September 13, 2012

What is Going On With Big Pharma?

By Gordon Schnell

With GlaxoSmithKline’s recent blockbuster $3 billion settlement with the Department of Justice — the largest health care fraud penalty on record — you have to wonder what is going on in the world of Big Pharma these days.  This is an industry that constantly complains of being misunderstood, underappreciated and unfairly maligned.  And there is some legitimacy to their lament.  Afterall, the large drug makers are the ones spending most of the money and shouldering most of the risk in their research and development efforts to find the next great cure.  They likewise are driving the medical advances that are enabling so many of us to live longer and healthier lives.  But there comes a point when all of the good these companies do is eclipsed by their inexorable drive for profits.  We may be at that tipping point.

Glaxo’s latest transgressions are a case in point.  See Big Pharma Strikes Again — Glaxo Settles Largest HealthCare Fraud Case In History.  Among a host of fraudulent endeavors to beef up its bottom line, Glaxo promoted its best-selling antidepressants, Paxil and Wellbutrin, for uses not approved by the FDA.  And it failed to disclose significant safety risks with its top diabetes drug Avandia.  These are serious lapses for a company in which we are placing so much of the public trust.  Perhaps the scariest part of it all is that this illicit behavior is not a first for Glaxo.  In fact, the ink is barely dry on its three-quarters of a billion dollar settlement in late 2010 for knowingly manufacturing ineffective and contaminated drugs.  These were some of the very same drugs at the center of the current misadventure. 

Lesson obviously not learned.  Not for Glaxo.  Nor it would seem for many of the other major players in the industry.  Glaxo is just the latest pharmaceutical company caught placing profits before public health and safety.  Over the past few years, virtually every other major drug maker has engaged in this questionable conduct.  Only a few months ago, Abbott Labs pleaded guilty and paid $1.5 billion to settle criminal and civil charges arising from the company’s misbranding and improper promotion of its anti-seizure drug Depakote.  And only a month before that, an Arkansas jury came down with a $1.2 billion verdict against Johnson & Johnson after it found the company had concealed the dangers associated with its anti-psychotic drug Risperdal.  That followed hefty jury awards in other states with more recent whisperings of imminent settlements with the Department of Justice and numerous states.  See Johnson & Johnson’s Risperdal Woes Roll On. 

Also joining the party recently have been Pfizer (paying the government $2.3 billion for its fraud associated with Lipitor, Bextra, Zyrtec and Celebrex); Eli Lilly ($1.4 billion for Zyprexa); Merck ($1 billion for Vioxx); Purdue Pharma ($635 million for OxyContin); AstraZeneca ($600 million for Seroquel); and Bristol Myers Squibb ($500 million for Plavix and Pravachol).  The list goes on and on.  And though the government has certainly stepped up its efforts to control and punish this fraud, it does not seem to be having any serious deterrent effect.  These nine and ten-figure payments have become just another cost of doing business.  Notably, Glaxo’s $3 billion slap on the wrist is just a trifle of the roughly $30 billion the company reportedly pulled in for these drugs over the period the settlement is supposed to cover.  In the area of health care fraud, it would seem that crime really does pay.

Which puts us in the current health care pickle we find ourselves.  We need these pharmaceutical companies desperately — to treat our various aches and illnesses and conditions; and to lead us in the charge to cure today’s most menacing diseases.  But these companies are of little help to us if they cannot be trusted to supply products that are as safe and effective as they claim — without exception.  So unless Big Pharma can begin to clean up their own act, it is time for the government to up the ante. 

Various options have been put on the table — sending executives to jail; rescinding government licenses; excluding these companies from Medicare and Medicaid altogether.  All workable solutions but unlikely to take hold given their extreme nature (as seen by many) and their effect of potentially stifling innovation and competition in the industry.  Perhaps the better compromise here is to bar executives — not their companies — from doing business with the federal health care programs.  That is precisely the punishment that the Department of Health and Human Services (HHS) levied against Purdue Pharma’s three most senior executives in connection with the company’s OxyContin scandal. 

Just two months ago, in a groundbreaking and hard-fought decision, the D.C. Court of Appeals ruled that such a ban was proper (though it took issue with the 12-year length of the ban).  Unsurprisingly, the decision has been decried across the industry.  Clearly, many fear that they will be next up on the firing line.  But it sets the stage for what may be the only way to really rein in this recidivism — give those ultimately in control of these pharmaceutical giants something more to worry about than just shareholder return.

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