FairWarining Reports

Drug Companies Pony Up in Illegal Marketing Cases, But Critics Wonder if Penalties are Enough

iStock photo

iStock photo

If you make truck deliveries in the overcrowded downtown streets of a big city, parking tickets might simply be a cost of doing business.

For top drug companies, critics say, there’s an equivalent expense — the billions of dollars paid out to settle criminal and civil charges of illegal marketing practices, Medicaid overcharges and kickbacks.

Big Pharma has written more than $30 billion in checks in the last 10 years to resolve the government allegations, according to statistics compiled by the consumer watchdog group Public Citizen. Nine drug manufacturers each forked over at least $900 million from 2006 through 2015.

Yet those sums, Public Citizen says, are essentially petty cash for the drug giants. The advocacy group, which seeks stiffer sanctions against violators, says the settlements amount to less than 5 percent of the net profits raked in by the 11 largest global pharmaceuticals firms over a similar period.


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“The financial rewards companies reap from engaging in these behaviors far outstrip any penalties they pay,” said Harvard Medical School professor Eric G. Campbell, who researches doctors’ conflicts of interest.

Treating fines as a cost of doing business, Campbell added, “truly appears to be the business model in marketing drugs.”

GlaxoSmithKline headed the payout list for the decade, ponying up $7.628 billion, more than double that of runner-up Pfizer, at $3.458 billion, according to Public Citizen.

In the largest health fraud settlement in history, Glaxo pleaded guilty and paid $3 billion in 2012 to resolve criminal and civil charges of promoting Paxil and Wellbutrin for uses not approved by the U.S. Food and Drug Administration. The government said Paxil, an anti-depressant, was unlawfully promoted to treat patients under age 18, while Wellbutrin, approved for major depressive disorder, was promoted for unapproved uses such as weight reduction and treatment of sexual dysfunction.

Thirty-one firms in the last quarter-century were repeaters, with two or more settlements. Glaxo and Pfizer again led the list, with each entering into 31 settlements with federal or state agencies since 1991, the research showed. Neither firm responded to requests for comment.

What’s known as off-label marketing –promoting drugs for uses other than those approved by the FDA – dominates the list of settlements. It’s legal, and not uncommon, for doctors to prescribe medicine for off-label use. But it’s illegal for drug companies to promote unapproved uses.

Some of the biggest prosecutions, however, involved drug companies that engaged in extravagant efforts to market their wares to physicians, hospitals and nursing homes for off-label uses. In some cases, anti-psychotics approved by the FDA to treat patients with schizophrenia were instead promoted to control the behavior of elderly dementia patients.

And some doctors prescribed the drugs after being plied with kickbacks, consulting deals and other favors from the drug industry. “We think not enough has been done to prosecute doctors and hold them accountable for egregious activities,” said Dr. Sammy Almashat, lead author of a recent Public Citizen report on drug industry settlements.

Dr. Sammy Almashat, Public Citizen

Dr. Sammy Almashat, Public Citizen

In one of the biggest health fraud settlements, Johnson & Johnson agreed in 2013 to pay $2.2 billion to resolve a case involving allegations that it conducted off-label marketing of the anti-psychotic Risperdal to doctors treating elderly dementia patients. The Department of Justice, in its criminal complaint, said the drug “increased risk of death among elderly dementia patients.” The department said Johnson & Johnson also played down, or fudged, findings that the drug raised the risk of strokes and diabetes.

Since 1991, unlawful promotion cases have accounted for about $11 billion of a total of more than $35 billion in civil and criminal settlements — far more than the payouts for overcharges to government health programs, kickbacks or monopoly practices.

After reaching a peak of $6.35-billion in 2012, settlements have fallen. Public Citizen’s report cites, as possible reasons, a shift in the focus of prosecutions and free speech court rulings involving drug marketing. In one of those cases, a drug manufacturer won a preliminary injunction after suing the FDA, claiming that restrictions on off-label promotion clashed with its First Amendment rights.

In addition, given that patents have expired on some of the anti-psychotic medicines that were the subject of major off-label marketing lawsuits, marketing of those drugs was bound to dwindle. “The companies have no motivation to sell them [any more], even for their indicated uses,” said Dr. Lon S. Schneider, a psychiatry professor at the University of Southern California medical school.

Harvard professor Campbell says another factor may be the recent spotlight on doctors and researchers who in the past accepted free vacations, martini-soaked dinners and other swag from drug companies.

Eric G. Campell, a Harvard Medical School professor

Eric G. Campbell, Harvard Medical School professor

In 2009, ProPublica, a nonprofit investigative journalism organization, launched a “Dollars for Docs” database. The data largely reflected disclosures that drug companies were required to make under settlements stemming from improper marketing allegations. A federal Sunshine Act followed, requiring more companies to publicly disclose payments to doctors. The information is available on this searchable database.

“There has definitely been an increase in interest in this by the media,” Campbell said. He added that he believes the news coverage spurred some doctors and institutions to reject, or discourage, payments from drug companies.

Almashat said that while “sensational stories of doctors being wined and dined” by drug companies have declined, prosecutors need to remain vigilant about “much more subtle and sophisticated” means for influencing physicians. He pointed to hefty fees paid by the companies to doctors for consulting work or speaking engagements.

Suffolk University law professor Marc A. Rodwin, who has written on drug company sanctions, says one solution might be charging drug company officials personally, so that they could face fines or even criminal misdemeanor counts. He added, however, “there seems to be a reluctance of prosecutors to act” against corporate officers.

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About the author

Paul Feldman is a FairWarning staff writer.

2 comments to “Drug Companies Pony Up in Illegal Marketing Cases, But Critics Wonder if Penalties are Enough”

  1. Charles M Hodge

    It’s a shame that profits have been put ahead of healing and safety.

  2. Doug Baldwin

    This is a good story about an interesting and fresh reality. The fact that such a huge billion dollar stream of penalty payments flows out from Big Pharma on a constant basis quietly and without much knowledge is indeed a powerful point of interest. Eye brows do get raised. And where does all that money go in the government? Do the enforcers get to keep it?

    But, of course, the vital central question of this article is to assert that maybe, the payment of all this money is insignificant to the transgressions being policed. The story wonders whether or not this is in effect chump change and a minor cost of continuing to do business in the illegal and immoral way that results in the penalty. The story is correct in asserting this needs an answer. But nothing in the story analyzes that answer or the path to that answer or indirect evidence to that answer. The penalties are said to equal about 5% of the profits of Big Pharma, and the implication is that this is small (!!!), but is that a fair point of comparison? If a giant contractor is found to be over charging the Pentagon by 1000% on the cost of toilet seats and hammers, as they have done, should they have to pay 10% of their worldwide profits as a penalty? Yes, we hate them for their hubris and contempt, but still, is something more proportional in order? We have no information about the value of off label prescribing or use and importantly, we have no information as to the patient/doctor motivations for that — why not use authorized drugs for that purpose? We might all assume that off label business might be huge, because of the huge normal sales and huge penalties, but why? Are there no competitors who are legal? And if there are no legal competitors, and if there is a health need, does that change the moral equation? To answer the questions posed by the article, we need data about off label sales, or some exploration about the data difficulties of that topic. For example, one would assume in levying the huge penalties, that there is some formula being used by the regulators. Surely, they don’t pull out of a hat their penalty numbers? What is the formula? Is it secret? Is it based on the overall drug sales, or the overall entire corporate parent’s total sales? Is is 5% of profits? Do the penalties remain static, or, as in criminal penalties, do they increase as the transgressions continue?

    I believe that “off label” promotion is properly and sensibly illegal. I also believe that is not the same as saying that off label use is always immoral and criminally and punitively harmful and it must be crushed with nuclear penalties. It depends on the extremity of health need, it depends on effectiveness, and it depends on what else is legally available. It does happen that certain medications have off label medicinal values and for various reasons, getting licensing for that is not in the cards any time soon, and other good choices not available. Is this risky? Of course. Should this remain illegal? Yes. Is our system of drug regulation good and deserving our trust and support? Yes. But is off label use always a transgression equivalent to a money grubbing felony level blatant contemptuous corruption of moral values deserving of a much larger nuclear financial penalty? Maybe so, maybe not. We are in a world full of pot, alcohol and constant abuse of over the counter meds like antihistamines, ibruprophen and tylenol, much less prescription pain killers. In other words, there are larger perspectives. Some off label uses have proven to be really medically helpful to desperate patients. Some of these patients travel to foreign countries to get that relief. So, it isn’t just all about profit and contempt for the law and there are doctor and patient pressures beyond the control of drug companies in the mix also. These thoughts have impact on deciding on the level of financial penalty, not just the level of corporate profit.

    I completely agree red flags fly here, something seems wrong. This seems to marry with the “ginormous” penalties levied on Wall Street banks for transgressions handling toxic mortgages, and the suspicion that it was all ho-hum to them. But on the other hand, there is always this general cry for more punishment and revenge at all levels, more jail time, etc. Is more punishment always the answer? We have all been reading how motor vehicle fines in some states are keeping poor people in an endless state of poverty — they can’t pay, they go to jail, they lose their jobs, then they can’t afford a car to get a job. In short, the relationship of maximizing punishment to maximizing societal benefit is complex.

    We have a great entry story here, but now we need more. It well may be that penalties at the level of 5% of corporate profits is not a bad level to be at, and if the drug companies are willing to pay that, well, good! That doesn’t automatically mean the off label use is evil and all about profit, a fraud on trusting and poorly informed patients, a conspiracy to enrich the undeserving. Surely in some part the bad motivations are absolutely true. We all believe it. Still, those big numbers may actually mean that there are ALSO big health and patient needs here and there, and that the regulatory process presently is preventing properly licensed medications to fill those needs in the marketplace, creating a void, and presenting doctors and patients the choice of nothing, or…..cough cough, something. But we don’t know the level of truth. We have no stats. Just because a drug company takes me golfing doesn’t mean I go from Mother Teresa to Hitler. Its wrong, make no doubt, but this story is about setting the level of penalty and that involves complexity. We have no info. This is a story, but there is more story here.

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