<strong>Fines for Drug Companies Ineffective?</strong>
Marcia Frellick <span>December 20, 2013</span>
A study of a recent escalation of fines paid by multinational drug companies to US federal and state governments shows that neither the amount of the penalties nor the measures to stop illegal practices are working, according to a report published online
December 18 in BMJ
. However, some experts think the problem lies, in part, with a complicated legal environment.
In the current study, Sidney Wolfe, MD, founder and senior adviser to the Health Research Group at Public Citizen in Washington, DC, reviewed all civil and criminal penalties paid to the US federal and state governments by pharmaceutical companies from January 1991 to July 2012 and found that they totaled $30.2 billion. Amid that total, the analysis shows:
More than half of the penalties were for illegal promotion or for illegally overcharging government programs, such as Medicaid, for drugs.
GlaxoSmithKline (GSK) was the most egregious repeat offender, with total criminal and civil penalties of $7.56 billion since 1991. Pfizer was next, with $2.96 billion in penalties. Since 1991, 11 other pharmaceutical companies also had criminal or civil settlements (or both) of more than $50 million at least twice.
Criminal fines grew more than 5-fold, going from $920 million in 2005-2008 to $5.1 billion from 2009 to mid-2012.
In 2012, profits for GSK were $7.7 billion and profits were $10 billion for Pfizer. Both amounts are greater than the total sum the companies paid the government from January 1991 to mid-2012.
Dr. Wolfe's analysis shows that from 2002, GSK and Pfizer were repeatedly fined, with penalties in the billions, for practices including fraudulent drug pricing, illegal off-label marketing of drugs, and paying kickbacks to healthcare professionals to encourage them to promote and prescribe drugs.
During this time, Dr. Wolfe notes, both companies signed several corporate integrity agreements, which are designed to prevent these offenses. The Office of the Inspector General negotiates such agreements with companies as part of the settlement of federal investigations. The terms include requiring companies to hire compliance officers or committees, develop written policies, and establish employee training programs.
On the basis of an analysis of the fines, Dr. Wolfe concludes, "There is a pathological lack of corporate integrity in many drug companies."
Healthcare Policy Expert Blames Confusing Laws
Uwe Reinhardt, PhD, professor at the Woodrow Wilson School of Public and International Affairs, Princeton University, New Jersey, and a national health policy expert, says that assessment is "a pretty harsh indictment." He said the fault may lie more with the complicated laws governing these drug-selling practices and lobbyists' successful efforts to get exceptions included in laws passed in Congress.
Dr. Reinhardt said that although he does not know whether murky rules were at the root of the particular violations Dr. Wolfe describes, he is seeing "a penchant of criminalizing corporate activity by having these arcane rules that sooner or later these corporations will run afoul of."
Pfizer and GSK also took issue with the report.
In an email to Medscape Medical News
, Pfizer spokesman Christopher Loder said, "The Public Citizen report looks backwards and unfairly holds Pfizer responsible for some conduct that occurred in other companies prior to Pfizer's acquisition of them. More importantly, the report ignores the significant steps Pfizer has taken not only to comply with state and federal laws but also to meet the high standards that patients, physicians, and the public expect."
He continued, "For example, Pfizer's compliance program has long included mandatory training for every one of our employees, proactive monitoring and surveillance, and strict enforcement of all federal and state healthcare laws. In addition, Pfizer has a dedicated chief compliance officer reporting directly to the chief executive officer, a corporate compliance committee, a code of conduct, a compliance hotline, and extensive procedures to investigate and remediate potential issues of noncompliance."
A GSK spokesperson said in response to the report: "We have a clear priority to ingrain a culture of putting patients first, acting transparently, respecting people inside and outside the organization, and displaying integrity in everything we do.
"Just this week, we announced further changes to the ways in which our medicines will be sold and marketed to ensure the interests of patients come first. We will roll out a new sales force compensation program which removes individual sales targets. We will also begin a process to end direct payments to doctors for speaking [at] programs or attendance at medical conferences."
Dr. Wolfe has disclosed no relevant financial relationships.
. Published online December 18, 2013. Full text
<div class="panel-pane pane-bmj-article-twitter-fb-links clear-block">
<div class="block-content"><div class="panel-pane pane-bmj-article-series clear-block"><div class="block-content"><div class="article-series">The Washington Brief
</div></div></div><div class="panel-pane pane-node-title clear-block"><div class="block-content">Escalating criminal and civil violations: pharma has corporate integrity? Not really
</div></div><div class="panel-pane pane-bmj-article-publishing-info clear-block"><div class="block-content"><div><span>http://schema.highwire.org/NLM/Journal</span>">BMJ <span class="slug-pub-date-pop">2013;</span> <span class="pop-slug-vol">347</span> <span class="slug-doi">doi:http://dx.doi.org/10.1136/bmj.f7507
</span> <span class="slug-ahead-of-print-date">(Published 18 December 2013)</span>
</div></div></div></div><div class="block-content"><div class="article fulltext-view"><span class="highwire-journal-article-marker-start"></span><div class="contributors"><ol>[*]<span class="name">Sidney M Wolfe</span><span class="contrib-role">, founder and senior adviser</span></li>[/list]<div class="author-affiliation"><p style="color:#006990;">Author Affiliations
Health Research Group at Public Citizen, Washington, DC</li>[/list]</div><ol>[*]<span class="em-link"><span class="em-addr">[url=mailto:Swolfe@citizen.org]Swolfe@citizen.org[/url]</span></span></li>[/list]</div><div class="teaser">
<strong>Sidney M Wolfe</strong> looks at the system that should, but does not, deter drug companies from breaking the law
Are criminal and civil penalties of hundreds of millions of dollars an important deterrent to law breaking by international drug companies?
Further, would external monitoring in the form of US government mandated corporate integrity agreements (CIA)1
to prevent recurrences of such illegal activities, lasting five years after being signed, be an additional deterrent? Yes in both cases, but only if the size of the penalties outweighed the companies gains while violating the laws and only if enforcement of the CIAs were effective. Unfortunately, neither is the case. This evaluation is based on the recent, sharp escalation in the frequency with which many giant multinational drug companies repeatedly engage in illegal criminal and civil activity after previously paying enormous fines and despite monitoring under CIAs. It seems that for some companies, commission of such criminal and civil violations has become part of their business models.
In 2012, we updated previous data to include all civil and criminal penalties paid to the US federal and state governments by pharmaceutical companies from January 1991 through 18 July 2012. The overall findings included: $30.2bn (£18.5bn; 22bn) in criminal and civil penalties was paid by drug companies to federal and state governments during this time period.
More than half of the total amounts of penalties were either for illegal promotion or illegally overcharging government programs for drugs. In the past three and a half years alone (2009 to mid-2012), criminal and civil penalties have totaled $18bn, well over half the total for the past 21 years. The largest growth has been for criminal penalties, leaping more than fivefold from $920m in 2005-8, to $5.1bn from 2009 to mid-2012, the latter comprising 76% of all criminal penalties paid since 1991. GlaxoSmithKline (GSK) topped the list of repeat offenders with total criminal and civil penalties of $7.56bn since 1991, comprised six different federal settlements and an additional number with states. Pfizer was the second highest with $2.96bn.2
Overall, since 1991, 11 other companies also had criminal or civil settlements or both exceeding $50m on at least two occasions.3
An analysis of several of the repeat civil payments and criminal penalties by GSK and Pfizer based on publicly available government documents illustrates the failure of such large penalties and the parallel failure of the accompanying CIAs to curb such behavior.
In 2003, GSK paid $87m to the US federal government and states to settle allegations that the company violated the False Claims Act (submitting false claims to the government)for underpaying rebates, effectively overcharging a government program (Medicaid), and signed a CIA, lasting until 2008, to ensure that GSK will accurately reports its best price information to the government in the future.4
In 2005, slightly more than two years later, GSK paid an additional $150m, again to resolve allegations that it violated the False Claims Act through fraudulent drug pricing and marketing of two antiemetic drugs, Zofran [ondansetron] and Kytril [granisetron], and signed an amended CIA, extending until 2010.5
Then in 2010, a GSK subsidiary paid $150m in criminal penalties, and GSK agreed to pay $600m to resolve civil allegations, again involving alleged violations of the False Claims Act related to selling drugs that were adulterated. The government stated such adulterated drugs undermine the integrity of the US Food and Drug Administrations approval process, can introduce substandard or ineffective drugs on to the market and, in the worst cases, can potentially put patients health at risk.<strong></strong>6
It is not clear why, despite continuation of illegal activity while under a previous CIA, there was no new or amended CIA from 2010 until 2015.
However in 2012, GSK paid the government $3bn, in criminal penalties and to resolve allegations of civil violations, described by the government as the Largest health care fraud settlement in US history.7
Again, for at least the fourth time including 2003, there were also allegations of False Claims Act violations, amounting to $2bn to resolve civil liability for illegal off label promotion of several drugs, including allegations that GSK paid kickbacks to health care professionals to induce them to promote and prescribe these [and other] drugs.
But there was also a $1bn criminal penalty for withholding information from the US Food and Drug Administration about the risks of rosiglitazone (marketed as Avandia) and for introducing misbranded drugs into interstate commerce. Unlike in 2010, there was a CIA accompanying the $3bn 2012 criminal and civil payments. GSK will therefore have been under a series of CIAs from 2003 through 2018, with the exception of the 2010 to 2012 interval.
Then there is Pfizer. In 2002, the company paid $49m to settle allegations that it violated the False Claims Act. The government charged that Pfizer fraudulently avoided paying fully the rebates owed to the state and federal governments under the national drug Medicaid Rebate program for the cholesterol lowering drug Lipitor [avorvastatin]. Pfizer signed a CIA which was to last until 2007.8
But in 2004, a Pfizer subsidiary paid $430m in criminal fines and other payments to settle allegations of civil violations, including False Claims Act violations, involving illegal off label marketing of gabapentin (Neurontin) and kickbacks. The government stated that This illegal and fraudulent promotion scheme corrupted the information process relied upon by doctors in their medical decision making, thereby putting patients at risk.9
In 2009, Pfizer and a subsidiary paid $2.3bn in criminal fines and payments to resolve allegations of civil violations for, among other offenses, illegal off label promotion of the painkiller valdecoxib (marketed as Bextra) and other drugs. The $1.3bn criminal penalty at the time was the largest ever against a drug company, and the $1bn civil settlement again involved alleged violations of the False Claims Act. Another CIA was signed that year, extending into 2014. The government stated that Illegal conduct and fraud by pharmaceutical companies puts the public health at risk, corrupts medical decisions by health care providers, and costs the government billions of dollars.10
Because of the repeat nature of Pfizers 2004 and 2009 criminal fines and civil settlement payments, we sought reports from the government documenting the degree of compliance with the 2004 CIA. After we filed a Freedom of Information Act request in 2009, the US government, in agreement with Pfizer, denied us access to many of the most important portions of these reports, claiming they were trade secret/confidential commercial information. In September, 2011, we filed suit in federal court against the government to obtain these documents. The litigation is continuing in Federal District Court in Washington, DC.11
Profits in 2012 alone for GSK amounted to $7.7bn12
and, for Pfizer, $10bn,13
both greater than the entire amount the companies paid to the government during the 21 plus year interval from January 1991 to mid-2012.
These escalating patterns of repeated criminal violations and civil settlements to resolve serious allegations of civil lawlessness hardly bespeak corporate integrity for GSK, Pfizer, or the many other companies who are also repeat offenders. We are forced to conclude that neither the current level of penalties nor corporate integrity agreements are effective and that there is a pathological lack of corporate integrity in many drug companies.
<div class="section notes">Notes
<strong>Cite this as:</strong> <em>BMJ</em> 2014;348:f7507
</div><div class="section fn-group">Footnotes
Competing interests: I have read and understood the BMJ Group policy on declaration of interests and declare that I have no relevant conflict of interest to declare.
Provenance and peer review: Commissioned; not externally peer reviewed.
</div><div class="section ref-list">References
<ol>[*]<a href="http://www.bmj.com/content/347/bmj.f7507#xref-ref-1-1"></a> <div class="cit ref-cit ref-other">
</li>[*]<a href="http://www.bmj.com/content/347/bmj.f7507#xref-ref-2-1"></a> <div class="cit ref-cit ref-other">
</li>[*]<a href="http://www.bmj.com/content/347/bmj.f7507#xref-ref-3-1"></a> <div class="cit ref-cit ref-other">
</li>[*]<a href="http://www.bmj.com/content/347/bmj.f7507#xref-ref-4-1"></a> <div class="cit ref-cit ref-other">
</li>[*]<a href="http://www.bmj.com/content/347/bmj.f7507#xref-ref-5-1"></a> <div class="cit ref-cit ref-other">
</li>[*]<a href="http://www.bmj.com/content/347/bmj.f7507#xref-ref-6-1"></a> <div class="cit ref-cit ref-other">
</li>[*]<a href="http://www.bmj.com/content/347/bmj.f7507#xref-ref-7-1"></a> <div class="cit ref-cit ref-other">
</li>[*]<a href="http://www.bmj.com/content/347/bmj.f7507#xref-ref-8-1"></a> <div class="cit ref-cit ref-other">
</li>[*]<a href="http://www.bmj.com/content/347/bmj.f7507#xref-ref-9-1"></a> <div class="cit ref-cit ref-other">
</li>[*]<a href="http://www.bmj.com/content/347/bmj.f7507#xref-ref-10-1"></a> <div class="cit ref-cit ref-other">
</li>[*]<a href="http://www.bmj.com/content/347/bmj.f7507#xref-ref-11-1"></a> <div