover topics outlined above in Section III.C.2.

 

5.     Update of Training.
Cephalon shall review the training annually, and, where appropriate, update the
training to reflect changes in Federal health care program requirements, FDA
requirements, any issues discovered during any internal audits or any IRO
Review, and any other relevant information.

 

6.     Computer-based Training.
Cephalon may provide the training required under this CIA through appropriate
computer-based training approaches. If Cephalon chooses to provide
computer-based training, it shall make available appropriately qualified and
knowledgeable staff or trainers to answer questions or provide additional
information to the individuals receiving such training. In addition, if
Cephalon chooses to provide computer-based General or Specific Training, all
applicable requirements to provide a number of “hours” of training in this Section III.C
may be met with respect to computer-based training by providing the required
number of “normative” hours as that term is used in the computer-based training
industry.

 

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D. Review Procedures.

 

1. General Description.

 

a.   Engagement
of Independent Review Organization. Within
90 days after the Effective Date, Cephalon shall engage an entity (or
entities), such as an accounting, auditing, or consulting firm (hereinafter “Independent
Review Organization” or “IRO”), to perform reviews to assist Cephalon in
assessing and evaluating its Promotional and Product Services Related
Functions. The applicable requirements relating to the IRO are outlined in
Appendix A to this CIA, which is incorporated by reference.

 

Each IRO engaged by Cephalon shall have expertise in
applicable Federal health care program and FDA requirements as may be
appropriate to the Review for which the IRO is retained. Each IRO shall assess,
along with Cephalon, whether it can perform the engagement in a professionally
independent and objective fashion, as appropriate to the nature of the review,
taking into account any other business relationships or other engagements that
may exist.

 

The IRO(s) shall conduct reviews that assess Cephalon’s
systems, processes, policies, procedures, and practices relating to Promotional
and Product Services Related Functions (Promotional and Product Services
Reviews).

 

b.   Frequency
and Brief Description of Reviews. As set
forth more fully in Appendix B, the Promotional and Product Services Review
shall consist of two components - a Systems Review and a Transactions Review.
The Systems Review shall assess Cephalon’s systems, processes, policies, and
procedures relating to Promotional and Product Services Related Functions. If there
are no material changes in Cephalon’s systems, processes, policies, and
procedures relating to Promotional and Product Services Related Functions, the
Promotional and Product Services Systems Review shall be performed for the
periods covering the first and fourth Reporting Periods. If Cephalon materially
changes its systems, processes,

 

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policies, and procedures relating to Promotional and
Product Services Related Functions, the IRO shall perform a Systems Review for
the Reporting Period in which such changes were made in addition to conducting
the Systems Review for the first and fourth Reporting Periods.

 

The Promotional and Product Services Transactions Review
shall be performed annually and shall cover each of the five Reporting Periods.
The IRO(s) shall perform all components of each annual Transaction Review.
As set forth more fully in Appendix B, the Transactions Review shall include
several components, including a review relating to Inquiries included in
Cephalon’s Inquiries Database, a review of Cephalon’s Call Plan Assessments,
and a review of a records relating to a sample of the Payments that are
reported by Cephalon pursuant to Section III.M below. In addition,
beginning with the second Reporting Period, each Transactions Review shall also
include a review of up to three additional areas or practices of Cephalon
identified by the OIG in its discretion (hereafter “Additional Items”).

 

For purposes of identifying the Additional Items to be
included in the Transactions Review for a particular Reporting Period, the OIG
will consult with Cephalon and may consider internal audit work conducted or
planned by Cephalon, Cephalon’s product portfolio, the nature and scope of
Cephalon’s promotional practices and arrangements with HCPs, and other
information known to it. As set forth more fully in Section III.D of
Appendix B, Cephalon may propose to the OIG that its internal audit(s) be
partially substituted for one or more of the Additional Items that would
otherwise be reviewed by the IRO as part of the Transactions Review. The OIG
retains sole discretion over whether, and in what manner, to allow Cephalon’ s
internal audit work to be substituted for a portion of the Additional Items
review conducted by the IRO.

 

The OIG shall notify Cephalon of the nature and scope of
the IRO review for each of the Additional Items no later than 90 days prior to
the end of the second through fifth Reporting Periods. Prior to

 

17

 

undertaking the review of the Additional Items, the IRO
and/or Cephalon shall submit an audit work plan to the OIG for approval and the
IRO shall conduct the review of the Additional Items based on a work plan
approved by the OIG.

 

c. Retention of Records.
The IRO and Cephalon shall retain and make available to OIG, upon request, all
work papers, supporting documentation, correspondence, and draft reports (those
exchanged between the IRO and Cephalon) related to the reviews.

 

2.     IRO Review Reports. The IRO(s) shall prepare a report (or reports) based upon each
Review performed. The information and content to be included in the report is
described in Appendix B, which is incorporated by reference.

 

3.     Validation
Review. In the event OIG has reason to
believe that: (a) any IRO Review fails to conform to the requirements of
this CIA; or (b) the IRO’s findings or Review results are inaccurate, OIG
may, at its sole discretion, conduct its own review to determine whether the
applicable IRO Review complied with the requirements of the CIA and/or the
findings or Review results are inaccurate (Validation Review). Cephalon shall
pay for the reasonable cost of any such review performed by OIG or any of its
designated agents. Any Validation Review of Reports submitted as part of
Cephalon’s final Annual Report shall be initiated no later than one year after
Cephalon’s final submission (as described in Section II) is received by
OIG.

 

Prior to initiating a Validation Review, OIG shall notify
Cephalon of its intent to do so and provide a written explanation of why OIG
believes such a review is necessary. To resolve any concerns raised by OIG,
Cephalon may request a meeting with OIG to: (a) discuss the results of any
Review submissions or findings; (b) present any additional information to
clarify the results of the applicable Review or to correct the inaccuracy of
the Review; and/or (c) propose alternatives to the proposed Validation
Review. Cephalon agrees to provide any additional information as may be
requested by OIG under this Section III.D.3 in an expedited manner. OIG
will attempt in good faith to resolve any Review issues with Cephalon prior to
conducting a Validation Review. However, the final determination as to whether
or not to proceed with a Validation Review shall be made at the sole discretion
of OIG.

 

18

 

4. Independence and
Objectivity Certification. The IRO shall include in its report(s) to
Cephalon a certification or sworn affidavit that it has evaluated its professional
independence and objectivity, as appropriate to the nature of the engagement,
with regard to the applicable Review and that it has concluded that it is, in
fact, independent and objective.

 

E. Disclosure Program.

 

Cephalon represents that it has a disclosure program
designed to facilitate communications relating to compliance with Federal
health care program and FDA requirements and Cephalon’s policies (the “Disclosure
Program”). During the term of the CIA, Cephalon shall maintain a Disclosure Program
that includes a mechanism (a toll- free compliance telephone line) to enable
individuals to disclose, to the Compliance Officer or some other person who is
not in the disclosing individual’s chain of command, any identified issues or
questions associated with Cephalon’s policies, conduct, practices, or
procedures with respect to a Federal health care program or FDA requirement
believed by the individual to be a potential violation of criminal, civil, or
administrative law. Cephalon shall continue to appropriately publicize the
existence of the disclosure mechanism (e.g., via periodic e-mails to
employees or by posting the information in prominent common areas).

 

The Disclosure Program shall emphasize a nonretaliation
policy, and shall include a reporting mechanism for anonymous communications
for which appropriate confidentiality shall be maintained. Disclosures made by
individuals residing outside the United States shall be in accordance with
applicable laws, including the European Union Data Protection Directive. Upon
receipt of a disclosure, the Compliance Officer (or designee) shall gather all
relevant information from the disclosing individual. The Compliance Officer (or
designee) shall make a preliminary, good faith inquiry into the allegations set
forth in every disclosure to ensure that he or she has obtained all of the
information necessary to determine whether a further review should be
conducted. For any disclosure that is sufficiently specific so that it
reasonably: (1) permits a determination of the appropriateness of the
alleged improper practice; and (2) provides an opportunity for taking
corrective action, Cephalon shall conduct an internal review of the allegations
set forth in the disclosure and ensure that proper follow-up is conducted.

 

The Compliance Officer (or designee) shall maintain a
disclosure log, which shall include a record and summary of each disclosure
received (whether anonymous or not),

 

19

 

the status of the respective internal reviews, and any
corrective action taken in response to the internal reviews. The disclosure log
shall be made available to OIG upon request.

 

F. Ineligible Persons.

 

1. Definitions.
For purposes of this CIA:

 

a. an “Ineligible Person” shall include an individual or
entity who:

 

i.      is
currently excluded, debarred, suspended, or otherwise ineligible to participate
in the Federal health care programs or in Federal procurement or nonprocurement
programs; or

 

ii.     has
been convicted of a criminal offense that falls within the ambit of 42 U.S.C. §
1320a-7(a), but has not yet been excluded, debarred, suspended, or otherwise
declared ineligible.

 

b. “Exclusion Lists” include:

 

i.    the
HHS/OIG List of Excluded Individuals/Entities (available through the Internet at
http://www.oig.hhs.gov); and

 

ii.   the
General Services Administration’s List of Parties Excluded from Federal
Programs (available through the Internet at http://www.epls.gov).

 

c. “Screened Persons” include: prospective and current
owners of Cephalon (other than shareholders who: (1) have an ownership
interest of less than 5%; and (2) acquired the ownership interest through
public trading); and prospective and current officers, directors, employees,
and contractors and agents of Cephalon. For purposes of employees residing
outside the United States, “Screened Persons” shall be limited to Covered
Persons.

 

20

 

2. Screening
Requirements. Cephalon shall ensure that all Screened Persons are
not Ineligible Persons, by implementing the following screening requirements.

 

a.     Cephalon
shall screen all Screened Persons against the Exclusion Lists prior to engaging
their services and, as part of the hiring or contracting process, shall require
such Screened Persons to disclose whether they are Ineligible Persons.

 

b.     Cephalon
shall screen all Screened Persons against the Exclusion Lists within 90 days
after the Effective Date and on an annual basis thereafter.

 

c.     Cephalon
shall implement a policy requiring all Screened Persons to disclose immediately
any debarment, exclusion, suspension, or other event that makes that person an
Ineligible Person.

 

Nothing in this Section affects the responsibility of
(or liability for) Cephalon to refrain (if applicable) from billing Federal
health care programs for items or services furnished, ordered, or prescribed by
an Ineligible Person. Cephalon understands that items or services furnished by
excluded persons are not payable by Federal health care programs and that
Cephalon may be liable for overpayments (if applicable) and/or criminal, civil,
and administrative sanctions for employing or contracting with an excluded
person regardless of whether Cephalon meets the requirements of Section III.F.

 

3. Removal Requirement.
If Cephalon has actual notice that a Screened Person has become an Ineligible
Person, Cephalon shall remove such Screened Person from responsibility for, or
involvement with, Cephalon’s business operations related to the Federal health
care programs and shall remove such Screened Person from any position for which
the Screened Person’s compensation or the items or services furnished, ordered,
or prescribed by the Screened Person are paid in whole or part, directly or
indirectly, by Federal health care programs or otherwise with Federal funds at
least until such time as the Screened Person is reinstated into participation
in the Federal health care programs.

 

4. Pending Charges and
Proposed Exclusions. If Cephalon has actual notice that a Screened
Person is charged with a criminal offense that falls within the

 

21

 

ambit of 42 U.S.C. §§ 1320a-7(a), 1320a-7(b)(1)-(3), or is
proposed for exclusion during the Screened Person’s employment or contract
term, Cephalon shall take all appropriate actions to ensure that the
responsibilities of that Screened Person have not and shall not adversely
affect the accuracy of any claims submitted to any Federal health care program.

 

G.             Notification of Government Investigation or Legal Proceedings.

 

Within 30 days after discovery by senior management at
U.S. corporate headquarters, Cephalon shall notify OIG, in writing, of any
ongoing investigation or legal proceeding known to Cephalon conducted or
brought by a governmental entity or its agents involving an allegation that
Cephalon has committed a crime or has engaged in fraudulent activities. This
notification shall include a description of the allegation, the identity of the
investigating or prosecuting agency, and the status of such investigation or
legal proceeding. Cephalon shall also provide written notice to OIG within 30
days after the resolution of the matter, and shall provide OIG with a
description of the findings and/or results of the investigation or proceedings,
if any.

 

H.            Reporting.

 

1. Reportable Events.

 

a. Definition of
Reportable Event. For purposes of this CIA, a “Reportable Event”
means anything that involves:

 

i.    a matter
that a reasonable person would consider a probable violation of criminal,
civil, or administrative laws applicable to any Federal health care program
and/or applicable to any FDA requirements relating to the promotion of Cephalon
products for which penalties or exclusion may be authorized; or

 

ii.   the
filing of a bankruptcy petition by Cephalon.

 

A Reportable Event may be the result of an isolated event
or a series of occurrences.

 

22

 

b. Reporting of
Reportable Events. If Cephalon determines (after a reasonable
opportunity to conduct an appropriate review or investigation of the
allegations) through any means that there is a Reportable Event, Cephalon shall
notify OIG, in writing, within 30 days after making the determination that the
Reportable Event exists. The report to OIG shall include the following
information:

 

i.    a
complete description of the Reportable Event, including the relevant facts,
persons involved, and legal and Federal health care program and/or FDA
authorities implicated;

 

ii.     a
description of Cephalon’s actions taken to correct the Reportable Event; and

 

iii.    any
further steps Cephalon plans to take to address the Reportable Event and
prevent it from recurring.

 

iv.    If the
Reportable Event involves the filing of a bankruptcy petition, the report to
the OIG shall include documentation of the filing and a description of any
Federal health care program authorities and/or FDA authorities implicated.

 

v.     Cephalon
shall not be required to report as a Reportable Event any matter previously
disclosed under Section III.G above.

 

I. Notification of Communications with FDA.

 

Within
30 days after the date of any written report, correspondence, or communication
between Cephalon and the FDA that materially discusses Cephalon’s or a Covered
Person’s actual or potential unlawful or improper promotion of Cephalon’s products
(including any improper dissemination of information about off-label
indications), Cephalon shall provide a copy of the report, correspondence, or
communication to the OIG. Cephalon shall also provide written notice to the OIG
within 30 days after the resolution of any such disclosed off-label matter, and
shall provide the OIG with a description of the findings and/or results of the
matter, if any.

 

23

 

J.             Review of Records
Reflecting the Content of Detailing Sessions.

 

Cephalon shall implement a Message Recall Monitoring
Program designed to identify, for each Reporting Period, potential-off-label
promotional activities by Cephalon’s field sales force through the analysis of
studies generated by an independent entity (Survey Entity) reflecting physician
recall of the marketing messages delivered by Cephalon’s sales force (Message
Recall Studies) for up to three Covered Products (as defined below). Cephalon
shall obtain Message Recall Studies for each Reporting Period. In order to
satisfy its obligations under this Section III.J, Cephalon may propose
that it obtain an alternative type of survey record 

 

(e.g. verbatims or similar records) rather than
Message Recall Studies. The OIG will consider Cephalon’s proposal, and after
considering Cephalon’s proposal shall, in its discretion, identify the type of
survey records to be obtained.

 

For each Reporting Period and for each Covered Product,
Cephalon shall contract with the Survey Entity to conduct Message Recall
Studies. The OIG shall select and notify the Survey Entity of a one week period
within every other quarter of the Reporting Period for which the Message Recall
Studies shall be conducted beginning in the second full quarter after the
Effective Date. For each Covered Product, Cephalon shall obtain Message Recall
Studies covering the identified week in all regions across the United States.

 

Prior to the start of the second Reporting Period and
every Reporting Period thereafter, based on the information provided and other
information known to it, and after consultation with Cephalon, the OIG shall
select up to three Government Reimbursed Products to be the basis for the
review outlined in this Section III.J and shall notify Cephalon of its
selection. These identified products shall be known as the “Covered Products.”
The parties have already identified the Covered Products for the first
Reporting Period.

 

Cephalon shall review the records obtained from the Survey
Entity and shall identify any instances in which the records appear to indicate
that Covered Persons may have discussed and/or disseminated information about
off-label uses of the Covered Products. Cephalon shall make findings based on
its review (Off-Label Findings) and shall take any responsive action it deems
necessary. If necessary for purposes of its review, Cephalon shall endeavor to
gather additional factual information about the circumstances relating to any
Off-Label Findings. As part of each Annual Report,

 

24

 

Cephalon shall provide the OIG with copies of the
underlying records of the detailing interactions, a copy of Cephalon’s
Off-Label Findings, and a description of the action(s), if any, Cephalon took
in response to the Off-Label Findings.

 

K.            Field Force Monitoring
and Review Efforts.

 

To the extent not already accomplished, within 120 days
after the Effective Date, Cephalon shall establish a Field Force Monitoring
Program (FFMP) to evaluate and monitor field sales force representatives’
interactions with HCPs. The FFMP shall be a formalized process designed to
directly observe the appropriateness of field sales force representative’s
interactions with HCPs and to identify potential off-label promotional
activities.

 

Under this program, Cephalon compliance personnel, or appropriately
trained designees who are not from marketing or the field sales organizations
and who are not within three levels of the field sales force representative’s reporting
structure, shall conduct direct field observations (Observations) of field
sales force representatives to assess whether the messages delivered and
materials distributed to HCPs are consistent with Cephalon’s Policies and
Procedures. These Observations shall be full day ride-alongs with field sales
representatives, and each Observation shall consist of directly observing all
meetings between a sales representative and HCPs during the workday. The
Observations shall be scheduled throughout the year, randomly selected by
Cephalon compliance personnel, include each therapeutic area and actively
promoted product, and be conducted across the United States. At the completion
of each Observation, Cephalon compliance personnel or the designee shall prepare
a report which includes:

 

	
   

  	
  1)

  	
  the identity of the sales representative;

  
	
   

  	
  2)

  	
  the identity of the Cephalon compliance professional;

  
	
   

  	
  3)

  	
  the date and duration of the Observation;

  
	
   

  	
  4)

  	
  the product(s) promoted during the Observation;

  
	
   

  	
  5)

  	
  an overall assessment of compliance with Cephalon
  policy; and

  
	
   

  	
  6)

  	
  the identification of any potential off-label
  promotional activity by the field sales representative.

  

 

Cephalon compliance personnel shall conduct at least 30
full-day Observations during each Reporting Period. The number of inspections
conducted for each therapeutic

 

25

 

area and product shall be proportional in number to the
size of each therapeutic area and product, and shall be conducted across the
United States.

 

In the event that a compliance issue, including potential
off-label promotion, is identified during any Observation, Cephalon shall
investigate the incident consistent with established Policies and Procedures
for the handling of investigations. As part of the formal investigation
procedures, findings shall be made and all necessary and appropriate responsive
action (including disciplinary action) and corrective action shall be taken.
The Compliance Officer shall disclose Reportable Events pursuant to Section III.H
above, if applicable. Any compliance issues identified during an Observation
and any corrective action shall be recorded in the files of Global Compliance.

 

Cephalon shall include a summary of the FFMP and the
results of the FFMP as part of each Annual Report. As part of each Annual
Report, Cephalon also shall provide the OIG with copies of the Observation
report for any instances in which it was determined that improper promotion
occurred and a description of the action(s) that Cephalon took as a result
of such determinations. Cephalon shall make the Observation reports for all
other Observations available to the OIG upon request.

 

L.             Notice to Health Care
Providers and Entities.

 

Within 90 days after the Effective Date, Cephalon shall
send, by postage prepaid first class mail, Certificate of Mailing requested, an
exact copy of the notice attached hereto as Attachment A, showing the date of
the mailing, to any health care provider or entity that Cephalon currently
details. This mailing shall notify each health care provider and entity of the
terms of the global settlement with the United States, including an explanation
of the conduct to which Cephalon pled guilty and the conduct resolved by the
civil settlement. The mailing shall also notify each health care provider or
entity that they may report any questionable conduct by Cephalon
representatives to a compliance telephone number or e-mail address established
by Cephalon or to the FDA.

 

The Chief Compliance Officer (or a designee) shall maintain
a log of all calls and messages received by Cephalon in response to the notice.
The log shall include a record and summary of each call and message received
(whether anonymous or not), the status of the call or message, and any
corrective action taken in response to the call or message. The disclosure log
shall be made available to OIG upon request. As part of the

 

26

 

Implementation Report and each Annual Report, Cephalon
shall provide to the OIG a summary of the calls and messages received.

 

M.           Reporting of Physician
Payments.

 

1.     Phase I Reporting

 

By January 31, 2010, Cephalon shall post in a
prominent position on its website an easily accessible and readily searchable
listing of all physicians who received any Phase I Payments (as defined below
in Section III.M.3) directly or indirectly from Cephalon during Calendar
Year 2009 and the aggregate value of such payments in the calendar year.

 

After the initial posting, 30 days after the end of each
subsequent calendar quarter until March 2011, Cephalon shall also post on
its website a listing of updated information about all Phase I Payments
provided during the applicable calendar year during the preceding quarter(s).
The quarterly listing shall be easily accessible and readily searchable.

 

Each listing shall include a complete list of all
individual physicians to whom Cephalon directly or indirectly made Phase I
Payments in the preceding calendar year. Each listing shall be arranged
alphabetically according to the physicians’ last name. The Payment amounts in
the lists shall be reported in $10,000 increments (e.g., $0 - $10,000; $10,001- $20,000; etc.) For each physician, the applicable
listing shall include the following information: i) full name; ii) city and
state of the physician’s practice; and iii) the aggregate value of the payment(s) in
the preceding quarter(s) or year (as applicable). The reporting described
in this Section III.M.1 shall be referred to hereafter as “Phase I
Reporting.”

 

2.     Phase II Reporting

 

No later than March 31, 2011 and during the remaining
term of the CIA, Cephalon shall post in a prominent position on its website an
easily accessible and readily searchable listing of physicians and Related
Entities (as defined in Section III.M.3) who received any Payments
directly or indirectly from Cephalon and the aggregate value of such Payments
in the preceding Calendar Year. After the initial posting, 30 days after the
end of each subsequent calendar quarter Cephalon shall also post on its website
a listing

 

27

 

of updated information about all Payments provided during
the applicable calendar year during the preceding quarter(s). The quarterly
listing shall be easily accessible and readily searchable.

 

Each listing shall include a complete list of all
individual physicians and Related Entities to whom Cephalon directly or
indirectly made Payments in the preceding calendar year. Each listing shall be
arranged alphabetically according to the physicians’ last name and the name of
the Related Entity. The Payment amounts in the lists shall be reported in
$10,000 increments (e.g., $0 -
$10,000; $10,001- $20,000; etc.)
For each physician and Related Entity, the applicable listing shall include the
following information: i) full name; ii) city and state of the physician’s
practice; iii) name, city, and state in which the Related Entity is located;
and iv) aggregate value of the Payment(s) in the preceding quarter(s) or
year (as applicable). The reporting described in this Section III.M.2
shall be referred to hereafter as “Phase II Reporting.”

 

3.     Miscellaneous Provisions

 

Cephalon shall continue to make each annual listing and
the most recent quarterly listing of both Phase I Reporting and Phase II
Reporting available on its website at least throughout the term of this CIA.
Cephalon shall retain and make available to OIG, upon request, all work papers,
supporting documentation, correspondence, and records related to all applicable
Payments and to the annual and quarterly listings of Payments. Nothing in this Section III.M
affects the responsibility of Cephalon to comply with (or liability for
noncompliance with) all applicable Federal health care program requirements and
state laws as they relate to all applicable Payments made to physicians or
Related Entities.

 

If the proposed Physician Payments Sunshine Act of 2008 or
similar legislation is enacted, the OIG shall determine whether the purposes of
this Section III.M are reasonably satisfied by Cephalon’s compliance with
such legislation. In such case, and in its sole discretion, the OIG may agree
to modify or terminate provisions of Section III.M as appropriate.

 

For purposes of this Section III.M, the term “Payments”
is defined to include all payments or transfers of value (whether in cash or in
kind) made to physicians and/or to Related Entities. The term Payments
includes, for example, payments or compensation for services rendered, grants,
fees, honoraria, and payments relating to research or education. The term
Payments also includes food, entertainment, gifts, trips or travel,

 

28

 

product(s)/item(s) provided for less than fair market
value; or other economic benefit. The term Payments does not include: i) samples
of drug products that meet the definition set forth in 21 C.F.R. § 203.3(i), or
ii) discounts, rebates, or other pricing terms.

 

For purposes of this Section III.M, the term “Phase I
Payments” is defined as those Payments made in connection with physicians
serving as speakers, participating in speaker training, or serving as
consultants (including for advisory boards, or preceptorships.)

 

For purposes of this Section III.M, the term “Related
Entity” is defined to be any entity by or in which any physician receiving
Payments is employed, has tenure, or has an ownership interest.

 

IV.           CHANGES
TO BUSINESS UNITS OR LOCATIONS

 

A.     Change or Closure of Unit
or Location. In the event that, after the Effective Date, Cephalon changes locations
or closes a business unit or location related to Promotional and Product
Services Related Functions, Cephalon shall notify OIG of this fact as soon as
possible, but no later than within 30 days after the date of change or closure
of the location.

 

B.      Purchase or Establishment
of New Unit or Location. In the event that, after the Effective Date, Cephalon
purchases or establishes a new business unit or location related to Promotional
and Product Services Related Functions, Cephalon shall notify OIG no later than
the date the purchase or establishment is publicly disclosed. This notification
shall include the address of the new business unit or location, phone number,
fax number, Federal health care program provider or supplier number (if
applicable), and the name and address of the contractor that issued each number
(if applicable). Each new business unit or location and all Covered Persons at
each new business unit or location shall be subject to the applicable
requirements of this CIA.

 

C.      Sale of Unit or Location. In the event that, after
the Effective Date, Cephalon proposes to sell any or all of its business units
or locations related to the Promotional and Product Services-Related Functions
that are subject to this CIA, Cephalon shall notify OIG of the proposed sale no
later than the date the sale is publicly disclosed. This notification shall
include a description of the business unit or location to be sold, a brief

 

29

 

description of the terms of the sale, and the name and contact
information of the prospective purchaser. This CIA shall be binding on the
purchaser of such business unit or location, unless otherwise determined and
agreed to in writing by the OIG.

 

V.            IMPLEMENTATION
AND ANNUAL REPORTS

 

A.     Implementation Report. Within 150 days after
the Effective Date, Cephalon shall submit a written report to OIG summarizing
the status of its implementation of the requirements of this CIA
(Implementation Report). The Implementation Report shall, at a minimum,
include:

 

1.       the name, address, phone
number, and position description of the Chief Compliance Officer required by Section III.A.
1, and a summary of other noncompliance job responsibilities the Compliance
Officer may have;

 

2.       the names and positions
of the members of the Compliance Committee required by Section III.A.2;

 

3.       (a) a copy of the
letter (including all attachments) required by Sections II.C.6 and III.B.2 sent
to each party employing Third Party Personnel; (b) a list of all such
existing agreements; and (c) a description of the entities’ response to
Cephalon’s letter;

 

4.       the names and positions
of the Certifying Employees required by Section III.A.4;

 

5.       a copy of Cephalon’s Code
of Conduct required by Section III.B.1;

 

6.       to the extent not already
provided to the OIG, a copy of all Policies and Procedures required by Section III.B.3;

 

7.       the number of individuals
required to complete the Code of Conduct certification required by Section III.B.1,
the percentage of individuals who have completed such certification, and an
explanation of any exceptions (the documentation supporting this information
shall be available to OIG, upon request);

 

8.       the following information
regarding each type of training required by Section III.C:

 

30

 

a.       a description of such
training, including a summary of the topics covered, the length of sessions,
and a schedule of training sessions;

 

b.      the number of individuals
required to be trained, percentage of individuals actually trained, and an
explanation of any exceptions.

 

A copy of all training materials and the documentation
supporting this information shall be available to OIG, upon request;

 

9.       a description of the
Disclosure Program required by Section III.E;

 

10.     the following information
regarding the IRO(s): (a) identity, address, and phone number; (b) a
copy of the engagement letter; and (c) a summary and description of any
and all current and prior engagements and agreements between Cephalon and the
IRO;

 

11.     a certification from the
IRO regarding its professional independence and objectivity with respect to
Cephalon;

 

12.     a description of the
process by which Cephalon fulfills the requirements of Section III.F
regarding Ineligible Persons;

 

13.     the name, title, and
responsibilities of any person who is determined to be an Ineligible Person
under Section III.F; the actions taken in response to the screening and
removal obligations set forth in Section III.F;

 

14.     a list of all of Cephalon’s
locations (including locations and mailing addresses); the corresponding name
under which each location is doing business; the corresponding phone numbers
and fax numbers; each location’s Federal health care program provider or
supplier number(s) (if applicable), and the name and address of each Federal
health care program contractor to which Cephalon currently submits claims (if
applicable);

 

15.     a description of Cephalon’s
corporate structure, including identification of any parent and sister
companies, subsidiaries, and their respective lines of business;

 

31

 

16.     a certification by the
Chief Compliance Officer that the notice required by Section III.L was
mailed to each health care provider and entity, the number of health care
providers and entities that received a copy of the notice, a sample copy of the
notice required by Section III.L, and a summary of the calls and messages
received in response to the notice; and

 

17.     the certifications
required by Section V.C.

 

B.      Annual Reports. Cephalon shall submit
to OIG annually a report with respect to the status of, and findings regarding,
Cephalon’s compliance activities for each of the five Reporting Periods (Annual
Report).

 

Each Annual Report shall include, at a minimum:

 

1.       an explanation of any
change in the identity, position description, or other noncompliance job
responsibilities of the Chief Compliance Officer and any change in the
membership of the Compliance Committee or Certifying Employees described in
Sections III.A.1, 2 or 4;

 

2.       a summary of any
significant changes or amendments to the Policies and Procedures required by Section III.B.3
and the reasons for such changes (e.g., change in applicable
requirements);

 

3.       the number of individuals
required to complete the Code of Conduct certification required by Section III.B.1,
the percentage of individuals who have completed such certification, and an
explanation of any exceptions (the documentation supporting this information
shall be available to OIG, upon request);

 

4.       (a) a copy of the
letter (including all attachments) required by Sections II.C.6 and III.B.2 sent
to each entity employing Third Party Personnel; (b) a list of all such
existing agreements; and (c) a description of the entities’ response to
Cephalon’s letter;

 

5.       the following information
regarding each type of training required by Section III.C:

 

32

 

a.       a description of such
training, including a summary of the topics covered, the length of sessions,
and a schedule of training sessions;

 

b.      the number of individuals
required to be trained, percentage of individuals actually trained, and an
explanation of any exceptions.

 

A copy of all training materials and the documentation
supporting this information shall be available to OIG, upon request.

 

6.       a complete copy of all
reports prepared pursuant to Section III.D, along with a copy of the IRO’s
engagement letter (if applicable);

 

7.       Cephalon’s response and
corrective action plan(s) related to any issues raised by the reports
prepared pursuant to Section III.D;

 

8.       a summary and description
of any and all current and prior engagements and agreements between Cephalon
and the IRO, if different from what was submitted as part of the Implementation
Report;

 

9.       a certification from the
IRO regarding its professional independence and objectivity with respect to
Cephalon;

 

10.     a summary of Reportable
Events (as defined in Section III.H) identified during the Reporting
Period and the status of any corrective and preventative action relating to all
such Reportable Events;

 

11.     a summary of the
disclosures in the disclosure log required by Section III.E that relate to
Federal health care programs;

 

12.     any changes to the
process by which Cephalon fulfills the requirements of Section III.F
regarding Ineligible Persons;

 

13.     the name, title, and
responsibilities of any person who is determined to be an Ineligible Person
under Section III.F; the actions taken by Cephalon in response to the
screening and removal obligations set forth in Section III.F;

 

33

 

14.     a
summary describing any ongoing investigation or legal proceeding required to
have been reported pursuant to Section III.G. The summary shall include a
description of the allegation, the identity of the investigating or prosecuting
agency, and the status of such investigation or legal proceeding;

 

15.     a
summary describing any communication with the FDA required to have been
reported pursuant to Section III.I. This summary shall include a
description of the matter and the status of the matter;

 

16.     all
information required by Section III.J;

 

17.     all
information required by Section III.K;

 

18.     a
summary of the calls and messages received in response to the notice required
by Section III.L and the disposition of those calls and messages;

 

19.     a
description of all changes to the most recently provided list of Cephalon’s
locations (including addresses) as required by Section V.A. 14; the
corresponding name under which each location is doing business; the
corresponding phone numbers and fax numbers; each location’s Federal health
care program provider or supplier number(s) (if applicable), and the name
and address of each Federal health care program contractor to which Cephalon
currently submits claims (if applicable);

 

20.     a
certification from the Chief Compliance Officer that information regarding
payments has been posted on Cephalon’s website as required Section III.M;
and

 

21.     the
certifications required by Section V.C.

 

The first Annual Report shall be received by OIG no later
than 60 days after the end of the first Reporting Period. Subsequent Annual
Reports shall be received by OIG no later than the anniversary date of the due
date of the first Annual Report.

 

C.  Certifications.
The following certifications shall be included in the Implementation Report and
Annual Reports:

 

1.  Certifying
Employees: In each Annual Report, Cephalon shall include the certifications
of Certifying Employees as required by Section III.A.4.

 

34

 

2.  Chief
Compliance Officer: In each Implementation Report and Annual Report,
Cephalon shall include the following individual certification by the Chief
Compliance Officer:

 

a.   he or she
has reviewed the Report and has made reasonable inquiry regarding its content
and believes that the information in the Report is accurate and truthful;

 

b.   to the
best of his or her knowledge, except as otherwise described in the applicable
report, Cephalon is in compliance with Federal health care program and FDA
requirements and the obligations of the CIA;

 

c.   to the
best of his or her knowledge, Cephalon has complied with its obligations under
the Settlement Agreement: (a) not to resubmit to any Federal health care
program payors any previously denied claims related to the Covered Conduct
addressed in the Settlement Agreement, and not to appeal any such denials of
claims; (b) not to charge to or otherwise seek payment from federal or
state payors for unallowable costs (as defined in the Settlement Agreement);
and (c) to identify and adjust any past charges or claims for unallowable
costs;

 

d.   Cephalon’s:
1) Policies and Procedures as referenced in Section III.B.3 above; 2)
templates for standardized contracts and other similar documents; and 3) the
training materials used for purposes of Section III.C all have been
reviewed by competent legal counsel and have been found to be in compliance
with all applicable Federal health care program and FDA requirements. In
addition, Cephalon’s promotional materials containing claims or information
about Government Reimbursed Products and other materials and information
intended to be disseminated outside Cephalon have been reviewed by competent
regulatory, medical and/or legal personnel in accordance with applicable
Policies and Procedures to ensure that legal, medical, and regulatory concerns
have been addressed and elevated when required, and that the materials and
information when finally approved are in compliance with all applicable Federal
health care program and FDA requirements. If the applicable legal requirements
have not changed, after the initial review of the documents listed above, only
material changes to the documents must be reviewed by competent regulatory,
medical and/or legal personnel. The certification shall include a description
of the document(s) reviewed and approximately when the

 

35

 

review was completed. The documentation supporting this
certification shall be available to OIG, upon request; and

 

e. Cephalon’s call plans for Government Reimbursed
Products were reviewed at least once during the Reporting Period (consistent
with Section III.B.3.e) and, for each product the call plans were found to
be consistent with Cephalon’s policy objectives as referenced above in Section III.B.3.e.

 

D.  Designation
of Information. Cephalon shall clearly identify any portions of its
submissions that it believes are trade secrets, or information that is
commercial or financial and privileged or confidential, and therefore
potentially exempt from disclosure under the Freedom of Information Act (FOIA),
5 U.S.C. § 552. Cephalon shall refrain from identifying any information as
exempt from disclosure if that information does not meet the criteria for
exemption from disclosure under FOIA.

 

VI.          NOTIFICATIONS AND SUBMISSION OF
REPORTS

 

Unless otherwise stated in writing after the Effective
Date, all notifications and reports required under this CIA shall be submitted
to the following entities:

 

	
  OIG:

  	
   

  	
  Administrative and Civil Remedies Branch

  
	
   

  	
   

  	
  Office of Counsel to the Inspector General

  
	
   

  	
   

  	
  Office of Inspector General

  
	
   

  	
   

  	
  U.S. Department of Health and Human Services

  
	
   

  	
   

  	
  Cohen Building, Room 5527 

  
	
   

  	
   

  	
  330 Independence Avenue, S.W. 

  
	
   

  	
   

  	
  Washington, DC 20201 

  
	
   

  	
   

  	
  Telephone: (202) 619-2078 

  
	
   

  	
   

  	
  Facsimile: (202) 205-0604

  
	
   

  	
   

  	
   

  
	
  CEPHALON:

  	
   

  	
  Executive Vice President, Chief Compliance Officer

  
	
   

  	
   

  	
  Cephalon, Inc.

  
	
   

  	
   

  	
  40 Moores Road

  
	
   

  	
   

  	
  Frazer, PA 19355

  
	
   

  	
   

  	
  Phone: (610) 727-6280

  
	
   

  	
   

  	
  Facsimile: (610) 727-6001

  

 

36

 

Unless otherwise specified, all notifications and reports
required by this CIA may be made by certified mail, overnight mail, hand
delivery, or other means, provided that there is proof that such notification
was received. For purposes of this requirement, internal facsimile confirmation
sheets do not constitute proof of receipt. Upon request by OIG, Cephalon may be
required to provide OIG with an electronic copy of each notification or report
required by this CIA in searchable portable document format (pdf), either
instead of or in addition to, a paper copy.

 

VII.         OIG INSPECTION, AUDIT, AND REVIEW
RIGHTS

 

In addition to any other rights OIG may have by statute,
regulation, or contract, OIG or its duly authorized representative(s) may
examine or request copies of Cephalon’s books, records, and other documents and
supporting materials and/or conduct on-site reviews of any of Cephalon’s
locations for the purpose of verifying and evaluating: (a) Cephalon’s
compliance with the terms of this CIA; and (b) Cephalon’s compliance with
the requirements of the Federal health care programs in which it participates
and with all applicable FDA requirements. The documentation described above
shall be made available by Cephalon to OIG or its duly authorized
representative(s) at all reasonable times for inspection, audit, or
reproduction. Furthermore, for purposes of this provision, OIG or its duly
authorized representative(s) may interview any of Cephalon’s employees,
contractors, or agents who consent to be interviewed at the individual’s place
of business during normal business hours or at such other place and time as may
be mutually agreed upon between the individual and OIG. Cephalon shall assist
OIG or its duly authorized representative(s) in contacting and arranging
interviews with such individuals upon OIG’s request. Cephalon’s employees may
elect to be interviewed with or without a representative of Cephalon present.

 

VIII.       DOCUMENT AND RECORD RETENTION

 

Cephalon shall maintain for inspection all documents and
records relating to reimbursement from the Federal health care programs, or to
compliance with this CIA, for six years (or longer if otherwise required by
law) from the Effective Date.

 

37

 

IX.       DISCLOSURES

 

Consistent with HHS’s FOIA procedures, set forth in 45
C.F.R. Part 5, OIG shall make a reasonable effort to notify Cephalon prior
to any release by OIG of information submitted by Cephalon pursuant to its
obligations under this CIA and identified upon submission by Cephalon as trade
secrets, or information that is commercial or financial and privileged or
confidential, under the FOIA rules. With respect to such releases, Cephalon
shall have the rights set forth at 45 C.F.R. § 5.65(d).

 

X.        BREACH AND DEFAULT PROVISIONS

 

Cephalon is expected to fully and timely comply with all
of its CIA obligations.

 

A.  Stipulated
Penalties for Failure to Comply with Certain Obligations. As a contractual
remedy, Cephalon and OIG hereby agree that failure to comply with certain
obligations as set forth in this CIA may lead to the imposition of the
following monetary penalties (hereinafter referred to as “Stipulated Penalties”)
in accordance with the following provisions.

 

1.  A Stipulated Penalty of $2,500 (which shall
begin to accrue on the day after the date the obligation became due) for each
day Cephalon fails to establish, implement, or accomplish any of the following
obligations as described in Section III:

 

a.   a
Compliance Officer;

 

b.   a
Compliance Committee;

 

c.   the Board
resolution;

 

d.   a written
Code of Conduct;

 

e.   written
Policies and Procedures;

 

f.    the
training of Covered Persons;

 

g.   a
Disclosure Program as required by Section III.E;

 

38

 

h. Ineligible
Persons screening and removal requirements;

 

i.   notification
of Government investigations or legal proceedings;

 

j.   notification
of communications with FDA regarding off-label matters;

 

k.  Message
Recall Studies (or alternative information permitted by Section III.J);

 

l.   a program
for FFMP;

 

m. notification
to any health care providers or entities as required by Section III.L; or

 

n. posting of
any Payments as required by Section III.M.

 

2.     A Stipulated Penalty of $2,500 (which shall begin to accrue on the day
after the date the obligation became due) for each day Cephalon fails to engage
an IRO, as required in Section III.D and Appendices A-B.

 

3.     A
Stipulated Penalty of $2,500 (which shall begin to accrue on the day after the
date the obligation became due) for each day Cephalon fails to submit the
Implementation Report or the Annual Reports to OIG in accordance with the
requirements of Section V by the deadlines for submission.

 

4.     A Stipulated Penalty of $2,500 (which shall begin to accrue on the day
after the date the obligation became due) for each day Cephalon fails to submit
the annual IRO Review Report(s) in accordance with the requirements of
Sections III.D and V.B.6 and Appendix B.

 

5.     A
Stipulated Penalty of $1,500 for each day Cephalon fails to grant access as
required in Section VII. (This Stipulated Penalty shall begin to accrue on
the date Cephalon fails to grant access.)

 

39

 

6.   A
Stipulated Penalty of $5,000 for each false certification submitted by or on
behalf of Cephalon as part of its Implementation Report, Annual Report,
additional documentation to a report (as requested by the OIG), or otherwise
required by this CIA.

 

7.   A
Stipulated Penalty of $1,000 for each day Cephalon fails to comply fully and
adequately with any obligation of this CIA. OIG shall provide notice to
Cephalon, stating the specific grounds for its determination that Cephalon has
failed to comply fully and adequately with the CIA obligation(s) at issue
and steps Cephalon shall take to comply with the CIA. (This Stipulated Penalty
shall begin to accrue 10 days after Cephalon receives this notice from OIG of
the failure to comply.) A Stipulated Penalty as described in this Subsection
shall not be demanded for any violation for which OIG has sought a Stipulated
Penalty under Subsections 1-6 of this Section.

 

B.    Timely
Written Requests for Extensions. Cephalon may, in advance of the due date,
submit a timely written request for an extension of time to perform any act or
file any notification or report required by this CIA. Notwithstanding any other
provision in this Section, if OIG grants the timely written request with
respect to an act, notification, or report, Stipulated Penalties for failure to
perform the act or file the notification or report shall not begin to accrue
until one day after Cephalon fails to meet the revised deadline set by OIG.
Notwithstanding any other provision in this Section, if OIG denies such a
timely written request, Stipulated Penalties for failure to perform the act or
file the notification or report shall not begin to accrue until three business
days after Cephalon receives OIG’s written denial of such request or the
original due date, whichever is later. A “timely written request” is defined as
a request in writing received by OIG at least five business days prior to the
date by which any act is due to be performed or any notification or report is
due to be filed.

 

C.    Payment
of Stipulated Penalties.

 

1.   Demand
Letter. Upon a finding that Cephalon
has failed to comply with any of the obligations described in Section X.A
and after determining that Stipulated Penalties are appropriate, OIG shall
notify Cephalon of: (a) Cephalon’s failure to comply; and (b) OIG’s
exercise of its contractual right to demand payment of the Stipulated Penalties
(this notification is referred to as the “Demand Letter”).

 

2.   Response
to Demand Letter. Within 10 days after the
receipt of the Demand Letter, Cephalon shall either: (a) cure the breach
to OIG’s satisfaction and pay

 

40

 

the applicable Stipulated Penalties; or (b) request a
hearing before an HHS administrative law judge (ALJ) to dispute OIG’s
determination of noncompliance, pursuant to the agreed upon provisions set
forth below in Section X.E. In the event Cephalon elects to request an ALJ
hearing, the Stipulated Penalties shall continue to accrue until Cephalon
cures, to OIG’s satisfaction, the alleged breach in dispute. Failure to respond
to the Demand Letter in one of these two manners within the allowed time period
shall be considered a material breach of this CIA and shall be grounds for
exclusion under Section X.D.

 

3.   Form of
Payment. Payment of the Stipulated
Penalties shall be made by electronic funds transfer to an account specified by
the OIG in the Demand Letter.

 

4.   Independence
from Material Breach Determination. Except
as set forth in Section X.D.1.c, these provisions for payment of
Stipulated Penalties shall not affect or otherwise set a standard for OIG’s
decision that Cephalon has materially breached this CIA, which decision shall
be made at OIG’s discretion and shall be governed by the provisions in Section X.D,
below.

 

D. Exclusion for Material Breach of this CIA.

 

1. Definition of
Material Breach. A material breach of this CIA means:

 

a.   a failure
by Cephalon to report a Reportable Event and take corrective action, as
required in Section III.H;

 

b.   a
repeated or flagrant violation of the obligations under this CIA, including,
but not limited to, the obligations addressed in Section X.A;

 

c.   a failure
to respond to a Demand Letter concerning the payment of Stipulated Penalties in
accordance with Section X.C;

 

d.   a failure
to engage and use an IRO in accordance with Section III.D; or

 

e.   a failure
of the Board to issue a resolution in accordance with Section III.A.3.

 

41

 

2. Notice of Material
Breach and Intent to Exclude. The parties agree that a material
breach of this CIA by Cephalon constitutes an independent basis for Cephalon’s
exclusion from participation in the Federal health care programs. Upon a
determination by OIG that Cephalon has materially breached this CIA and that
exclusion is the appropriate remedy, OIG shall notify Cephalon of: (a) Cephalon’s
material breach; and (b) OIG’s intent to exercise its contractual right to
impose exclusion (this notification is hereinafter referred to as the “Notice
of Material Breach and Intent to Exclude”).

 

3. Opportunity to Cure.
Cephalon shall have 30 days from the date of receipt of the Notice of Material
Breach and Intent to Exclude to demonstrate to OIG’s satisfaction that:

 

a.   Cephalon
is in compliance with the obligations of the CIA cited by OIG as being the
basis for the material breach;

 

b.   the
alleged material breach has been cured; or

 

c.   the
alleged material breach cannot be cured within the 30-day period, but that: (i) Cephalon
has begun to take action to cure the material breach; (ii) Cephalon is
pursuing such action with due diligence; and (iii) Cephalon has provided
to OIG a reasonable timetable for curing the material breach.

 

4. Exclusion Letter.
If, at the conclusion of the 30-day period, Cephalon fails to satisfy the
requirements of Section X.D.3, OIG may exclude Cephalon from participation
in the Federal health care programs. OIG shall notify Cephalon in writing of
its determination to exclude Cephalon (this letter shall be referred to
hereinafter as the “Exclusion Letter”). Subject to the Dispute Resolution
provisions in Section X.E, below, the exclusion shall go into effect 30
days after the date of Cephalon’s receipt of the Exclusion Letter. The
exclusion shall have national effect and shall also apply to all other Federal
procurement and nonprocurement programs. Reinstatement to program participation
is not automatic. After the end of the period of exclusion, Cephalon may apply
for reinstatement by submitting a written request for reinstatement in
accordance with the provisions at 42 C.F.R. §§ 1001.3001-.3004.

 

42

 

E. Dispute Resolution.

 

1.   Review
Rights. Upon OIG’s delivery to
Cephalon of its Demand Letter or of its Exclusion Letter, and as an agreed-upon
contractual remedy for the resolution of disputes arising under this CIA,
Cephalon shall be afforded certain review rights comparable to the ones that
are provided in 42 U.S.C. § 1320a-7(f) and 42 C.F.R. Part 1005 as if
they applied to the Stipulated Penalties or exclusion sought pursuant to this
CIA. Specifically, OIG’s determination to demand payment of Stipulated
Penalties or to seek exclusion shall be subject to review by an HHS ALJ and, in
the event of an appeal, the HHS Departmental Appeals Board (DAB), in a manner
consistent with the provisions in 42 C.F.R. § 1005.2-1005.2 1. Notwithstanding
the language in 42 C.F.R. § 1005.2(c), the request for a hearing involving
Stipulated Penalties shall be made within 10 days after receipt of the Demand
Letter and the request for a hearing involving exclusion shall be made within
25 days after receipt of the Exclusion Letter.

 

2.   Stipulated
Penalties Review. Notwithstanding any
provision of Title 42 of the United States Code or Title 42 of the Code of
Federal Regulations, the only issues in a proceeding for Stipulated Penalties
under this CIA shall be: (a) whether Cephalon was in full and timely
compliance with the obligations of this CIA for which OIG demands payment; and (b) the
period of noncompliance. Cephalon shall have the burden of proving its full and
timely compliance and the steps taken to cure the noncompliance, if any. OIG
shall not have the right to appeal to the DAB an adverse ALJ decision related
to Stipulated Penalties. If the ALJ agrees with OIG with regard to a finding of
a breach of this CIA and orders Cephalon to pay Stipulated Penalties, such
Stipulated Penalties shall become due and payable 20 days after the ALJ issues
such a decision unless Cephalon requests review of the ALJ decision by the DAB.
If the ALJ decision is properly appealed to the DAB and the DAB upholds the
determination of OIG, the Stipulated Penalties shall become due and payable 20 days
after the DAB issues its decision.

 

3.   Exclusion
Review. Notwithstanding any provision
of Title 42 of the United States Code or Title 42 of the Code of Federal
Regulations, the only issues in a proceeding for exclusion based on a material
breach of this CIA shall be:

 

a. whether Cephalon was in material breach of this CIA;

 

43

 

b.   whether
such breach was continuing on the date of the Exclusion Letter; and

 

c.   whether
the alleged material breach could not have been cured within the 30-day period,
but that: (i) Cephalon had begun to take action to cure the material
breach within that period; (ii) Cephalon has pursued and is pursuing such
action with due diligence; and (iii) Cephalon provided to OIG within that
period a reasonable timetable for curing the material breach and Cephalon has
followed the timetable.

 

For purposes of the exclusion herein, exclusion shall take
effect only after an ALJ decision favorable to OIG, or, if the ALJ rules for
Cephalon, only after a DAB decision in favor of OIG. Cephalon’s election of its
contractual right to appeal to the DAB shall not abrogate OIG’s authority to
exclude Cephalon upon the issuance of an ALJ’s decision in favor of OIG. If the
ALJ sustains the determination of OIG and determines that exclusion is
authorized, such exclusion shall take effect 20 days after the ALJ issues such
a decision, notwithstanding that Cephalon may request review of the ALJ
decision by the DAB. If the DAB finds in favor of OIG after an ALJ decision
adverse to OIG, the exclusion shall take effect 20 days after the DAB decision.
Cephalon shall waive its right to any notice of such an exclusion if a decision
upholding the exclusion is rendered by the ALJ or DAB. If the DAB finds in
favor of Cephalon, Cephalon shall be reinstated effective on the date of the
original exclusion.

 

4.  Finality of Decision. The review by an ALJ
or DAB provided for above shall not be considered to be an appeal right arising
under any statutes or regulations. Consequently, the parties to this CIA agree
that the DAB’s decision (or the ALJ’s decision if not appealed) shall be
considered final for all purposes under this CIA.

 

XI.          EFFECTIVE AND BINDING AGREEMENT

 

Cephalon and OIG agree as follows:

 

A. This CIA shall be binding on the successors, assigns,
and transferees of Cephalon;

 

44

 

B.      This
CIA shall become final and binding on the date the final signature is obtained
on the CIA;

 

C.      This
CIA constitutes the complete agreement between the parties and may not be
amended except by written consent of the parties to this CIA;

 

D.      The
undersigned Cephalon signatories represent and warrant that they are authorized
to execute this CIA. The undersigned OIG signatory represents that he is
signing this CIA in his official capacity and that he is authorized to execute
this CIA; and

 

E.      This
CIA may be executed in counterparts, each of which constitutes an original and
all of which constitute one and the same CIA. Facsimiles of signatures shall
constitute acceptable, binding signatures for purposes of this CIA.

 

45

 

ON BEHALF OF CEPHALON, INC.

 

 

	
  /s/
  Frank Baldino

  	
   

  	
  September
  29, 2008

  
	
  Frank
  Baldino

  	
   

  	
  Date

  
	
  Chief
  Executive Officer

  	
   

  	
   

  
	
  Cephalon
  Inc.

  	
   

  	
   

  

 

 

	
  /s/
  Valli Baldassano

  	
   

  	
  September
  29, 2008

  
	
  Valli
  Baldassano

  	
   

  	
  Date

  
	
  Cephalon
  Chief Compliance Officer

  	
   

  	
   

  

 

 

	
  /s/
  Eric W. Sitarchuk

  	
   

  	
  September
  29, 2008

  
	
  Eric
  W. Sitarchuk

  	
   

  	
  Date

  
	
  Counsel
  for Cephalon, Inc.

  	
   

  	
   

  

 

 

	
  /s/
  Megan L. Traversari

  	
   

  	
  September
  29, 2008

  
	
  Megan
  L. Traversari

  	
   

  	
  Date

  
	
  Counsel
  for Cephalon, Inc.

  	
   

  	
   

  

 

46

 

ON BEHALF OF THE OFFICE OF INSPECTOR GENERAL

OF THE DEPARTMENT OF HEALTH AND HUMAN SERVICES

 

 

	
  /s/
  Gregory E. Demske

  	
   

  	
  September
  29, 2008

  
	
  Gregory
  E. Demske

  	
   

  	
  Date

  
	
  Assistant
  Inspector General for Legal Affairs

  	
   

  	
   

  
	
  Office
  of Inspector General

  	
   

  	
   

  
	
  U.
  S. Department of Health and Human Services

  	
   

  	
   

  

 

47

 

Attachment A

 

Dear
Healthcare Provider:

 

As
you may be aware Cephalon, Inc. recently entered into a global civil,
criminal, and administrative settlement with the United States and individual
states in connection with its promotion of three Cephalon products. This letter
provides you with additional information about the settlement, explains
Cephalon’s commitments going forward, and provides you with access to
information about those commitments. In general terms, the Government alleged
that Cephalon unlawfully promoted three drugs (Actiq, Gabitril, and Provigil)
for uses not approved by the Food & Drug Administration (FDA). To
resolve these matters, Cephalon pled guilty to a misdemeanor criminal violation
and agreed to pay a total of $425 million to the Federal Government and state
Medicaid programs. In addition, Cephalon paid $6,150,000 in a companion
settlement with the Connecticut Attorney General related to unfair trade practice
laws. Additional information about the settlements may be found at the
following websites [include a link to the
USAO, Cephalon (www.cephalon.com), and Attorney General of Connecticut’s
websites.]

 

As
part of the federal settlement, Cephalon also entered a five-year corporate
integrity agreement with the Office of Inspector General of the U.S. Department
of Health and Human Services. The corporate integrity agreement is available at
http://oig.hhs.gov/fraud/cia/index.html. Under this agreement, Cephalon agreed
to undertake certain obligations designed to promote compliance with Federal
health care program and FDA requirements. We also agreed to notify healthcare
providers about the settlement and inform them that they can report any
questionable practices by Cephalon’s representatives to Cephalon’s Compliance
Department or the FDA.

 

Please
call or email Cephalon at 1-866-900-7167
or questions@cephalon.com if you
have questions about the settlement  referenced above or to report any
instances in which you believe that a Cephalon representative inappropriately
promoted a product or engaged in other questionable conduct. Alternatively, you
may report any such instances to the FDA’s Division of Drug Marketing,
Advertising, and Communications at 301-796- 1200. You should direct medical
questions or concerns about the products to Cephalon’s Medical Information
department.

 

We
appreciate your time and attention. We are dedicated to ensuring that we bring
you the scientific and medical information you need to make well-informed
decisions about whether Cephalon products are right for your patients.

 

Sincerely,

 

Chief
Executive Officer

Cephalon, Inc.

 

 

APPENDIX
A

INDEPENDENT
REVIEW ORGANIZATION

 

This Appendix contains
the requirements relating to the Independent Review Organization (IRO) required
by Section III.D of the CIA.

 

A.             IRO Engagement.

 

Cephalon shall engage an
IRO that possesses the qualifications set forth in Paragraph B, below, to
perform the responsibilities in Paragraph C, below. The IRO shall conduct the review
in a professionally independent and objective fashion, as set forth in
Paragraph D. Within 30 days after OIG receives written notice of the identity
of the selected IRO, OIG will notify Cephalon if the IRO is unacceptable.
Absent  notification
from OIG that the IRO is unacceptable, Cephalon may continue to engage the IRO.

 

If Cephalon engages a new
IRO during the term of the CIA, this IRO shall also meet the requirements of
this Appendix. If a new IRO is engaged, Cephalon shall submit the information identified
in Section V.A.10 of the CIA to OIG within 30 days of engagement of the
IRO. Within 30 days after OIG receives written notice of the identity of the
selected IRO, OIG will notify Cephalon if the IRO is unacceptable. Absent
notification from OIG that the IRO is unacceptable, Cephalon may continue to
engage the IRO.

 

B.              IRO Qualifications.

 

The IRO shall:

 

1.  assign individuals to conduct the Promotional and
Product Services Review who have expertise in all applicable Federal health
care program and FDA requirements relating to Promotional and Product Services
Related Functions. The assigned individuals shall also be knowledgeable about
the general requirements of the Federal health care program(s) under which
Cephalon products are reimbursed;

 

2.  assign individuals to design and select the samples
for the Transaction Reviews who are knowledgeable about appropriate statistical
sampling techniques; and

 

3.  have sufficient staff and resources to
conduct the reviews required by the CIA on a timely basis.

 

 

C.            IRO Responsibilities.

 

The IRO shall:

 

1.  perform each Promotional and Product Services Review
in accordance with the specific requirements of the CIA;

 

2.  follow all applicable Federal health care program and
FDA requirements in making assessments in each Promotional and Product Services
Review;

 

3.  if in doubt of the application of a particular Federal
health care program or FDA requirement, policy, or regulation, request
clarification from the appropriate authority (e.g., CMS or FDA);

 

4.  respond to all OIG inquires in a prompt, objective,
and factual manner; and

 

5.  prepare timely, clear, well-written reports that
include all the information required by Appendix B to the CIA.

 

D.            IRO Independence and Objectivity.

 

The IRO must perform each
Promotional and Product Services Review in a professionally independent and
objective fashion, as appropriate to the nature of the engagement, taking into
account any other business relationships or engagements that may exist between
the IRO and Cephalon.

 

E.             IRO Removal/Termination.

 

1.     Provider. If Cephalon terminates its IRO during
the course of the engagement, Cephalon must submit a notice explaining its
reasons to OIG no later than 30 days after termination. Cephalon must engage a
new IRO in accordance with Paragraph A of this Appendix.

 

2.     OIG Removal of IRO. In the event OIG has reason to believe
that the IRO does not possess the qualifications described in Paragraph B, is
not independent and/or objective as set forth in Paragraph D, or has failed to
carry out its responsibilities as described in Paragraph C, OIG may, at its
sole discretion, require Cephalon to engage a new IRO in accordance with
Paragraph A of this Appendix.

 

Prior to requiring
Cephalon to engage a new IRO, OIG shall notify Cephalon of its intent to do so
and provide a written explanation of why OIG believes such a step is necessary.
To resolve any concerns raised by OIG, Cephalon may request a meeting with OIG
to discuss any aspect of the IRO’s qualifications, independence or performance
of its

 

2

 

responsibilities and to
present additional information regarding these matters. Cephalon shall provide
any additional information as may be requested by OIG under this Paragraph in
an expedited manner. OIG will attempt in good faith to resolve any differences
regarding the IRO with Cephalon prior to requiring Cephalon to terminate the
IRO. However, the final determination as to whether or not to require Cephalon
to engage a new IRO shall be made at the sole discretion of OIG.

 

3

 

Appendix B to CIA for Cephalon, Inc.

Promotional and Product Services Review

 

I.              Promotional and Product
Services Review, General Description

 

As
specified more fully below, Cephalon shall retain an Independent Review
Organization (IRO) to perform reviews to assist Cephalon in assessing and
evaluating its systems, processes, policies, procedures, and practices related
to Cephalon’s Promotional and Product Services Related Functions (Promotional
and Product Services Review). The Promotional and Product Services Review shall
consist of two components - a systems review (the “Promotional and Product
Services Systems Review” or “Systems Review”), and a transactions review (the “Promotional
and Product Services Transactions Review” or “Transactions Review”) as
described more fully below. Cephalon may engage, at its discretion, a single
IRO to perform both components of the Promotional and Product Services Review
provided that the entity has the necessary expertise and capabilities to
perform both.

 

If
there are no material changes in Cephalon’s systems, processes, policies, and
procedures relating to Promotional and Product Services Related Functions, the
IRO shall perform the Promotional and Product Services Systems Review for the
first and fourth Reporting Periods. If Cephalon materially changes its systems,
processes, policies, and procedures relating to Promotional and Product
Services Related Functions, the IRO shall perform a Promotional and Product
Services Systems Review for the Reporting Period(s) in which such changes
were made in addition to conducting the Review for the first and fourth
Reporting Periods. The additional Systems Review(s) shall consist of: 1)
an identification of the material changes; 2) an assessment of whether other
systems, processes, policies, and procedures previously reported did not
materially change; and 3) a review of the systems, processes, policies, and
procedures that materially changed. The IRO shall conduct the Promotional and
Product Services Transactions Review for each Reporting Period of the CIA.

 

II.            Promotional and Product
Services Systems Review

 

A.            Description of Reviewed
Policies and Procedures

 

The
Promotional and Product Services Systems Review shall be a review of Cephalon’s
systems, processes, policies, and procedures (including the controls on those
systems, processes, policies, and procedures) relating to certain Promotional
and Product Services Related Functions. Where practical, Cephalon personnel may
compile documentation, schedule and organize interviews, and undertake other
efforts to assist the IRO in performing the Systems Review. The IRO is not

 

1

 

required
to undertake a de novo review of the information gathered or activities
undertaken by Cephalon pursuant to the preceding sentence.

 

Specifically,
the IRO shall review Cephalon’s systems, processes, policies, and procedures
associated with the following (hereafter “Reviewed Policies and Procedures”):

 

1)             Cephalon’s
systems, policies, processes, and procedures  applicable to the manner in
which Cephalon representatives (including sales representatives and/or Medical
Services department personnel) handle requests or inquiries relating to
information about the uses of Cephalon products (including non-FDA-approved (i.e., off-label) uses) and the
dissemination of materials relating to off-label uses of products. This review
includes:

 

a)                                      the manner in
which Cephalon sales representatives and marketing personnel handle requests
for information about off-label uses of Cephalon products (i.e., by referring all such requests to
Medical Services department personnel at Cephalon);

 

b)                                     the manner in
which Medical Services department personnel, including those at Cephalon’s
headquarters, handle and respond to requests for information about off-label
uses of Cephalon products (including tracking the requests and using
pre-approved materials for purposes of responding to the request);

 

c)                                      the form and
content of information and materials related to Cephalon’s products
disseminated to physicians, pharmacists, or other health care professionals
(collectively “HCPs”) or health care institutions (HCIs) by Cephalon;

 

d)                                     Cephalon’s
systems, processes, and procedures (including the Inquiries Database) to track
requests for information about off-label uses of products and responses to
those requests;

 

e)                                      the manner in
which Cephalon collects and supports information reported in any systems used
to track and respond to requests for product information, including its
Inquiries Database;

 

f)                                        the processes
and procedures by which the Compliance Officer (and other appropriate
individuals within Cephalon) identify situations in which it appears that improper
off-label promotion may have occurred; and

 

2

 

g)                                     Cephalon’s
processes and procedures for investigating,  documenting, resolving, and
taking appropriate disciplinary action for potential situations involving
off-label promotion;

 

2)             Cephalon’s
policies and procedures applicable to the manner  and circumstances under
which its Medical Services department personnel (including any medical science
liaisons (MSLs)) participate in meetings or events with HCPs or HCIs (either
alone or with sales representatives) and the role of the medical personnel at
such meetings or events;

 

3)             Cephalon’s
systems, policies, processes, and procedures relating to Cephalon’s internal
review and approval of information and materials related to Cephalon’s products
disseminated to HCPs or HCIs by Cephalon;

 

4)             Cephalon’s systems,
polices, processes and procedures relating to incentive compensation for
Covered Persons who are sales representatives, with regard to whether the
systems, policies, processes, and procedures are designed to ensure that
financial incentives do not inappropriately motivate such individuals to engage
in the improper promotion, sales, and marketing of Cephalon’s products. This
shall include a review of the bases upon which compensation is determined and
the extent to which compensation is based on product performance; and

 

5)             Cephalon’s
systems, processes, policies, and procedures relating to the development and
review of call plans for Cephalon’s products. This shall include a review of
the bases upon which HCPs and HCIs belonging to specified medical specialties
are included in, or excluded from, the call plans based on expected utilization
of Cephalon products for FDA-approved uses or non-FDA-approved uses.

 

B.
Promotional and Product Services Systems Review Report

 

The
IRO shall prepare a report based upon each Systems Review. For each of the
Reviewed Policies and Procedures identified in Section II.A above, the
report shall include the following items:

 

1)             a description
of the documentation (including policies)  reviewed and any personnel
interviewed;

 

3

 

2)                                      a detailed
description of Cephalon’s systems, policies, processes, and procedures relating
to the items identified in Sections II.A.1-5 above, including a general
description of Cephalon’s control and accountability systems (e.g.,
documentation and approval requirements, and tracking mechanisms) and written
policies regarding the Reviewed Policies and Procedures;

 

3)                                      a description
of the manner in which the control and accountability systems and the written
policies relating to the items identified in Sections II.A.1-5 above are made
known or disseminated within Cephalon;

 

4)                                      a detailed
description of any system(s) used to track and respond to requests for
information about Cephalon’s products (including the Inquiries Database);

 

5)                                      a detailed
description of Cephalon’s incentive compensation system for Covered Persons who
are sales representatives, including a description of the bases upon which
compensation is determined and the extent to which compensation is based on
product performance. To the extent that Cephalon may establish compensation
differently for individual products, the IRO shall report separately on each
such type of compensation arrangement;

 

6)                                      findings and
supporting rationale regarding any weaknesses in Cephalon’s systems, processes,
policies, and procedures relating to the Reviewed Policies and Procedures, if
any; and

 

7)                                      recommendations
to improve any of the systems, policies, processes, or procedures relating to
the Reviewed Policies and Procedures, if any.

 

III.                                 Promotional and
Product Services Transaction Review

 

As
described more fully below in Sections III.A-D, the Promotional and Product
Services Transactions Review shall include: (1) a review of a sample of
Inquiries reflected in the Inquiries Database; (2) a review of Cephalon’s
call plans and Cephalon’s call plan review process; (3) a review of
records relating to a sample of the Payments that are reported by Cephalon
pursuant to Section III.M of the CIA; and (4) a review of up to three
additional items identified by the OIG in accordance with Section III.D.1.b
of the CIA (hereafter “Additional Items”.) The

 

4

 

IRO
shall report on all aspects of its reviews in the Promotional and Product
Services Transactions Review Reports.

 

A.                                   Review of
Inquiries and Inquiries Database

 

1)                                      Description of
Inquiries Database

 

As
set forth in Section III.B.3.d of the CIA, Cephalon shall establish a
database to track information relating to requests for information received by
Cephalon about its products (hereafter “Inquiries”). Specifically, Cephalon
shall document and record all Inquiries received from HCPs or HCIs regarding
Cephalon’s products in a database (the “Inquiries Database”). Cephalon shall
record in the Inquiries Database the following information for each Inquiry
received: 1) date of Inquiry; 2) form of Inquiry (e.g., fax, phone,
medical information request form); 3) name of requesting HCP or HCI; 4) nature
and topic of request (including exact language of the Inquiry if made in
writing); 5) nature/form of the response from Cephalon (including a record of
any materials provided in response to the request); and 6) the name of the
Cephalon representative who called upon or interacted with the HCP or HCI. Any
response from Medical Services to an HCP or HCI shall identify whether the
information provided addresses an indication that is part of an approved
product label. The status and findings of any follow-up review conducted by
Cephalon in situations in which improper off-label promotion is suspected shall
be maintained by Global Compliance.

 

2)                                 Internal Review
of Inquiries Database

 

On
a semi-annual basis, the Compliance Officer or other appropriate personnel
shall review the Inquiries Database and related information, as appropriate,
and shall generate a report summarizing the items of information outlined in Section III.A.
1 above for each Inquiry received during the preceding two quarters (“Inquiry
Report”). The Compliance Officer or other appropriate personnel shall review
the Inquiry Reports to assess whether the information contained in the report
suggests that improper off-label promotion may have occurred in connection with
any Inquiry(ies). If the Compliance Officer or other appropriate personnel, in
consultation with other appropriate Cephalon personnel, suspects that improper
off-label promotion may have occurred in connection with any Inquiry, the
Compliance Officer or other appropriate personnel shall

 

5

 

undertake
a follow-up review of the Inquiry (Off-Label Review), make specific findings
based on his/her Off-Label Review, and take all appropriate responsive action
(including disciplinary action of the Covered Person and reporting of the
conduct, including disclosing Reportable Events pursuant to Section III.H
of the CIA, if applicable).

 

3)                                      IRO Review of
Inquiries Reflected in Inquiries Database

 

The
IRO shall select and review a random sample of 60 Inquiries from among the
Inquiries reflected in the Inquiries Database for each Reporting Period.
Forty-five of the Inquiries reviewed by the IRO shall be Inquiries for which
Cephalon conducted an Off-Label Review, and the other 15 shall be Inquiries for
which Cephalon did not conduct an Off-Label Review. For each Inquiry reviewed,
the IRO shall determine:

 

a)              Whether each item of
information listed above in Section III.A. 1 is reflected in the Inquiries
Database for each reviewed Inquiry; and

 

b)             For each Inquiry for which
the Compliance Officer or other appropriate personnel conducted an Off-Label
Review, the basis for suspecting that improper off-label promotion may have
occurred; the steps undertaken as part of the Off-Label Review; the findings of
the Compliance Officer or other appropriate personnel as a result of the
Off-Label Review; and any follow-up actions taken by Cephalon based on the
Off-Label Review findings.

 

B.                                     IRO Review of
Cephalon’s Call Plans and Call Plan Review Process

 

The
IRO shall conduct a review and assessment of Cephalon’s review of its call
plans for Government Reimbursed Products as set forth in Section III.B.3.e
of the CIA. Cephalon shall provide the IRO with: i) a list of products promoted
by Cephalon during the Reporting Period; ii) information about the FDA-approved
uses for each Cephalon product; and iii) the call plans for each product.
Cephalon shall also provide the IRO with information about the reviews of call
plans that Cephalon conducted during the Reporting Period and any modifications
to the call plans made as a result of Cephalon’s reviews.

 

For
each call plan, the IRO shall select a sample of 50 of the HCPs and HCIs
included on the call plan. For each call plan, the IRO shall compare the

 

6

 

sampled
HCPs and HCIs against the criteria (e.g.,
medical specialty or practice area) used by Cephalon in conducting
its review and/or modification of the call plan in order to determine whether
Cephalon followed its criteria and Policies and Procedures in reviewing and
modifying the call plan.

 

The
IRO shall note any instances in which it appears that the sampled HCPs and HCIs
on a particular call plan are inconsistent with Cephalon’s criteria relating to
the call plan and/or Cephalon’s Policies and Procedures. The IRO shall also
note any instances in which it appears that Cephalon failed to follow its
criteria or Policies and Procedures.

 

C.                                     IRO Review of
Physician Payment Listings

 

1.                                       Information
Contained in Physician Payment Listings

 

As
set forth in Section III.M of the CIA, Cephalon shall post quarterly and
annual listings of physicians and Related Entities who received Payments, as
defined in the CIA, directly or indirectly from Cephalon. For purposes of the
IRO review as set forth in this Section III.C, each annual listing shall
be referred to as the “Physician Payment Listing” or “Listing.” For each
physician and Related Entity, each Physician Payment Listing shall include the
following information: i) full name; ii) city and state of the physician; iii)
name, city, and state of the Related Entity (if applicable); and iv) the
aggregate value of the Payment(s) in the preceding year.

 

For
purposes of this IRO review, the term “Control Documents” shall include all
documents or electronic records associated with each Payment reflected in the
Physician Payments Listing for the sampled physician and/or Related Entity. For
example, the term “Control Documents” includes, but is not limited to,
documents relating to the nature, purpose, and amount of all Payments reflected
in the Listing; contracts relating to the Payment(s) reflected in the
Listing; documents relating to the occurrence of Payment(s) reflected in
the Listing; documents reflecting any work product generated in connection with
the Payment(s); documents submitted by sales representatives or headquarters
personnel to request approval for the Payment(s); and business rationale or
justification forms relating to the Payment(s).

 

2.                                  Selection of
Sample for Review

 

For
each Reporting Period, the OIG shall have the discretion to identify 50
physicians or Related Entities from the applicable Physician Payment Listing
that will be subject to the IRO review described below. If the OIG elects to
exercise this discretion, it shall notify the IRO of the 50 physicians and/or
Related Entities

 

7

 

subject
to the IRO review. If the OIG elects not to exercise its discretion as
described above, the IRO shall randomly select 50 physicians and/or Related
Entities to be included in the review. For each selected physician and/or
Related Entity, the IRO shall review the entry in the Physician Payment Listing
and the Control Documents relating to Payments reflected in Listing identified
by the IRO as necessary and sufficient to validate the Payment information in
the Listing.

 

3.                                       IRO Review of
Control Documents for Selected Physicians and/or  Related Entities

 

For each physician and/or Related Entity selected as
part of the sample, the IRO shall review the Control Documents identified by
the IRO as necessary and sufficient to validate each Payment reflected in the
Listing to evaluate the following:

 

a)                                      Whether Control
Documents are available relating to each Payment reflected in the Listing for
the sampled physician and/or Related Entity;

 

b)                                     Whether the
Control Documents were completed and archived in accordance with the
requirements set forth in Cephalon’s policies;

 

c)                                      Whether the
aggregate value of the Payment(s) as reflected in the Listing for the
sampled Physician is consistent with the value of the Payments(s) reflected
in the Control Documents; and

 

d)                                     Whether the
Control Documents reflect that Cephalon’s policies were followed in connection
with Payment(s) reflected in the Listing (e.g., all required
written approvals for the activity were obtained in accordance with Cephalon’s
policies.)

 

4.                                       Identification
of Material Errors and Additional Review

 

A
Material Error is defined as any of the following:

 

a)              A situation in which all
required Control Documents relating to Payments reflected in the Listing for
the sampled physician and/or Related Entity do not exist and:

 

8

 

i.                  no corrective action was
initiated prior to the selection of the sampled physicians and/or Related
Entities; or

 

ii.               the IRO cannot confirm that
Cephalon otherwise followed its policies and procedures relating to the entry
in the Listing for the sampled physician or Related Entity, including its
policies and procedures relating to any Payment(s) reflected in the
Listing; or

 

b)             Information or data is
omitted from key fields in the Control Documents that prevents the IRO from
assessing compliance with Cephalon’s policies and procedures, and the IRO
cannot obtain this information or data from reviewing other Control Documents.

 

If
a Control Document does not exist, but Cephalon has initiated corrective action
prior to the selection of the sampled physicians and/or Related Entities, or if
a Control Document does not exist but the IRO can determine that Cephalon
otherwise followed its policies and procedures with regard to each entry in the
Listing for a sampled physician or Related Entity, the IRO shall consider such
a situation to be an exception (rather than a Material Error) and the IRO shall
report the situation as such. Similarly, the IRO shall note as exceptions any
Control Documents for which non-material information or data is omitted.

 

If
the IRO identifies any Material Errors, the IRO shall conduct such Additional
Review of the underlying Payment associated with the erroneous Control
Documents as may be necessary to determine the root cause of the Material
Errors. For example, the IRO may need to review additional documentation and/or
conduct interviews with appropriate personnel to identify the root cause of the
Material Error(s) discovered.

 

D.                                    IRO Review of
Additional Items

 

As
set forth in Section III.D.1.b of the CIA and beginning with the second
Reporting Period, the OIG at its discretion may identify up to three additional
items for the IRO to review (hereafter “Additional Items”.) No later than 90
days prior to the end of the second through fifth Reporting Periods, the OIG
shall notify Cephalon of the nature and scope of the IRO review to be conducted
for each of the Additional Items. Prior to undertaking the review of the
Additional Items, the IRO and/or Cephalon shall submit an audit work plan to
the OIG for approval and the IRO shall conduct the review of the Additional
Items based on a work plan approved by the OIG. The IRO shall include
information about its review of each

 

9

 

Additional
Item in the Transactions Review Report (including a description of the review
conducted for each Additional Item; the IRO’s findings based on its review for
each Additional Item; and the IRO’s recommendations for any changes in Cephalon’s
systems, processes, policies, and procedures based on its review of each
Additional Item.)

 

Cephalon
may propose to the OIG that its internal audit(s) be partially substituted
for one or more of the Additional Items that would otherwise be reviewed by the
IRO for the applicable Reporting Period. The OIG retains sole discretion over
whether, and in what manner, to allow Cephalon’s internal audit work to be
substituted for a portion of the Additional Items review conducted by the IRO.

 

In
making its decision, the OIG agrees to consider, among other factors, the
nature and scope of Cephalon’s planned internal audit work, the results of the
Transactions Review(s) during prior Reporting Period(s), and Cephalon’s
demonstrated audit capabilities to perform the proposed audit work internally.
If the OIG denies Cephalon’s request to permit its internal audit work to be
substituted for a portion of the IRO’s review of Additional Items in a given
Reporting Period, Cephalon shall engage the IRO to perform the Review as
outlined in this Section III.

 

If
the OIG agrees to permit certain of Cephalon’s internal audit work for a given
Reporting Period to be substituted for a portion of Additional Items review,
such internal work would be subject to verification by the IRO (Verification
Review). In such an instance, the OIG would provide additional details about
the scope of the Verification Review to be conducted by the IRO. However, for
purposes of any Verification Review, the IRO shall review of at least 20% of
the sampling units reviewed by Cephalon in its internal audits.

 

E.                                      Promotional and
Product Services Transactions Review Report

 

For
each Reporting Period, the IRO shall prepare a report based on its Promotional
and Product Services Transactions Review. The report shall include the
following:

 

1)                                      General
Elements to Be Included in Report

 

a)                                      Review
Objectives: A clear statement of the objectives intended to be achieved by each
part of the review;

 

b)                                     Review
Protocol: A detailed narrative description of the procedures performed and a
description of the sampling unit

 

10

 

and
universe utilized in performing the procedures for each sample reviewed; and

 

c)                                      Sources of
Data: A full description of documentation and other information,
if applicable, relied upon by the IRO in performing the
Promotional and Product Services Transactions Review.

 

2)                                      Results to be
Included in Report

 

The
following results shall be included in each Promotional and Product Services
Review Report:

 

(Relating
to the Review of Inquiries)

 

a)                                      in connection
with the review of Inquiries, a description of each type of sample unit
reviewed, including the number of each type of sample units reviewed (e.g., the
number of Inquiries) and an identification of the types of documents and
information reviewed for the Inquiries;

 

b)                                     for each
Inquiry sample unit, the IRO shall summarize the information about the Inquiry
contained in the Inquiries Database;

 

c)                                      for each
Inquiry sample unit, findings and supporting rationale as to whether: (i) each
item of information listed in Section III.A. 1 is reflected in the
Inquiries Database; and (ii) for each Inquiry for which an Off-Label
Review was conducted, the basis for suspecting that improper off-label
promotion may have occurred; the steps undertaken as part of the Off-Label
Review; the findings of the Compliance Officer as a result of the Off-Label
Review; and any follow-up actions taken by Cephalon as a result of the
Compliance Officer’s findings;

 

d)                                     the findings
and supporting rationale regarding any weaknesses in Cephalon’s systems,
processes, policies, procedures, and practices relating to the Inquiries, and
the Inquiries Database, if any;

 

11

 

e)                                      recommendations
for improvement in Cephalon’s systems, processes, policies, procedures, and
practices relating to the Inquiries and the Inquiries Database, if any;

 

(Relating
to the Call Plan Reviews)

 

f)                                        a list of the
products promoted by Cephalon during the Reporting Period and a summary of the
FDA-approved uses for such products;

 

g)                                     for each
Cephalon product: i) a description of the criteria used by Cephalon in
developing or reviewing the call plans and for including or excluding specified
types of HCPs or HCIs from the call plans; ii) a description of the review
conducted by Cephalon of the call plans and an indication of whether Cephalon
reviewed the call plans as required by Section III.B.3.e of the CIA; iii)
a description of all instances for each call plan in which it appears that the
HCPs and HCIs included on the call plan are inconsistent with Cephalon’s
criteria relating to the call plan and/or Cephalon’s Policies and Procedures;
and iv) a description of all instances in which it appears that Cephalon failed
to follow its criteria or Policies and Procedures relating to call plans or the
review of the call plans;

 

h)                                     the findings
and supporting rationale regarding any weaknesses in Cephalon’s systems,
processes, policies, procedures, and practices relating to Cephalon’s call
plans or the review of the call plans, if any;

 

i)                                         recommendations,
if any, for changes in Cephalon’s systems, processes, policies, procedures, and
practices that would correct or address any weaknesses or deficiencies
uncovered during the Transactions Review with respect to call plans or the
review of the call plans;

 

(Relating to the Physician Payment Listing Reviews)

 

j)                                         a description
of the entries in the Physician Payment Listing for each physician or Related
Entity sampled and a description of Control Documents reviewed in connection
with each selected physician or Related Entity;

 

12

 

k)                                      for each
sampled physician or Related Entity, findings and supporting rationale as to
whether: (i) all required Control Documents exist; (ii) each Control
Document was completed in accordance with all of the requirements set forth in
the applicable Cephalon policy; (iii) the aggregate value of the Payment(s) as
reflected in the Listing for the sampled physician or entity is consistent with
the value of the Payment(s) reflected in the Control Documents; (iv) each
Control Document reflects that Cephalon’s policies were followed in connection
with the underlying activity reflected in the document (e.g., all
required approvals were obtained); and (v) any disciplinary action was
undertaken in those instances in which Cephalon policies were not followed;

 

l)                                         for each
sampled physician or Related Entity unit reviewed, an identification and
description of all exceptions discovered. The report shall also describe those
instances in which corrective action was initiated prior to the selection of
the sampled physicians or Related Entities, including a description of the
circumstances requiring corrective action and the nature of the corrective
action;

 

m)                                   if any Material
Errors are discovered in any sample unit reviewed, a description of the error,
the Additional Review procedures performed and a statement of findings as to
the root cause(s) of the Material Error;

 

(Relating to the Review of Additional Items)

 

n)                                     for each
Additional Item reviewed, a description of the review conducted;

 

o)                                     for each
Additional Item reviewed, the IRO’s findings based on its review;

 

p)                                     for each
Additional Item reviewed, the findings and supporting rationale regarding any
weaknesses in Cephalon’s systems, processes, policies, procedures, and
practices relating to the Additional Item, if any; and

 

q)                                     for each
Additional Item reviewed, recommendations, if any, for changes in Cephalon’s
systems, processes, policies, and

 

13

 

procedures
that would correct or address any weaknesses or deficiencies uncovered during
the review.

 

14Exhibit 10.3

 

STATE SETTLEMENT
AGREEMENT AND RELEASE

 

I.  PARTIES

 

This Settlement Agreement and Release (“Agreement”) is entered into
between the State of                         
(“State”), and Cephalon, Inc.  (“Cephalon”),
a Delaware corporation with its principal place of business in Frazer,
Pennsylvania, hereinafter collectively referred to as “the Parties”.

 

II.  PREAMBLE

 

As a preamble to this Agreement, the Parties agree to the following:

 

A.            At
all relevant times, Cephalon distributed, marketed and sold pharmaceutical
products in the United States, including drugs sold under the trade names of
Actiq, Gabitril and Provigil.

 

B.            Cephalon
has entered into a plea agreement with the United States Attorney for the
Eastern District of Pennsylvania and has agreed to plead guilty, pursuant to
Fed. R. Crim. P. 11, to a one count Information to be filed in United States
v. Cephalon, Inc. (the “Federal Criminal Action”) that will allege that
between January 2001 through October 1, 2001, Cephalon introduced
into interstate commerce and caused the introduction into interstate commerce
of drugs (Actiq, Gabitril, and Provigil) that were misbranded through off-label
promotion, a misdemeanor, in violation of 21 U.S. C. §§ 331(a), 333(a)(1) and
352(f)(1).

 

C.            Cephalon
has entered into a separate settlement agreement (the “Federal Settlement
Agreement and Release”) with the United States (as that term is defined in the
Federal Settlement Agreement and Release), which will be receiving settlement
funds from 

 

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Cephalon pursuant to Paragraph 1 below for the Covered Conduct
described in Paragraph D below.

 

D.            The
State contends that it has certain civil and administrative claims against
Cephalon for engaging in the following alleged conduct (“the Covered Conduct”):

 

(i)            Between January 1,
2001 and December 31, 2006 for Actiq and Provigil and between January 1,
2001 and February 18, 2005 for Gabitril, Cephalon knowingly and willfully
promoted the sale and use of Actiq, Gabitril and Provigil for certain uses
which the Food and Drug Administration had not approved (i.e. “unapproved uses”).
The promotion of Actiq, Gabitril and Provigil for these unapproved uses
violated the Food Drug and Cosmetic Act 21 U.S.C. § 331(a), 21 U.S.C. § 352(f).
In addition, certain of these unapproved uses were not medically accepted
indications for which the United States and State Medicaid programs approved
reimbursement. As a result of Cephalon’s conduct, Cephalon knowingly caused
false and/or fraudulent claims to be submitted to the United States and the State
Medicaid programs.

 

(ii)           Cephalon has entered
into a plea agreement with the United States Attorney for the Eastern District
of Pennsylvania and has agreed to plead guilty, pursuant to Fed. R. Crim. P.
11, to a one Count Information to be filed in United States v. Cephalon, Inc.
(the “Federal Criminal Action”) that will allege that between January 2001
through October 1, 2001, Cephalon introduced into interstate commerce and
caused the introduction into interstate commerce of drugs (Actiq, Gabitril, and
Provigil) that were misbranded 

 

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through
off-label promotion, a misdemeanor, in violation of 21 U.S. C. §§ 331(a),
333(a)(1) and 352(f)(1).

 

E.     Cephalon has cooperated fully
and completely with the State throughout the course of its investigation and
continues to do so.

 

F.     This Agreement is made in compromise of disputed claims.  This Agreement is neither an admission of
facts or liability by Cephalon nor a concession by the State that its claims
are not well founded.  Neither this
Settlement, its execution, nor the performance of any obligation under it,
including any payment, nor the fact of the settlement, is intended to be or
shall be understood as an admission of liability or wrongdoing or other
expression reflecting upon the merits of the dispute by Cephalon.

 

G.    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 below.

 

III. TERMS AND CONDITIONS

 

NOW, THEREFORE, in reliance on the
representations contained herein and in consideration of the mutual promises,
covenants, and obligations set forth below in this Agreement, and for good and
valuable consideration as stated herein, the Parties agree as follows:

 

1.             Cephalon agrees to pay to the United States and the
States that will be receiving settlement funds pursuant to this paragraph (the “Medicaid
Participating States”) collectively the sum of three hundred seventy-five
million dollars ($375,000.000.00) plus interest in an amount 

 

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of 4.0% per annum from January 1, 2008,
and continuing until and including the day before complete payment is made (the
“Settlement Amount”).  Of this sum,                                                                                     ($                            )
represents payment to Medicaid, which shall constitute a debt immediately due
and owing to the United States and the Medicaid Participating States on the Effective
Date of this Agreement subject to the terms of the Federal Settlement Agreement
and Release and this Agreement.  This
debt is to be discharged by payments to the United States and the Medicaid
Participating States under the following conditions:

 

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A.            Cephalon  and the United States separately have agreed
that the sum of                                                          
($                                ),
plus interest in an amount of 4.0% per annum from January 1, 2008, and
continuing until and including the day before complete payment is made represents
the federal share (the “Federal Settlement Amount”).  The Federal Settlement Amount shall be paid
pursuant to the terms of the Federal Settlement Agreement and Release.

 

B.            Cephalon and the
Medicaid Participating States agree that the sum of                                                             
($                          ),
plus interest in an amount of 4.0% per annum 
from January 1, 2008, until and including the day before complete
payment is made represents the States’ share (the “Medicaid State Settlement
Amount”).    This Medicaid State Settlement Amount shall
be paid into an interest bearing account no later than thirty (30) business days
after the Federal Settlement Agreement and Release’s Effective Date pursuant to
written payment instructions from the National Association of Medicaid Fraud
Control Units’ Negotiating Team (“NAMFCU”) for the Medicaid Participating
States.

 

C.            The total portion of the Settlement Amount paid by
Cephalon in settlement for the Covered Conduct to the State is $                        ,
consisting of a portion paid to the State under this Agreement and another
portion paid to the Federal government as part of the Federal Settlement
Agreement and Release.  The individual
portion of the Medicaid State Settlement Amount allocable to the State under
this Agreement is the sum of $                    ,
plus applicable interest.  NAMFCU shall disburse
to the State the individual portion of the Medicaid State Settlement Amount allocable
to the State after the Effective Date of this Agreement.  If the State does not 

 

5

 

execute this Agreement within 180 days of the
Effective Date of the Federal Settlement Agreement and Release, the total
portion of the Settlement Amount paid by Cephalon in settlement for the Covered
Conduct to the State plus the interest accrued on that amount shall revert to Cephalon.

 

2.             Contingent upon the Medicaid Participating States
receiving the Medicaid State Settlement Amount, the Medicaid Participating
States agree to pay, as soon as feasible after receipt, the agreed upon amounts
with Relators.

 

3.             Subject to the exceptions in Paragraph 4 below, and
in consideration of the obligations of Cephalon set forth in this Agreement,
conditioned upon Cephalon’s payment in full of the Settlement Amount, and
subject to Paragraph 13 below (concerning bankruptcy proceedings
commenced within 91 days of the Effective Date of this Agreement or any payment
under this Agreement), the State, on behalf of
itself, and its officers, agents, agencies, political subdivisions and departments,
agrees to release Cephalon, its predecessors, and its current and former
parents, affiliates, divisions, subsidiaries, successors and assigns, and their
current and former directors, officers, and employees (collectively, “Cephalon
Released Entities”), from any civil or administrative liability or monetary
claim that the State or any of its political subdivisions has or may have for
any claims submitted or caused to be submitted to the State Medicaid Program for
the Covered Conduct.  The payment of the
Settlement Amount fully discharges the Cephalon Released Entities from any
obligations to pay Medicaid related restitution, damages, and/or any civil fine
or civil penalty to the State for the Covered Conduct.

 

4.             Notwithstanding any term of this Agreement, the State
specifically does not release any person or entity from any of the following
claims or liabilities:  (a) any
criminal, civil, or administrative claims arising under state revenue codes; (b) any
criminal liability not 

 

6

 

specifically released by this Agreement; (c) any
civil liability that Cephalon has or may have under any state statute,
regulation, or rule not covered by this release; (d) any liability to
the State (or any agencies thereof) for any conduct other than the Covered
Conduct; (e) any claims based upon obligations created by this Agreement; (f) mandatory
exclusion from the State’s Medicaid program; (g) any express or implied
warranty claims or other claims for defective or deficient products and
services provided by Cephalon; (h) any claims for personal injury or
property damage or for other consequential damages arising from the Covered
Conduct; (i) any claims based on a failure to deliver items or services
due; or (j) any civil or administrative claims relating to the Covered
Conduct against individuals, including officers and employees, who, as of the
Effective Date of this Agreement, received written notification that they are
the target of a criminal investigation, are criminally indicted or charged, or
are convicted, or who enter into a criminal plea agreement.  The State represents that any mandatory
exclusion provisions under its state law do not apply in the facts and
circumstances of this case.

 

5.             This
Agreement is expressly conditioned upon resolution of the Federal Criminal
Action.  In consideration of the
acceptance of Cephalon’s plea of guilty in the Federal Criminal Action, the State,
to the extent the Attorney General is authorized to do so, agrees that it shall
not further criminally investigate, prosecute, or refer for prosecution or
investigation to any agency, the Cephalon Released Entities.

 

6.             In
consideration of the obligations of Cephalon set forth in this Agreement, and
the CIA that Cephalon has entered into with HHS-OIG in connection with this
matter, and conditioned on Cephalon’s payment in full of the Settlement Amount,
except as reserved in Paragraph 4 above and subject to Paragraph 13 below
(concerning bankruptcy proceedings commenced within 91 days of the Effective
Date of this Agreement or any payment under this 

 

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Agreement),
the State agrees to release and refrain from instituting, directing, or
maintaining any administrative claim or any action seeking exclusion from the
State’s Medicaid program against Cephalon, its predecessors, and their current
or former parents, affiliates, divisions, subsidiaries, successors, and assigns
for the Covered Conduct.  The Medicaid
Fraud Control Unit for the State further agrees to refrain from recommending,
causing or attempting to cause any administrative action or sanction, including
debarment, by any other government agency of the State for the Covered
Conduct.  Nothing in this Agreement
precludes the State from taking action against Cephalon in the event that
Cephalon is excluded by the federal government, or for conduct and practices
other than the Covered Conduct or conduct underlying the conviction in the
Federal Criminal Action.  The State does
not release Cephalon from any claims or actions which may be asserted by
private payors or insurers, including those that are paid by a state’s Medicaid
program on a capitated basis.

 

7.             Within fourteen
business days of the Effective Date of this Agreement, the State agrees to dismiss
with prejudice any lawsuit specifically as to the Cephalon Released Entities,
including any qui tam “whistleblower” lawsuits,
in which the State has intervened, is a party and/or has the authority to
dismiss, currently pending against Cephalon in any court asserting allegations
or claims relating to the Covered Conduct. 
This Agreement is contingent upon dismissal with prejudice of all such qui tam “whistleblower” lawsuits.  To the extent any such qui tam
“whistleblower” lawsuit is not dismissed with prejudice, this Agreement shall
become null and void and the amount allocable to the State under this
Agreement, as set forth in Paragraph III 1(C), shall be returned to Cephalon.

 

8.             The Cephalon
Released Entities waive and shall not assert any defenses they may have to
criminal prosecution or administrative action relating to the Covered Conduct,
which 

 

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defenses
may be based in whole or in part on a contention that, under the Double
Jeopardy Clause of the Fifth Amendment of the Constitution or the Excessive
Fines Clause of the Eighth Amendment of the Constitution, this Agreement bars a
remedy sought in such criminal prosecution or administrative action.

 

9.             In
consideration of the obligations of the State set forth in this Agreement, the Cephalon
Released Entities waive and discharge the State, its agencies, political
subdivisions, employees, servants, and agents from any claims (including
attorneys’ fees, costs, and expenses of every kind and however denominated)
which the Cephalon Released Entities have asserted, could have asserted, or may
assert in the future against the State, its agencies, political subdivisions,
employees, servants, and agents, related to or arising from the State’s
investigation and prosecution of the Covered Conduct.

 

10.           The
Settlement Amount that Cephalon must pay pursuant to Paragraph 1 above will not
be decreased as a result of the denial of claims for payment now being withheld
from payment by the State’s Medicaid program, or any other state payor, related
to the Covered Conduct; and, if applicable, Cephalon agrees not to resubmit to
the State’s Medicaid program or any other state payor, any previously denied
claims, which denials were based on the Covered Conduct, and agrees not to
appeal or cause the appeal of any such denials of claims.

 

11.           Cephalon waives
and shall not seek payment for any of the health care billings covered by this
Agreement from any health care beneficiaries or their parents, sponsors,
legally responsible individuals, or third party payors based upon the claims
for payment covered by this Agreement.

 

12.           Cephalon
expressly warrants that it has reviewed its financial condition and that it is
currently solvent within the meaning of 11 U.S.C. §§ 547(b)(3) and
548(a)(B)(ii)(I), and shall 

 

9

 

remain
solvent following payment of the Settlement Amount.  Further, the Parties expressly warrant that,
in evaluating whether to execute this Agreement, the Parties (a) have
intended that the mutual promises, covenants, and obligations set forth herein
constitute a contemporaneous exchange for new value given to Cephalon within
the meaning of 11 U.S.C. § 547(c)(1), and (b) have concluded that these
mutual promises, covenants and obligations do, in fact, constitute such a
contemporaneous exchange.

 

13.           In the
event Cephalon commences, or another party commences, within 91 days of the
effective date of this Agreement or any payment made hereunder, any case,
proceeding, or other action under any law relating to bankruptcy, insolvency,
reorganization, or relief of debtors (a) seeking to have any order for
relief of Cephalon’s debts, or seeking to adjudicate Cephalon as bankrupt or
insolvent, or (b) seeking appointment of a receiver, trustee, custodian or
other similar official for Cephalon or for all or any substantial part of
Cephalon’s assets, Cephalon agrees as follows:

 

A.            Cephalon’s
obligations under this Agreement may not be avoided pursuant to 11 U.S.C. §§
547 or 548, and Cephalon shall not argue or otherwise take the position in any
such case, proceeding or action that: (i) Cephalon’s obligations under
this Agreement may be avoided under 11 U.S.C. §§ 547 or 548; (ii) Cephalon
was insolvent at the time this Agreement was entered into, or became insolvent
as a result of the payment made to the State hereunder; or (iii) the
mutual promises, covenants, and obligations set forth in this Agreement do not
constitute a contemporaneous exchange for new value given to Cephalon.

 

B.            If Cephalon’s
obligations under this Agreement are avoided for any reason, including, but not
limited to, through the exercise of a trustee’s avoidance powers under the
Bankruptcy Code, the State, at its sole option, may rescind the releases
provided in 

 

10

 

this
Agreement, and bring any civil and/or administrative claim, action or
proceeding against Cephalon for the claims that would otherwise be covered by
the releases provided in this Agreement. 
If the State chooses to do so, Cephalon agrees that for purposes only of
any claims, actions or proceedings referenced in this first clause of this
Paragraph, (i) any such claims, actions, or proceedings brought by the
State (including any proceedings to exclude Cephalon from participation in the
State’s Medicaid program) are not subject to an “automatic stay” pursuant to 11
U.S.C. § 362(a) as a result of the action, case, or proceeding described
in the first clause of this Paragraph, and that Cephalon shall not argue or
otherwise contend that the State’s claims, actions, or proceedings are subject
to an automatic stay; (ii) Cephalon shall 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 which are brought by the State within 90 calendar days
of written notification to Cephalon that the releases herein have been
rescinded pursuant to this Paragraph, except to the extent such defenses were
available before June 24, 2005; and (iii) the United States and the
Medicaid Participating States have a valid claim against Cephalon in the amount
of three hundred and seventy five million dollars ($375,000,000.00) plus
applicable multipliers and penalties and they may pursue their claims, inter alia, in the case, action, or proceeding referenced in
the first clause of this Paragraph, as well as in any other case, action or
proceeding; and

 

C.            Cephalon
acknowledges that its agreements in this Paragraph are provided in exchange for
valuable consideration provided in this Agreement.

 

14.           The Parties each represent that this Agreement is freely and voluntarily
entered into without any degree of duress or compulsion whatsoever.

 

11

 

15.           Except as expressly provided to the contrary in this Agreement, each Party
to this Agreement shall bear its own legal and other costs incurred in
connection with this matter, including the preparation and performance of this
Agreement.

 

16.           Except as otherwise stated in this Agreement, this Agreement is intended to
be for the benefit of the Parties only, and by this instrument the Parties do
not release any claims against any other person or entity.

 

17.           Nothing in this Agreement constitutes an agreement by the State concerning
the characterization of the amounts paid hereunder for purposes of the State’s
revenue code.

 

18.           In addition to all other payments and responsibilities under this
Agreement, Cephalon agrees to pay all reasonable travel costs and expenses of the
NAMFCU Negotiating Team.  Cephalon will
pay this amount by separate check or wire transfer made payable to the National
Association of Medicaid Fraud Control Units after  Medicaid Participating States execute their
respective Agreement or as otherwise agreed by the Parties.

 

19.           Cephalon covenants to cooperate fully, truthfully and in a reasonably
timely manner in the production of business records and in using reasonable
efforts to make employees available for interviews with Company counsel present,
if agreeable to the employee, with the State in any ongoing investigation or
investigation commenced within five years of the Effective Date of this
Agreement of individuals and entities not specifically released by this
Agreement relating to the Covered Conduct. 
This provision does not require Cephalon to:  (1) waive any applicable privilege or
work product protection, (2) create or produce records that had not
already been prepared in the ordinary course of business, or (3) further or
encourage cooperation by any individual to the extent inconsistent with the
advice of that individual’s separate counsel.

 

12

 

20.           This Agreement is governed by the laws of the State except that disputes
arising under the CIA shall be resolved exclusively under the dispute
resolution provisions of the CIA.

 

21.           The undersigned Cephalon signatories represent and warrant that they are
authorized as a result of appropriate corporate action to execute this
Agreement.  The undersigned State
signatories represent that they are signing this Agreement in their official
capacities and that they are authorized to execute this Agreement on behalf of
the State through their respective agencies and departments.

 

22.           The “Effective Date” of this Agreement shall be the date of signature of
the last signatory to this Agreement. 
Facsimiles of signatures shall constitute acceptable binding signatures
for purposes of this Agreement.

 

23.           This Agreement shall be binding on all successors, transferees, heirs, and
assigns of the Parties.

 

24.           This Settlement Agreement constitutes the complete agreement between the
Parties and shall not be amended except by written consent of the Parties.

 

25.           Each Party agrees to perform any further acts and to execute and deliver
any further documents reasonably necessary to carry out this Agreement.

 

26.           This Agreement may be executed in counterparts, each of which shall
constitute an original, and all of which shall constitute one and the same
Agreement.

 

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STATE

 

 

	
  By:

  	
   

  	
   

  	
  Dated:

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
  OFFICE OF THE ATTORNEY GENERAL

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  Dated:

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
  Medicaid Program:

  	
   

  	
   

  

 

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CEPHALON, INC.

 

 

	
  By:

  	
   

  	
   

  	
  Dated:

  
	
  GERALD J. PAPPERT, ESQ.

  	
   

  	
   

  
	
  Executive Vice President and

  	
   

  	
   

  
	
  General Counsel

  	
   

  	
   

  
	
  Cephalon, Inc.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  Dated:

  
	
  ERIC SITARCHUK, ESQ.

  	
   

  	
   

  
	
  Morgan, Lewis & Bockius, LLP

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  J. SEDWICK SOLLERS, III, ESQ.

  	
   

  	
   

  
	
  King & Spalding, LLP

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  MARK A. JENSEN, ESQ.

  	
   

  	
   

  
	
  King & Spalding, LLP

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Counsel to Cephalon, Inc.

  	
   

  	
   

  

 

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