What 20 Years Of Pharma Fraud Has Wrought
22 CommentsBy Ed Silverman // December 17th, 2010 // 9:44 am
Once upon a time, defense contractors were considered the biggest hucksters. You know, the US Defense Department would pay $10 for a pencil. Now, though, drugmakers have surpassed every other industry when it comes to defrauding the US government, according to a new analysis by Public Citizen, which calls for stiffer penalies and increased criminal prosecution of pharma execs.
The findings: Of 165 settlements comprising $19.8 billion in penalties during the past 20 years, 73 percent of the settlements and 75 percent of the penalties - representing $14.8 billion - have occurred in just the past five years. And four drugmakers - GlaxoSmithKline, Pfizer, Eli Lilly, and Merck’s Schering-Plough -accounted for 53 percent, or $10.5 billion, of all financial penalties. The chart below shows there were 10 deals in 2006, 27 in 2008, and 38 last year. Through Nov. 1, 32 settlements have been reached this year, but there have been more recent deals (see here and here).
Off-label marketing was responsible for the largest amount of financial penalties, although Glaxo recently agreed to pay $750 million fine to settle charges over numerous production problems at a former facility in Puerto Rico, signaling the feds are now eyeing manufacturing fraud as another avenue of pursuit (back story).
The most common violation against state governments was deliberately overcharging state health programs, primarily Medicaid, and this was responsible for the largest amount of financial penalties levied by the states. And former pharma employees and other whistleblowers initiated the largest number of federal settlements over the past 10 years. From 1991 through 2000, such cases comprised 9 percent of payouts to the government, but from 2001 through 2010, they accounted for 67 percent.
The report goes on to list all violations that led to settlements: overcharging government health programs; illegal promotion; anti-trust violations; kickbacks; concealing clinical trial findings; poor manufacturing practices; environmental violations; financial violations and illegal distribution.
And for those wondering about comparisons to defense contractors, last year, pharma settlements involving charges brought under the False Claims Act totaled $1.16 billion compared with $438 million involving defense companies. So far this year, pharma is up to $989 million versus $261 million for defense contractors (here is the complete report).
Hat tip to the Milwaukee Journal-Sentinel
industry insider
In the overall area of health we still have a long way to go to catch up to the 1998 Tobacco Master Settlement Agreement of $205 billion.
http://en.wikipedia.org/wiki/Tobacco_Master_Settlement_Agreement
George Bailey
Did analysis by Sidney Wolfe mention that settlements indicate no admission of wrongdoing in almost every case, and with the threat by the federal prosecutors to eliminate sales to Medicaid and Medicare as a penalty no case in any sensible risk-benefit analysis is worth fighting? If you were charged with robbery and the prosecutor said you could take 3-5 years in prison or you could go to trial but if you lost it meant the death penalty, regardless of your guilt or not, what would you do?
Rita Booke, M.D.
As long as settlements are allowed without prison time for some of these people, it will continue. As a doctor of Gynecology, the government are a bunch of pussies.
Outside the Box
To George Bailey:
If I could prove I hadn’t done the robbery I would take the trial. In the case of Medicaid fraud the facts are very rarely contested. I’m afraid we live in an industry where there are some unscrupulous actors.
Off-label marketing is frequently a more complicated story, but pricing fraud is not so hard. What gets missed a lot (in my opinion) is bundling - now that is really hard to police, incredibly difficult to prove, and one of the most anti-competitive activities in the industry.
Former Big Pharma
I spent 20 years in Big Parma and I’m so happy I’m out at this point. The first 10 years were great, the next 5 not so bad, but the last 5 have been an embarrassment. The greed, the corruption, the lying and cheating are all too much. We are in a business that is called “ethical” pharmaceuticals, but we have forgotten what that word means. Not all employees have behaved badly, but many of the top commercial executives have. In the good old days, when people like Roy ran companies, they usually did the right thing. In the recent past, it seems they rarely did. Isn’t it strange that the problems accelerated after the business types took ovor. Screw the governement and the public, make lots of money, admit no wrongdoing, stockholders pay the fine, employees lose their jobs, and then do it again and again and again. The pattern has become all too familiar!!
Reality
It will never change as long as the executives walk. They are white collar criminals and should be held personally accountable. That they are allowed to walk is a crime in itself. The government needs to be much tougher. Ban the culprits from working with the government, put a few of them behind bars and ruin their careers! Many others have been ruined because they dared to question the corrupt activities. Then and only then do we have a chance of making a dent in this sociopathic behavior. Sad thing is, it will probably never happen. Too many friends in high places.
Mikey
Dr. Brooke-I love you!
Doc
Lock em all up.
Also Former Big Pharma
I too, like Former Big Pharma spent a long time in Big Pharma. At first it was great and a job i was proud to have. But the slope got slippery and since around 2005 it became an embarrassment. Yes, some people are ethical, but not many. I’m glad to be out and I’m actually going into the security business getting a private investigator license to go after some of the stuff that I know happens.
I could write a book about what is wrong with the industry. Just read CafePharma and you can see what represents the industry now. I know a lot of that is the truth, I lived it for too long.
Condor
To George Bailey (and all here assembled, more generally):
The only reason the corporations are not handed the “death penalty” is that in many cases they are the sole source of life-saving treatment.
Disqualifying those treatments from Medicare/Medicaid works an entirely unwarranted penalty upon the most innocent of victims: the people who need the treatments to continue living. Don’t kid yourself: reimbursement is the difference between life and death for most American patients, in this setting — they simply cannot afford to pay privately for the medicines in question.
So — what used to be considered the highest form of stwerardship (take only a fair profit, as we have a life-saving responsibility) has mutated, in the last ten years to a mentality (at some big pharma C suites) “do anything you want — the feds will never bar us from Medicare/Medicaid — that would be a PR disaster, as people died from curable diseases!”. . . and feel free to charge the absolute top of what the market will bear, all along. They do so, so that when the $2.1 billion criminal fine is assessed by DoJ, and agreed to by pharma (that’s Pfizer, for Pharmacia’s Celebrex and Bextra — a Fred Hassan/Carrie Cox production!), there is perhaps $10 billion of profit left over, after the fine is paid. Disgusting.
नमस्ते
AnneS
There is no incentive for the government to change anything, when they are making so much money off of big pharma.
North of the border
The No.1 job and responsibility of US gov’t is protection of business corporations, especially the big ones.It is part of American soci-economic system which is in fact dog eat dog capitalism in which everything goes even use of illegality to do their business.This is obvious to anyone who worked in bigpharma that use of both legal and illegal practices is allowed and approved by the corporate elite. In fact if you don’t do it that way, you’d be out soon or never get ahead. So the big pharma and feds play a game in which the bigpharma trys to get away with “murder” while the feds are trying to get them and if and when they do, they make a deal between them and bigpharma pays the fine and they go on using same criminal ways but in new and improved forme. If they get caught again… you know what happens.The bigpharma as a whole is always ahead of gov’t in $$ otherwise they would not continue. Now if the culprits were to get some good time in the big house, well things could change. But even there some would sacrifice themselves, go to jail and when out would be rich bejond most of us. Just like that other mafia where “soldiers” take the blame and end up in jail for the dons.At least in US there is some punishment unlike in may other places where they do absolutely anything they want without any concequences. Imagine what they do in third world countries. Scary stuff.
industry insider
If you substitute Big Pharma for Big Banking, we are “Too Big to Fail”, like the US Federal Government. We are locked into permanent mutual interdependence, what British bankers Haldane and Alessandri call The Doom Loop. We help to bail each other out when necessary. Example is PDUFA, where in return for payment of user fees we get expedited reviews. The money we pay the Fed helps their payroll, and the expedited reviews help our bottom line, hence the Doom Loop (see below). We are locked in mutual embrace as long as things are set up as they are.
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/6516579/Bank-of-England-says-financiers-are-fuelling-an-economic-doom-loop.html
Doc
These practices would mostly come to an end, if every person that could be connected to the illegal acts via emails, memos, etc were individually prosecuted and fined/jailed.
North of the border
?? to Doc and Rita Brooks MD, if you are “real” docs: What is the role of physicians of any sort in this fraud and perpetual criminality? Without docs and their support the bigpharma could not do most likely 90% of their misconduct. Be it offlabel, be it bribery, be it excessive honoraria, be it anything else the brains of bigpharma could come up with. They need docs to carry it out. So why is so little talked about the role of these health care professionals in this sorry state. The issue ould be the old “chicken and egg” thing. In my opinion and I should know after spending over 30 years doing the big pharma (one of the 3 biggest cos) “stuff”, it’s the chicken that did it. THE BIGGEST CRIME OF BIGPHARMA IS THAT THEY CORRUPTED OUR MOST IMPORTANT RESOURCE OF HEALTH CARE, OUR DOCTORS AND OTHER HEALTH PROFESSIONALS. I know I did my share. Only ONE doctor refused the $$ I offered, others all took it. In their defence, how long one can resist the easy money offers from all bigpharma cos?
Director of Pharmacy
Rita, Doc and others: you are the pussies. Who do you think big pharma is in bed with? What role do evil, profit monger MDs have in this mess. Look in the mirrors.
Salient point
Market mechanisms do provide some corrective here. Shareholders may “pay the fines,” as Former Big Pharma said, but don’t like doing so & therefore often become former shareholders. As they sell, share prices go down, market cap declines & boards get testy. It’s worth noting that share prices of all the companies cited in the post have been mediocre even as the overall market has improved.
Taking direct legal action is not effective with publicly held companies because putting execs behind bars doesn’t necessarily impact share prices. It’s more effective–& easier, the way the law is written–with private companies, like Purdue.
Truth
Death to a once-proud industry that used to be able to do the right thing. Patients mattered and the public health was important. Then greed became king, the idiots took over, and the patients and the public became primary targets to endlessly rip-off for easy money. Shame on this industry for their blatant betrayal of the public trust!!
John Simms
It’s funny, these people rip off the system, and they complain that the government spends too much. Well it’s people like them that causes the government to spend so much! Not too mention how harmful a lot of the drugs are that these people make.
The time has come
What was once a ethical, proud industry is being ransacked by the modern day CEO vampire elite, with the assistance of the US government/lobbying machines. The american people aren’t dumb - they know it. Eventually it will collapse and the Bernie’s of this pharmarama will shrivel off to prison.
Dr No
It’s the same old thing reading most of these comments: all one-sided and toeing the PC line of the day. Time to grow-up, folks. Pharma, like many businesses and institutions are absolutely necessary and provide a benefit to society. And the vast,vast majority of employees and their actions are honorable and well-intentioned - even the executives. Has fraud been committed - sure. But it is not routine, business-as-usual practice. Labeling sloppy management at a manufacturing facility or the failure to meet a particular font size on a sales piece as “fraud” is ridiculous. The behavior of governments around the world is every bit as bad, if not worse, and they have the upper hand. Nonetheless, I do not believe the bulk of government employees generally go to work for the sole purpose of extorting corporations and screwing taxpayers, even if a few clearly do. Reading this article and some of the various comments, you get the impression that pharma has suddenly gone rogue or that the long arm of the law has finally caught up with them. Sadly, they are just the current deer in the cross-hairs and shaking down Pharma plays well in Peoria. Remember when the only thing a doctor could do was commit malpractice or when the sole function of an insurance company was to deny care and kill people to make the quarterly dividend? Having spent various parts of my career in private practice, health insurance,and big pharma (no gov’t yet, I can say from experience that no group should be labelled as either angelic or evil. (well, I may concede on Shakespeare’s point about lawyers)
JOE MORGAN
IF YOU WANT TO WRITE A BOOK ABOUT FRAUND I CAN FILL YOU WITH 14 YRS OF UNREAL THINKS AT GSK.