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.
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.