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Multibillion-dollar settlements are a weak deterrent to drug-company fraud, editorial says

REUTERS/Thomas Peter
In July, the Department of Justice reported a $3 billion settlement with GlaxoSmithKline (GSK) for, among other things, withholding information about the safety of its diabetes medication Avandia.

Multibillion-dollar fraud settlements between the federal government and drug companies have become disturbingly common in recent years.

Just last July, the Department of Justice reported a $3 billion settlement with GlaxoSmithKline (GSK) for, among other things, withholding information about the safety of its diabetes medication Avandia and for marketing several additional drugs, including the antidepressants Paxil and Wellbutrin, for unapproved uses. GSK also pled guilty to three criminal counts.

GSK’s actions had very real — and deadly — consequences for the patients. Internal Food and Drug Administration (FDA) studies linked Avandia, for example, to 304 deaths in the third quarter of 2009 alone.

Yet, as Boston University law professor Kevin Outterson points out in an editorial published last week in the New England Journal of Medicine (NEJM), the legal settlements, which have totaled more than $11 billion since 2009, are a weak deterrent to health-care fraud, as they have little impact on the profits of the companies involved. That fact helps explains why so many drug companies have been implicated in recent years. Fraud pays.

Writes Outterson:

When the GSK settlement was announced, 25 major companies and 8 of the top 10 global pharmaceutical companies were under “corporate integrity agreements.” Corporate integrity agreements, now a routine part of settlements for health care fraud, typically require enhanced compliance activities within the company for 5 years, including reports to the government from an independent monitor.

But questions remain about the efficacy of fines and corporate integrity agreements in deterring corporate misbehavior. The 2012 fines against Abbott Laboratories [$1.5 billion for illegally marketing its antiepileptic drug Depakote for the treatment of dementia] and GSK represent a modest percentage of those companies’ revenue. Companies might well view such fines as merely a cost of doing business — a quite small percentage of their global revenue and often a manageable percentage of the revenue received from the particular product under scrutiny. If so, little has been done to change the system; the government merely recoups a portion of the financial fruit of firms’ past misdeeds.

Recommendations for change

Outterson calls on the government to make the following changes:

  • Increase fines so that they amount to a higher percentage of the drug companies’ revenues. (The GSK fine accounted for only 11 percent of its affected revenues.)
  • Require drug companies to be transparent with their clinical trial data so that they can’t hide negative results from regulators, doctors — and patients.
  • Strengthen federal law (the False Claims Act) so that drug-company whistleblowers are encouraged, not punished, for stepping forward and reporting fraud.
  • Impose penalties on company executives as well as on the companies themselves. “Individuals must be held responsible in appropriate circumstances,” Outterson stresses.

A ‘rogue’s gallery’

Based on information in the editorial and elsewhere, Time magazine reporter Maria Szalavitz put together this week a “rogue’s gallery” of the top 10 biggest drug-company settlements since 2007. Companies on the list, in addition to GSK and Abbott, include:

  • Bristol Myers Squibb, which sent sales teams into nursing homes to promote its antipsychotic drug Abilify for the treatment of dementia, even though the FDA had issued an explicit warning against using the drug on the elderly;
  • AstraZeneca, which illegally marketed its antipsychotic drug Seroquel to the elderly and children for conditions for which the drug had not been found safe;
  • Purdue Pharma, which minimized the addictiveness of its painkiller Oxycotin and promoted the drug’s use for long-term pain, despite a lack of evidence that it was either safe or effective under such conditions; and
  • Merck, which falsely claimed that its arthritis drug Vioxx was safe, and marketed it for conditions for which it hadn’t been approved. As Szalavitz reports, Vioxx is believed to have caused between 88,000 and 140,000 heart attacks before it was pulled off the market in 2004. Half of those heart attacks were fatal.

You can read Szalavitz’s full, detailed list on Time’s website. Outterson’s editorial can be read on NEJM’s website.

Comments (1)

  1. Submitted by Ray Schoch on 09/19/2012 - 10:17 am.

    Just a thought…

    If corporations, including pharmaceutical corporations, are “people,” according to the most recent ruling from the SCOTUS, why aren’t they being treated as “people” in the criminal justice system?

    If I manufacture a substance in my basement and sell it to my neighbor on the basis of alleged beneficial effects, without bothering to tell her that the substance has a 50% chance of killing her, and she dies from its use, would knowingly selling poison to my neighbor not be considered criminal behavior? And in a court of law, were I to murder my neighbor in that fashion, would I not be punished by, for example, prison, and/or a prohibition from ever engaging in the manufacture of that or similar substances in the future?

    Yet, in similar circumstances, pharmaceutical companies get trifling fines, often with no admission of guilt or wrongdoing, and are allowed to continue to operate as if nothing has happened. Meanwhile, the same executives who made the decisions that killed people who used those products continue to go to work and get extravagantly paid for lying about the efficacy and safety of their company’s operations and products.

    Outterson’s recommendations are the very minimum that ought to be adopted. If corporations are “people” in terms of constitutional rights, then corporations should also be “people” in terms of legal responsibility, and therefore subject to the corporate equivalent of prison, restitution and other truly significant and heavy fines, and even corporate death penalties if they’re shown to have knowingly manufactured and marketed a substance with fatal side effects.

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