Study Details Scope of Big Pharma's Crimes

Public Citizen recently released the most authoritative study yet conducted on the stunning scope of illegal activity by pharmaceutical companies. The study -- done by Sammy Almashat, Charles Preston, Timothy Waterman, and Sidney Wolfe -- looked at federal and state government settlements with these companies going back to 1991. It found that a total of "165 civil and/or criminal settlements of $1 million or more were made between the government and pharmaceutical companies from 1991 to 2010, with settlement amounts totaling $19.81 billion."

The data presented in the report is fascinating, and must reading for anyone interested in the chronic abuses of Big Pharma. But maybe the most important points of the study come in its conclusion:

Clearly, the continuing increase in violations by pharmaceutical companies despite such large financial settlements is an indication that the current system oenforcement is not working. The lack of criminal prosecution that would result injailing of company executives has been cited as a major reason for the continuing large-scale fraud, in addition to the fact that current settlement payouts may not be a sufficient deterrent. For example, GlaxoSmithKline and Pfizer have paid out a combined total of $7.44 billion in financial penalties overthe past 20 years. These two companies made a combined $16.5 billion in global net profits in one year alone. Thus, these financial penalties, although increasing, remain a very small fraction of company net profits and therefore do not provide a sufficient deterrent against further violations. Increased punishments may be needed, such as significantly larger financial penalties and, if appropriate, felony prosecution—including jail—for company executives engaging in criminal behavior. . . .

This more aggressive level of enforcement would be based on applying thedoctrine,” a legal precedent that holds top corporate executives liable for illegal conduct within their company, even if they didn’t know about or participate in it. The main purpose of employing this standard is to force companies to “…implement measures that will prevent [these] violations in the first instanceparticularly in cases where public safety is at risk. In addition to the prospect of jail time for individual executives, a felony conviction could result in their companies becoming ineligible for reimbursement from federal and state healthprograms, a critical source of pharmaceutical company revenues.

Holding actual individuals responsible is the usual response to crime sprees, except when those sprees are orchestrated by corporate executives. Until that changes, America's white collar crime epidemic will continue.

Rapidly Increasing Criminal and Civil Penalties

Bristol-Myers Squibb and the Culture of Kickbacks

It is well known that one reason health care costs are so high is because of the high cost of prescription drugs. According to a recent report by Public Citizen, U.S. spending on prescription drugs has increased from $40 billion in 1990 to $234 billion in 2008. But what most people don't know is that pharmaceutical companies have engaged in a variety of illegal marketing tactics that help to drive up the costs of drugs, including giving kickbacks to doctors to prescribe pricier drugs than is needed.

The practice of kickbacks has attracted new scrutiny thanks to a whistleblower lawsuit against Bristol-Myers Squibb, the giant drugmaker. BMS bribed doctors to prescribe certain drugs "with sports tickets, fancy meals, honoraria, all-expense-paid trips, and gifts," according to the California State Insurance Commissioner Dave Jones. Today, Jones' office announced that it has joined the lawsuit, which is the largest health insurance fraud case ever pursued by a California state agency.

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Complaint Against Bristol-Myers Squibb

Off-Label Marketing: Can It Be Stopped? Should It Be?

In an ideal world, "off-label" drug use--the prescibing of drugs in a manner for which they are not approved--would be employed by doctors looking to innovatively and safely treat their patients in cases that call for such treatment. For example, many doctors prescribe drugs "off-label" when treating cancer, and these treatments have often proved beneficial to patients. However, for off-label use to be successful and safe, prescribing doctors need to take innumerable things into consideration: a patient's age, medical history, condition(s), and the possible side-effects of a drug not tested for what its being used for.

You would hope that doctors would make these decisions using unbiased information. Unfortunately, not only is much off-label use not supported by data, it is often drug companies -- focused on the bottom-line -- which heavily influence what information doctors get about the off-label uses of various drugs.

While off-label use is a common and legal practice among physicians and psychiatrists, it is illegal under  FDA regulations for drug manufacturers to directly promote their product for off-label uses. That's because "off-label" prescriptions may be more detrimental than no treatment at all. For example, many drugs not approved for children are consistently and increasingly prescribed to children to treat ADHD, social, and mood disorders. These drugs can have negative effects on their developing systems. 

Despite the FDA’s ban on the “direct” promotion of prescription drugs for off-label uses, drug manufacturers such as Pfizer and Allergan (the company that produces Botox) have employed a wide range of indirect methods to push their products for such uses. Pfizer illegally promoted four drugs for uses other than what was FDA approved. Allergan was recently prosecuted for, essentially, bribing its “top injecting” doctors to prescribe Botox off-label. Prosecutors cited instances in 2005 and 2006 when Allergan paid over 200 doctors $1,500 each to attend a weekend-long event named the “Allergan Institute of Distinction” whose purported goal was to “elicit feedback from doctors about their experience with Botox.” According to prosecutors, doctors “provided no consulting services.” Perhaps Allergan thought that $1,500 would make these doctors more imaginative when it came to finding other uses for Botox. Better not to take chances in that regard, however—documents compiled by the prosecution also state that the “Allergan Institute of Distinction” included presentations on off-label uses of Botox. 

Last month, Allergan paid a $600 million settlement to the government. In 2009, Pfizer paid $2.3 billion for what the justice department labeled “fraudulent marketing.” That seems like an astronomical sum, one that would make a company think twice about practicing less-than-morally-sound marketing strategies. But for a company such as Pfizer that is worth nearly $110 billion, and has reaped billions in profits from selling drugs for off-label uses, $2.3 billion may just be a slap on the wrist. Although they’ve vowed to “meet the high standards that patients, physicians, and the public expect,” what’s stopping them from finding other ways to market their product, possibly at the expense of patients? If money is the object—and it clearly is—it’s not unreasonable to assume a drug company will continue to use whatever means necessary to promote their product, especially if the fines they may incur don’t exceed profits.

The FDA seems to have no plan for making penalties and boundaries for drug manufacturers more explicit; in fact, recent trends suggest that the FDA is leaving much of the regulating to manufacturers. What is going on here? Most likely, the FDA doesn’t want to get into trouble for encouraging doctors to use drugs under conditions for which they aren’t clinically proven, but neither does it want to make off-label use completely illegal, for fear of stymieing medical innovation. However, the middle road they’ve created allows drug companies to take advantage of various loopholes, and not in the name of medical innovation.

All this makes it ever more important that we know which doctors have financial ties to pharmaceutical companies before they write up those prescriptions.  

Why Are Big Pharma Execs Never Punished for Defrauding the Government?

The routine is now maddeningly familiar: The U.S. Justice Department announces that some huge drug company has broken the law and defrauded government healthcare programs of tens of millions of dollars. Prosecutors use terms like "illegal kickbacks" and "conspiracy" to describe the schemes they have discovered. And large financial penalties are trumpeted as evidence that justice has been done.

But there is nearly always something missing in these cases: Criminal charges against the Big Pharma executives who orchestrated the frauds. Worse, the companies involved typically do not even admit any wrongdoing. Strangely, these serious crimes don't seem to involve any actual criminals.

The latest example is the settlement announced earlier this week by the Justice Department with three drug makers, including Abbott Laboratories. Collectively, the firms will pay $421 million as result of charges that they overbilled the U.S. government for medicines. Abbott will pay $126.5 million.

Abbott and the other firms were nabbed for a type of fraud that is widespread in the healthcare field, namely telling the government that drugs cost one price while charging healthcare providers a much lower price. This allows healthcare providers to get reimbursed by Medicare and Medicaid for much more than they actually spend on drugs, what's known as a "spread." Drug makers engage in this scheme to incentivize providers to use their drugs. Taxpayers get soaked because drug makers inflate the price of drugs  beyond what is justified so they can offer a nice spread to providers yet still make a profit. These schemes are one reason why the costs of Medicare and Medicaid have been sky high, while Big Pharma makes record profits and doctors drive Mercedes. And it's not just the federal government that gets stuck with an inflated bill. States overpay, too, since states pick up part of the tab for Medicaid. In turn, high Medicaid costs can squeeze out spending on other priorities -- like education.

This is outrageous stuff, and government authorities have been hopping mad for years. The Justice Department has gone after nearly every major drug maker, often repeatedly, and state attorney generals have also joined the fight. In announcing the settlement earlier this week, the Justice Department played up just how tough the crackdown has been: "Since January of 2009, the Justice Department's Civil Division and the U.S. Attorneys around the nation have recovered more than $9 billion in cases alleging false claims, fraud against the government, and violations of the Food, Drug and Cosmetic Act. Cases alleging fraud or false claims against government health care programs are the largest portion of these recoveries, and during this period the Justice Department has opened more health care fraud cases, secured larger fines and judgments, and recovered more dollars lost to health care fraud than in any other period: more than $5 billion. Criminal fines, forfeitures, restitution and disgorgement under the Food, Drug and Cosmetic Act have yielded another $3 billion, again a record number."

All that sure does sound serious. So it is bizarre that the specific individuals who perpetrate these criminal schemes are nearly never held responsible. Nor are their names even mentioned in most of the cases. (Top executives at Abbott Laboratories include: Miles D. White, Richard A. Gonzalez, and Donald V. Patton. The COO of Roxane Laboratories, one of the other firms named, is Robert Fromuth. The CEO of the third firm named, B. Braun Medical, is Caroll H. Neubauer. None have been accused of wrongdoing.) And despite clear evidence that crimes occurred, the companies are not forced to acknowledge criminal deeds. In fact, they typically deny any wrongdoing even as they  fork over record sums to settle claims by the Justice Department. So it was that on the same day that DOJ announced its settlement with Abbott Laboratories, a company spokesperson said "We continue to believe that we have complied with all laws and regulations and have entered into this agreement to eliminate the uncertainty associated with continued litigation."  

You can find similar statements by drug makers in nearly every large settlement involving the defrauding of U.S. government programs. And you'll hear the same language in settlements about the illegal marketing of drugs. For instance, last year Pfizer agreed to a record $2.3 billion penalty -- but still denied any illegal behavior. Basically, these cases amount to Big Pharma and the Justice Department agreeing to disagree as to whether any laws were actually broken. And instead of executives being punished, it is shareholders who pick up the tab for criminal behavior.

Sidney Wolfe, a doctor and consumer advocate with Public Citizen, said about the Pfizer settlement at the time that it may seem large, "but it's not enough to ensure drug companies will curb their bad behavior."  Wolfe said what drug makers were doing was  "part of well-organized crime in this country" and the penalties wouldn't deter more such crime "because they represent just a fraction of drug company profits and no one has gone to jail."

The latest slap on the wrist for Big Pharma this week shows that nothing has changed.

Abbott Double Whammy

Yesterday, Kos Pharmaceuticals, a unit of Abbott Laboratories, was charged by the Justice Department with paying more than $41 million to resolve a U.S. probe of the company’s promotion of the drugs Advicor and Niaspan for unapproved uses. The original charges brought forth by prosecutors accused Kos of conspiring to violate the so-called anti-kickback stature in the form of cash, travel, grants and honoraria to doctors and other medical professionals to prescribe the drugs for uses not approved by the FDA. Kos will pay a $3.4 million fine and $38 million to resolve the civil case.

In a separate but equally disturbing case today, Abbott Laboratories, Boehringer Ingelheim GmbH’s Roxane unit and B. Braun Melsungen agreed to pay $421 million to settle claims they overcharged the U.S. for certain medications in order to increase reimbursements from Medicare and Medicaid.  Abbott is expected to pay $126.5 million, Boehringer’s Roxane to pay $280 million and B. Braun to pay $14.7 million.