Amgen Settles, Pleads Guilty to Misbranding Aranesp

Now it's Amgen's turn to settle and plead.  <a href="http://www.nytimes.com/2012/12/19/business/amgen-agrees-to-pay-762-million-in-drug-case.html">Per the New York Times,</a><br /><br /><blockquote class="tr_bq"><i>The biotechnology giant Amgen marketed its anemia drug Aranesp for unapproved uses even after the Food and Drug Administration explicitly ruled them out</i>, federal prosecutors said on Tuesday.<br /><br /><div itemprop="articleBody"> The federal charges were made public as <i>Amgen pleaded guilty to illegally marketing the drug and agreed to pay <b>$762 million</b> in criminal penalties and settlements of whistle-blower lawsuits.</i> </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">Amgen was '<i>pursuing profits at the risk of patient safety</i>' Marshall L. Miller, acting United States attorney in Brooklyn, said in a telephone news briefing on Tuesday. </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">David J. Scott, Amgen’s general counsel, entered the guilty plea at the United States District Court in Brooklyn to <i>a single misdemeanor count of misbranding the drug, Aranesp</i>, meaning selling it for uses not approved by the F.D.A. </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">Amgen agreed to pay $136 million in criminal fines and forfeit $14 million, with about $612 million going to settle civil litigation. </div></blockquote><div itemprop="articleBody"><br /></div><div itemprop="articleBody">The article noted the key charge against Amgen,</div><div itemprop="articleBody"><br /></div><blockquote class="tr_bq"><div itemprop="articleBody"> In court on Tuesday, prosecutors charged that <i>Amgen had promoted the use of Aranesp to treat anemia in cancer patients who were not undergoing chemotherapy, even though the drug’s approval was only for patients receiving chemotherapy. </i></div><div itemprop="articleBody"><br /></div><div itemprop="articleBody"><i>A subsequent study sponsored by Amgen showed that use of Aranesp by those nonchemotherapy cancer patients had actually increased the risk of death</i>, and the off-label use diminished. </div></blockquote><div itemprop="articleBody"><br /></div><div itemprop="articleBody">Also,</div><div itemprop="articleBody"><br /></div><blockquote class="tr_bq"><div itemprop="articleBody"> The federal charges also say Amgen promoted using larger but less frequent injection of Aranesp than stated in the label as a way of making the drug more attractive to doctors and patients than Procrit, a rival anemia drug from Johnson & Johnson. </div></blockquote><div itemprop="articleBody"><br /></div><div itemprop="articleBody">As is typical of such cases, the prosecutors could not figure out how to charge any individuals who might have authorized, directed, or implemented the bad behavior,</div><div itemprop="articleBody"><br /></div><blockquote class="tr_bq"><div itemprop="articleBody"> Mr. Miller said that the<i> evidence in the Amgen case was not sufficient to charge individuals</i>. However, he said, Amgen agreed to sign a corporate integrity agreement that requires executives and board members to personally certify compliance with regulations. That would make it easier to prosecute individuals should violations occur again, he said. </div></blockquote><div itemprop="articleBody"><br /></div><div itemprop="articleBody"><b>The Charges in Context</b></div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">In some reports of the settlement, the issue appeared to be money.  For example, Pharmalot <a href="http://www.pharmalot.com/2012/12/amgen-to-plead-guilty-in-marketing-probe/">reported</a> that after a whistle-blower filed suit against Amgen, "a subsequent investigation by the Justice Department found that these practices induced physicians to use Amgen medications unnecessarily when lower cost alternatives were available." </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">However, Amgen's practices could have had much worse effects than just removing money from the US Treasury.</div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">Consider the context.  Only a few of the not very numerous articles in the media on this case noted that the key complaint was that Amgen was pushing use of Aranesp for patients with cancer, specifically those not receiving chemotherapy.   (<a href="http://news.yahoo.com/amgen-pleads-guilty-misbranding-charges-pay-762-million-161356503--finance.html">Reuters</a> made this explicit, for example, but not so the <a href="http://www.latimes.com/business/la-fi-amgen-plea-20121219,0,7120268.story">Los Angeles Times,</a> or <a href="http://www.bloomberg.com/news/2012-12-18/amgen-expected-to-plead-guilty-to-charges-u-s-says.html">Bloomberg's initial coverage</a>.)</div><div itemprop="articleBody"><br /></div><div itemprop="articleBody"> In fact, there has been concern about the adverse effects of Aranesp for patients with cancer for a while.  In 2007, Khuri noted in a commentary in the New England Journal of Medicine(1) that "concern about a detrimental effect of ESAs [erythropoiesis stimulating agents, a class of drugs of which Aranesp is a prominent member] in patients with cancer arose" after results of a small clinical trial of epoetin beta in patients with oral, pharyngeal or laryngeal cancer receiving radiation therapy showed worse survival in patients receiving that drug.  Subsequently, in 2008, a meta-analysis of multiple randomized clinical trials showed that patients with cancer receiving ESAs, including Aranesp, had an increased risk of venous thromboembolism (drug clots) and death.(2)  In 2009,  another meta-analysis showed that ESAs lead to decreased survival in patients with cancer.(3)</div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">Recall, though, that Aranesp is meant to improve anemia.  It was not meant to cure cancer, or even put the disease into remission.  Its use therefore was mainly adjunctive.  Thus, it appears its benefits for cancer patients (improved anemia, and possibly decrease in such symptoms as fatigue) could not outweigh its harms (including hastening death).</div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">So the issue was not merely that Amgen was promoting a drug in an instance in which its use had not been improved by the US Food and Drug Administration (FDA), or that such use of the drug was unnecessarily costly.  The issue was that Amgen was promoting a drug that had no proven benefits for the patients, but could hasten their death.  It appears that Amgen was pursuing profits at the expense of lives.</div><div itemprop="articleBody"><br /></div><div itemprop="articleBody"><b>Summary</b></div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">So it is particularly disturbing that no individual apparently will be held responsible for the promotion of Aranesp for patients for whom its use might prove fatal.  The assurance that the proposed corporate integrity agreement will prevent further abuse is notably hollow.  I can recall no recent case in which the government authorities have used such an agreement to pursue charges against individuals.  The likely deterrent effect of the monetary settlement will likely be minimal.  $762 million may look just like a cost of doing business when the drug in question was bringing in over $2 billion a year (<a href="http://www.latimes.com/business/la-fi-amgen-plea-20121219,0,7120268.story">per the Los Angeles Times</a>).  </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">So the <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements</a> march on and on.  The government continues to extract fines from health care organizations whose actions endanger not only the federal budget, but patients' well being and lives, without even trying to hold individuals responsible.  The impunity of health care corporate executives thus also continues.</div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">As we have said far too many times, we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.</div><div itemprop="articleBody"></div><div itemprop="articleBody"><br /></div><div itemprop="articleBody"><b>References</b></div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">1.  Khuri FR. Weighing the hazards of erythropoiesis stimulation in patients with cancer.  N Engl J Med 2007; 356: 2445-2447.  Link <a href="http://www.nejm.org/doi/full/10.1056/NEJMp078101">here</a>.</div><div itemprop="articleBody">2.  Bennett CI, Silver SM, Djulbegovic B et al.  Venous thromboembolism and mortality associated with recombinant erythropoietin and darbepoetin administration for the treatment of cancer-associated anemia.  JAMA 2008; 299: 914-924.  Link <a href="http://jama.jamanetwork.com/article.aspx?articleid=181533">here</a>.</div><div itemprop="articleBody">3.  Bohlius J, Schmidlin K, Brillant C et al.  Recombinant human eryhtropoiesis-stimulating agents and mortality in patients with cancer: a meta-analysis of randomised trials.  Lancet 2009; 373: 1532-1542.  Link <a href="http://www.thelancet.com/journals/lancet/article/PIIS0140-6736%2809%2960502-X/abstract">here</a>.</div>

Amgen Settles, Pleads Guilty to Misbranding Aranesp

Now it's Amgen's turn to settle and plead.  Per the New York Times,The biotechnology giant Amgen marketed its anemia drug Aranesp for unapproved uses even after the Food and Drug Administration expl…

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"Phony Consulting and Royalty Agreements," "Chocolate" Bribes, a Sales Representative Doubling as a Stripper, Oh My - Three Settlements for Othrofix

On this US election day, we seem to be in a mini-squall of cases involving unethical, deceptive, and now very colorful marketing practices used to push drugs and devices.  <br /><br />We recently discussed a settlement of allegations of deceptive marketing practices and kickbacks by pharmaceutical company Boehringer-Ingelheim (<a href="http://hcrenewal.blogspot.com/2012/10/just-another-day-at-office-boehringer.html">here</a>), a US congressional report alleging deceptive influence by Medtronic marketers over ostensibly scholarly publications (<a href="http://hcrenewal.blogspot.com/2012/10/marketers-systemic-influence-over.html">here</a>), a study of documents released after litigation that appear to show how Pfizer had a systemic marketing campaign that used controlled trials as deceptive marketing vehicles (<a href="http://hcrenewal.blogspot.com/2012/10/when-clinical-trials-are-meant-for.html">here</a>), <br /><br />Now three separate settlements by device/ biotechnology company Orthofix have come to light.<br /><br /><strong>Settlement 1 - "Phony Consulting and Royalty Agreements," and Prostitution as Kickbacks, and a Sales Representative as Stripper</strong><br /><br />A Bloomberg <a href="http://www.bloomberg.com/news/2012-11-02/orthofix-will-pay-u-s-30-million-to-settle-kickbacks.html">article</a> outlined Orthofix's two latest settlements.  The newest seems the most audacious, or bodacious,<br /><br /><blockquote class="tr_bq">Orthofix International NV, (OFIX) a maker of spinal implants, <em>agreed to pay the U.S. $30 million to settle claims that a subsidiary paid illegal kickbacks and provided prostitutes to doctors in return for orders. </em><br /><br />The subsidiary, Blackstone Medical Inc., <em>paid kickbacks to spinal surgeons in the form of phony consulting and royalty agreements, and travel and entertainment</em> to entice them to use its products, the U.S. Justice Department said in a statement today. </blockquote><br />This case adds to the mounting pile of evidence that many of the financial relationships among physicians and health care academics and drug, device, biotechnology and other health care corporations are not merely conflicts of interest incidental to innovation.  In particular, Bloomberg reported,<br /><br /><blockquote class="tr_bq">[Whistle blower Susan] Hutcheson <em>alleged that officials of Blackstone, purchased by Orthofix in 2006, violated kickback and false-claim laws by setting up a system to compensate doctors under sham consulting agreements and phony research grants</em>, according to court filings. The sales executive said the company also offered <em>lavish travel opportunities</em> to doctors who implanted its products, the filing said. <br /><br /><em>Some doctors were paid as much as $8,000 a month under the fictitious consulting agreements,</em> Hutcheson said in her suit, filed in federal court in Massachusetts. Orthofix’s U.S. unit is based in Lewisville, Texas. <em>Some also received phony research grants for as much as $18,000, the suit added. </em></blockquote><br />Then there was this colorful detail,<br /><br /><blockquote class="tr_bq">Blackstone salespeople also were <em>urged to take surgeons out for expensive dinners, escort them to strip clubs and pay for liaisons with prostitutes to get their business</em>, Hutcheson said in the suit. <br /><br /><em>One female sales manager in Dallas agreed to disrobe and join strippers on stage at the request of two surgeons to whom she was pitching the company’s products</em>, Hutcheson said in her suit. The sales manager was demoted, not fired, over the incident, Hutcheson said in the suit. </blockquote><br />We often hear from drug, device, and biotechnology companies that their sales efforts are all about providing needed information to physicians, information they could not otherwise obtain.  In this case, the information appeared to be rather anatomical, but also rather personal.<br /><br />The AP <a href="http://www.businessweek.com/ap/2012-11-02/orthofix-paying-30m-to-settle-kickbacks-case">coverage </a>of this store (here, via Businessweek) also noted that the settlement involved a corporate integrity agreement.  Neither story mentioned any admissions made by the company.  As far as I could tell, no corporate executives suffered any consequences as part of this settlement.<br /><br /><strong>Settlement 2 - Fraud, Obstructing the US Government, and Less Colorful Kickbacks to Promote Bone Growth Stimulators</strong><br /><br />The article did nor provide any helpful photographs, but it did note that Orthofix recently made a second settlement.<br /><br /><blockquote class="tr_bq">The settlement’s approval comes after <em>Orthofix officials agreed to pay $42 million to resolve a separate whistle-blower suit and a criminal probe of allegations</em> it paid kickbacks to doctors who used its bone-growth stimulators.<br /><br /><br /><em>One of its units will plead guilty in federal court in Boston federal court to a single felony count of obstructing a U.S. government audit and pay a $7.8 million fine, according to a June 7 regulatory filing. Orthofix also will pay $34.2 million to resolve whistle-blower claims that the company defrauded the federal Medicare program over bone-growth stimulators</em>, which patients wear after surgery to speed healing.</blockquote><br />Amazingly, unlike the first settlement, and unlike most settlements we have discussed,<br /><br /><blockquote class="tr_bq"><em>Five Orthofix employees have pleaded guilty to criminal charges in connection with probes</em> of the kickback allegations. <em>Thomas Guerrieri, an Orthofix vice president, pleaded guilty in April to violating the federal anti-kickback statute by setting up fake consulting agreements for doctors who used the company’s products</em>.</blockquote><br />Note that we discussed a surgeon who pleaded guilty to accepting kickbacks from multiple device companies, including the Blackstone subsidiary of Orthofix, <a href="http://hcrenewal.blogspot.com/2008/01/neurosurgeon-admits-kickbacks-from.html">here</a> in 2008. <br /><br /><strong>Settlement 3 - "Chocolate" Bribes to Mexican Government Officials</strong><br /><br />Finally, the AP story noted in passing "the recent resolution of a federal Foreign Corrupt Practices action" against the company.  I could not find any news coverage of that, but in July there did appear a <a href="http://www.sec.gov/news/press/2012/2012-133.htm">SEC press release</a>.<br /><br /><blockquote class="tr_bq">The Securities and Exchange Commission today <em>charged Texas-based medical device company Orthofix International N.V. with violating the Foreign Corrupt Practices Act (FCPA) when a subsidiary paid routine bribes referred to as 'chocolates' to Mexican officials in order to obtain lucrative sales contracts with government hospitals.</em><br /><br />The SEC alleges that Orthofix’s Mexican subsidiary Promeca S.A. de C.V. <em>bribed officials at Mexico’s government-owned health care and social services institution Instituto Mexicano del Seguro Social (IMSS). The 'chocolates' came in the form of cash, laptop computers, televisions, and appliances that were provided directly to Mexican government officials or indirectly through front companies</em> that the officials owned. The bribery scheme lasted for several years and yielded nearly $5 million in illegal profits for the Orthofix subsidiary.<br /><br /><br /><em>Orthofix agreed to pay $5.2 million to settle the SEC's charges</em>.</blockquote>Also,<br /><br /><blockquote class="tr_bq">Orthofix also disclosed today in an 8-K filing that it has<em> reached an agreement with the U.S. Department of Justice to pay a $2.22 million penalty in a related action</em>.</blockquote><br /><strong>Summary</strong>   <br /><br />So the box score here includes settlements of legal actions alleging bribery and kickbacks, a corporate integrity agreement, a guilty plea by a company subsidiary to obstructing the US government, and multiple guilty pleas by company executives.  The bribes and kickbacks were provided in various colorful forms.   <br /><br />The variety of unethical behaviors unearthed suggests a company with a seriously deranged corporate culture.  Whether the various actions taken against it, including the very unusual punishments meted out to some of its apparently mid-level executives will change its behavior, or serve as a lesson to other companies and their leaders is not clear.  Whether they are sufficient to suggest anyone should trust this company, its leaders, or its products seems questionable.    <br /><br />This story adds to our various compilations of <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements</a> and tales of <a href="http://hcrenewal.blogspot.com/search/label/crime">crime</a>, including <a href="http://hcrenewal.blogspot.com/search/label/bribery">bribery</a>, <a href="http://hcrenewal.blogspot.com/search/label/kickbacks">kickbacks</a> and <a href="http://hcrenewal.blogspot.com/search/label/fraud">fraud</a> involving major health care organizations which suggest serious, deep afflictions within the culture of our commercialized health care system.  Yet almost nowhere, except here on <a href="http://hcrenewal.blogspot.com/">Health Care Renewal </a>are there calls for serious reforms to restore trust in our health care organizations and their leaders.<br /><br />As we have said endlessly, up to now, such legal settlements seemingly have had no effect on the bad behavior of big health care organizations, while they continually erode trust in these organizations and their leadership, and trust in physicians to put patients ahead of personal gain. <br /><br />Furthermore, these cases seem to be part of a larger social problem. It seems that nowadays the leadership of large, powerful organizations feels free to promote their own interests using psychologically sophisticated but deceptive marketing and public relations strategies no matter what their effect on the public welfare.<br /><br />Again as we have said all too many times before, we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.<br /><br />Maybe after all the election hoopla dies down here in the US, we can finally have a serious conversation about health care reform that will make our health care system more trustworthy. 

"Phony Consulting and Royalty Agreements," "Chocolate" Bribes, a Sales Representative Doubling as a Stripper, Oh My - Three Settlements for Othrofix

On this US election day, we seem to be in a mini-squall of cases involving unethical, deceptive, and now very colorful marketing practices used to push drugs and devices.  We recently discussed a sett…

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The Case of the Bleeding Heart Prosecutors - How the Justice Department Became Lenient with Corporate Wrong-Doing

We have frequently posted, some may say tiresomely, about the lack of consequences or negative incentives for health care organizational leaders involved in wrong-doing.  For example, see the numerous cases against health care organizations that resulted in <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements</a>, almost never requiring any penalties against individuals who authorized, directed, or implemented the behavior in question.<br /><br />Now a <a href="http://www.nytimes.com/2011/07/08/business/in-shift-federal-prosecutors-are-lenient-as-companies-break-the-law.html">major article</a> in the New York Times by Gretchen Morgenson and Louise Story explains some of the history behind this aspect of the decreasing accountability of corporate leadership.  Their article focused on financial corporate leadership, but clearly is generalizable to health care corporate leadership.<br /><br /><strong>Banks Asked to Report Their Own Misbehavior</strong><br /><br />The Times article documents how the US Department of Justice deliberately became more lenient in the 1990s, supposedly to conserve scarce investigational resources:<br /><blockquote>dating to the mid-1990s ... banks were asked to regularly report suspicious activities to the Treasury Department, an effort that <em>aimed at relieving regulators of some of their enforcement loads.</em></blockquote><br /><strong>The Effect of the Arthur Andersen Case</strong><br /><br />Around the beginning of the 21st century there had been some vigorous prosecution of corporate financial wrong-doing:<br /><blockquote>The names have become synonymous with corporate wrongdoing — and forceful prosecution: Not just Enron, but also WorldCom, Tyco, Adelphia, Rite Aid and ImClone. In the early part of the last decade, <em>senior executives at all these companies were convicted and imprisoned</em>. </blockquote><br />However, for reasons that were not explained, a single unsuccessful case caused reconsideration of this approach:<br /><blockquote>The department began pulling back from a more aggressive pursuit of white-collar crime around 2005, say defense lawyers and former prosecutors, after the Supreme Court overturned a conviction it won against the accounting firm Arthur Andersen. That ended an era of brass-knuckle prosecutions related to fraud at companies like Enron. </blockquote><br /><strong>Sympathy for the Targets of Investigation</strong><br /><br />The pullback was rationalized for a sudden sympathy for the objects of investigation:<br /><blockquote>But by 2005, a debate was growing over aggressive prosecutions, <em>as some business leaders had been criticizing the approach as perhaps too zealous. </em><br /><br />That May, Justice Department officials met ahead of a session with a cross-agency group called the Corporate Fraud Task Force. It was weeks after Justice Department lawyers had presented to the Supreme Court their case against Arthur Andersen, which was seeking — successfully, it would turn out — to overturn its criminal fraud conviction in a prominent case. <br /><br />In the meeting,<em> the deputy attorney general at the time, James B. Comey, posed questions that surprised some attendees</em>, according to two people there who asked to remain anonymous because they were not supposed to discuss private meetings. <br /><br /><em>Was American business being hurt by the Justice Department’s investigations?,</em> Mr. Comey asked, according to these two people, who said they thought the message had come from others. He cautioned colleagues to be responsible. 'It was a total retrenchment,' one of the people said. 'It was like we were going backwards.' <br /><br />Mr. Comey said recently that he did not recall this conversation. <br /><br />Around the same time, the Justice Department was developing instructions on dealing with companies under investigation — particularly companies that work with the government. It issued <em>a memo in 2003 that gave companies more credit for cooperating</em> than in the past. That message was <em>reinforced in another memo in 2006</em>. <br /><br />As the first memo put it, 'it is entirely proper in many investigations for a prosecutor to consider the corporation’s pre-indictment conduct, e.g., voluntary disclosure, cooperation, remediation or restitution, in determining whether to seek an indictment.' <br /><br />During this period, the Justice Department <em>increased the use of deferred prosecutions or even nonprosecution agreements. </em><br /><br />Many well-known companies have benefited. In 2004, the American International Group, the giant insurer, paid $126 million when it entered a deferred prosecution agreement to settle investigations into claims that it had helped clients improperly burnish financial statements. <br /><br />Deals over accounting improprieties also were struck that year by Computer Associates International, a technology company, and <em>in 2005 by Bristol- Myers Squibb, a pharmaceutical concern</em>. Prudential Financial entered into a deferred prosecution in 2006 over improper mutual fund trading. </blockquote><br />Note that while the emphasis of this article was on the financial services industry, big health care organizations were also benefiting from more lenient treatment.  Note also that one firm given lenient treatment, AIG, went on to threaten collapse, a collapse that was feared could take down the entire world financial system, and hence was given a very generous government bail-out, which has not be paid back to this day.  <br /><br /><strong>Formalized Leniency</strong><br /><br />In 2008, the approach was formalized:<br /><blockquote>As the financial storm brewed in the summer of 2008 and institutions feared for their survival, a bit of good news bubbled through large banks and the law firms that defend them. <br /><br /><em>Federal prosecutors officially adopted new guidelines about charging corporations with crimes — a softer approach that, longtime white-collar lawyers and former federal prosecutors say, helps explain the dearth of criminal cases despite a raft of inquiries into the financial crisis</em>. <br /><br />Though little noticed outside legal circles, the guidelines were welcomed by firms representing banks. <em>The Justice Department’s directive, involving a process known as deferred prosecutions, signaled 'an important step away from the more aggressive prosecutorial practices seen in some cases under their predecessors,'</em> Sullivan & Cromwell, a prominent Wall Street law firm, told clients in a memo that September. <br /><br /><em>The guidelines left open a possibility other than guilty or not guilty, giving leniency often if companies investigated and reported their own wrongdoing. In return, the government could enter into agreements to <strong>delay or cancel the prosecution if the companies promised to change their behavior. </strong></em></blockquote><br /><strong>Less Deterrence</strong><br /><br />The NY Times article documented a number of opinions that increasing leniency was resulting in less deterrence of bad behavior:<br /><blockquote><em>'If you do not punish crimes, there’s really no reason they won’t happen again,'</em> said Mary Ramirez, a professor at Washburn University School of Law and a former assistant United States attorney. 'I worry and so do a lot of economists that we have created no disincentives for committing fraud or white-collar crime, in particular in the financial space.' </blockquote><br /><strong>Why So Much Sympathy from Prosecutors?</strong><br /><br />What was not really clear from the article is why US federal prosecutors seemed to go from their stereotypically tough on crime personas to bleeding hearts for corporate criminals. The one rationale the article provided from the Department of Justice was:<br /><blockquote>Defending the department’s approach, Alisa Finelli, a spokeswoman, said deferred prosecution agreements require that corporations pay penalties and restitution, correct criminal conduct and 'achieve these results without causing the loss of jobs, the loss of pensions and other significant negative consequences to innocent parties who played no role in the criminal conduct, were unaware of it or were unable to prevent it.' </blockquote><br />This, however, makes no sense. Well directed prosecutions of the people who apparently authorized, directed or implemented the wrong-doing ought to have very little effect on "innocent parties." The only jobs and pensions that should be lost should be those of the accused.<br /><br /><strong>Conclusions</strong><br /><br />This seems to be the most recently documented example of important but overlooked, or concealed changes in government policies that have enabled the health care system to become more unethical, dishonest and corrupt, and hence more dysfunctional.<br /><br /><a href="http://hcrenewal.blogspot.com/2009/06/why-did-us-physicians-give-up-their.html">Here</a> we discussed a Supreme Court decision interpreting US anti-trust law that has been used to prevent medical societies from enforcing ethical rules, and hence helped medicine to become increasingly commercialized, and to increasingly put money ahead of patient care.<br /><br /><a href="http://hcrenewal.blogspot.com/2009/06/why-did-us-physicians-give-up-their.html">Here</a> we discussed little discussed legislation from 1945 that allowed US insurance companies/ managed care organizations to avoid federal anti-trust investigation and enforcement, and hence to increased market power.<br /><br /><a href="http://hcrenewal.blogspot.com/2010/06/attempt-to-hold-health-care-leaders.html">Here</a> we discussed failure of the executive branch, and especially the Department of Justice to use existing legal doctrine, the Responsible Corporate Officer Doctrine, available since 1943, to make corporate leaders responsible for their companies' bad behaviors, leading to their increasing lack of accountability and less deterrence of malfeasance.<br /><br />Now we have seen a deliberate turn away from even direct penalties on corporations which have misbehaved, in return basically for a promise that "we won't do it again."<br /><br />The first two examples may be of unintended consequences.<br /><br />The last two seem to signal an increased coziness between some in government and corporations. The origins of this coziness just beg for investigation.<br /><br />Meanwhile, there seems to be no evidence that the government's new leniency has protected innocent people who would have been harmed by the previous tougher approach. Instead, there seems to be a growing tide of bad behavior by health care organizations, exemplified by the nature of some of the bad behavior that lead to the march of <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements</a>, and to the <a href="http://hcrenewal.blogspot.com/search/label/deferred%20prosecution%20agreement">deferred prosecution agreements</a> and <a href="http://hcrenewal.blogspot.com/search/label/corporate%20integrity%20agreement">corporate integrity agreements</a> generated in response to the new policies.<br /><br /><strong>What Is to Be Done?</strong><br /><br />- There clearly needs to be investigation, both by journalists and at a congressional level, of Department of Justice policies that have been increasingly lenient to and cozy with large corporations, including health care corporations.<br /><br />- Current Department of Justice officials need to be reminded that their clients are the US people, not corporate executives, no matter how hearty and well-met.<br /><br />ADDENDUM (12 July, 2011) -  See this related <a href="http://www.nakedcapitalism.com/2011/07/defining-deviancy-away-how-the-justice-department-adopted-see-no-evil-approach-to-corporate-crime.html">post</a> on the Naked Capitalism blog.<br /><br />ADDENDUM (19 July, 2011) - See related <a href="http://brodyhooked.blogspot.com/2011/07/kid-gloves-on-corporate-crime-different.html">post</a> by Dr Howard Brody on the Hooked: Ethics, Medicine and Pharma blog.

The Case of the Bleeding Heart Prosecutors - How the Justice Department Became Lenient with Corporate Wrong-Doing

We have frequently posted, some may say tiresomely, about the lack of consequences or negative incentives for health care organizational leaders involved in wrong-doing.  For example, see the numerous…

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Sunday Settlement and Guilty Plea Roundup

Here we go again.  <br /><br /><strong>AstraZeneca / Seroquel</strong><br /><br />We have posted frequently about allegations of devious marketing techniques used by AstraZeneca to promote its blockbuster atypical anti-psychotic drug Seroquel (quetiapine.)  See our posts <a href="http://hcrenewal.blogspot.com/2009/02/buried-data-smoke-and-mirrors-job-and.html">here</a>, <a href="http://hcrenewal.blogspot.com/2009/03/blogscan-over-selling-of-seroquel.html">here</a>, <a href="http://hcrenewal.blogspot.com/2009/05/more-documents-about-selling-of.html">here</a>, <a href="http://hcrenewal.blogspot.com/2009/10/more-on-misleading-promotion-of.html">here</a>, and <a href="http://hcrenewal.blogspot.com/2009/10/nemeroff-seroquel-and-accme.html">here</a>.  Now, as <a href="http://www.nytimes.com/2010/04/28/business/28drug.html">reported</a> by the New York Times, it is time for AZ to settle with the US government.<br /><blockquote>AstraZeneca has completed a deal to<em> pay $520 million to settle federal investigations into marketing practices for its blockbuster schizophrenia drug, Seroquel</em>, the Attorney General, Eric Holder, said at a news conference Tuesday afternoon. <br /><br />'AstraZeneca paid kickbacks to doctors as part of an<em> illegal scheme to market drugs for unapproved uses</em>,' Kathleen Sebelius, secretary of health and human services, said at the event in Washington. She said the company promoted drugs for unapproved uses by children, the elderly, veterans and prisoners. <br /><br />AstraZeneca agreed to sign <em>a corporate integrity agreement</em> with the federal government over its marketing of Seroquel for unapproved uses, but <em>will not face criminal charges</em>, company and federal officials said. <br /><br />The company, based in London, has been accused of <em>misleading doctors and patients by playing up favorable research and not adequately disclosing studies that show Seroquel increases the risk of diabetes. </em></blockquote><br />Of course, an AZ spokesperson had a different take on it.<br /><blockquote>Glenn Engelmann, AstraZeneca’s U.S. general counsel, released a statement saying the company denies the allegations but settled the investigation with the payment. <br /><br />'It is in the best interest of AstraZeneca to resolve these matters and to move forward with our business of discovering and developing important, life-changing medicines — while avoiding the delay, uncertainty, and expense of protracted litigation,' Mr. Engelmann said. </blockquote><br /><strong>Johnson and Johnson / Topamax</strong><br /><br />On the other hand, the issue of how Johnson and Johnson marketed Topamax (topiramate), a drug approved for treating seizures, is a new one for Health Care Renewal.  Here is the story, <a href="http://www.businessweek.com/news/2010-04-29/j-j-to-pay-81-million-end-federal-cases-on-topamax-update2-.html">via Bloomberg</a>.<br /><blockquote>Two units of Johnson & Johnson will <em>pay more than $81 million to resolve criminal and civil claims over illegal promotion of the epilepsy drug Topamax</em>, the U.S. Justice Department said.<br /><br />Ortho-McNeil Pharmaceutical LLC agreed to <em>plead guilty to a misdemeanor</em> and pay a $6.14 million criminal fine for misbranding the drug, the government said. Ortho-McNeil-Janssen Pharmaceuticals also will pay $75.37 million to resolve <em>civil allegations that it illegally marketed Topamax and caused false claims to be submitted to government health programs</em>.<br /><br />While the Food and Drug Administration approved Topamax for the treatment of partial onset seizures, Ortho-McNeil Pharmaceutical promoted the drug for unapproved psychiatric uses, the government said. The company<em> hired physicians through its 'Doctor-for-a-Day' program to join sales representatives in visiting doctors and to speak to colleagues about unapproved uses and doses,</em> according to the government.</blockquote><br />In this case, the company admitted wrong-doing as part of the specific plea agreement.<br /><blockquote>Under the plea agreement, <em>Ortho-McNeil Pharmaceutical will admit that from 2001 to 2003 it promoted Topamax 'for certain uses not approved' by the FDA</em>, according to a statement by Ortho-McNeil-Janssen.<br /><br />The company 'voluntarily discontinued the program at issue before receiving the government’s first subpoena in the investigation,' according to the statement.<br /><br />Ortho-McNeil-Janssen also will sign a five-year <em>corporate integrity agreement</em> with the U.S. Health and Human Services Department. </blockquote><br /><strong>Summary</strong><br /><br />Once more, with feeling ....  We have discussed a series of <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements</a> and <a href="http://hcrenewal.blogspot.com/search/label/crime">criminal convictions</a> and guilty pleas resolving cases of alleged wrong-doing by health care organizations. Almost none included any penalties for people who authorized, directed or implemented the bad behavior. None of the financial penalties were so big as to be more than another cost of doing business for the organizations involved. Corporate entities, but very rarely people have pleaded guilty or been convicted (almost always of misdemeanors), Some of the cases included gimmicks, like a subsidiary constructed only to plead guilty, that otherwise seemed to lessen accountability. <br /><br />If we truly want health care that is accessible, of high quality, at a fair price, and more importantly, if we want health care that is honest and focused on patients, we need to provide health care leaders with clear, rational incentives in these directions, and make them fully accountable for their actions, and the courses of their organizations under their leadership.<br /><br />ADDENDUM (2 May,2010) - See also <a href="http://brodyhooked.blogspot.com/2010/04/cost-of-doing-business-same-song-83rd.html">comments </a>on the Hooked: Ethics, Medicine, and Pharma blog by Dr Howard Brody on the AZ settlement.

Sunday Settlement and Guilty Plea Roundup

Here we go again.  AstraZeneca / SeroquelWe have posted frequently about allegations of devious marketing techniques used by AstraZeneca to promote its blockbuster atypical anti-psychotic drug Seroque…

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Pfizer (in the Guise of Pharmacia) Pfound to Violate Pfraud Law, While Pfizer CEO Made Pfederal Reserve Advisor

It was only a month ago that Pfizer Inc, the world's largest pharmaceutical company, submitted to a gargantuan $2.3 billion settlement and yet another corporate integrity agreement. As we posted <a href="http://hcrenewal.blogspot.com/2009/09/pfour-legal-settlements-for-pfizer-why.html">here</a>, this was the company's fourth major settlement of charges of unethical marketing behavior since 2002.<br /><br />Now Pfizer is in trouble again. As reported <a href="http://www.google.com/hostednews/ap/article/ALeqM5gKN6h5RGezwol5GiqLvvTxaVAYUQD9B1VSL00">by the AP</a>,<br /><br /><blockquote><br /><em>A judge on Tuesday imposed $4.5 million in forfeitures on prescription drug company Pharmacia Inc.[a Pfizer Inc subsidiary] for misrepresenting prices and defrauding Wisconsin's Medicaid system.<br /></em><br />A jury in February found that Pharmacia violated the state's Medicaid fraud law 1.44 million times over a decade. State Justice Department attorneys had demanded about $212 million in forfeitures, but Dane County Circuit Judge Richard Niess said jurors grossly overcalculated the number of violations.<br /><br />After reviewing the evidence, the judge found the actual tally was 4,578.<br /><br />He elected to set the forfeiture level at $1,000 per violation. The judge said he was concerned that if he ordered the maximum $68.6 million Pharmacia would pass the expense to consumers and nothing showed any of the fraudulent $7 million went directly to Pharmacia's profits.<br /><br />On the other hand, the judge said, a $100 per violation forfeiture totaling $457,800 would 'not register so much as blip on Pharmacia's multibillion-dollar annual fiscal radar screen' and a higher amount would draw attention to the need to reform pharmaceutical reimbursement scales.<br /></blockquote><br /><br />I must say that I do not understand the reasoning the judge used to set the penalties. If he thought that Pfizer would merely pass along a large penalty to patients, why would the company not pass along a smaller penalty to them.<br /><br />In any case, this is just the latest in a long string of cases in which a health care corporation was found to have committed unethical or illegal acts, but the only the corporation itself, but not the people who actually performed, directed or authorized the acts, paid a penalty. And when the penalty is paid by the corporation, its impact can be spread over all stock-holders, all employees, and all patients, clients, or customers, thus diluting its effect, and protecting those who authorized, directed, or performed the acts in question.<br /><br />I submit again that only when the people in health care leadership who perform, direct or authorize bad behavior pay penalties will bad behavior be deterred.<br /><br />Note that while Pfizer may be the world's largest pharmaceutical corporation, it seems to be the corporation most often cited for, convicted of, or having to make settlements for bad behavior (see some recent examples <a href="http://hcrenewal.blogspot.com/search/label/Pfizer">here</a>). (Although in the current case, you would have to read the news report very carefully to realize that Pfizer was involved. The fact that Pharmacia is a Pfizer subsidiary was only mentioned in passing.) <br /><br />Nonetheless, one would think Pfizer's leadership would be ashamed, and their reputation would suffer. But no. At about the same time this latest settlement was announced, this <a href="http://www.reuters.com/article/companyNews/idUSN0160921020091001">report from Reuters </a>appeared:<br /><br /><blockquote><br />The Federal Reserve Bank of New York said on Thursday that Pfizer (PFE.N) chief executive Jeffrey Kindler and Loews Corp (L.N) chief executive James Tisch will fill the two vacancies on its board of directors.<br /><br />Kindler was elected to finish a three-year term ending Dec. 31, taking the seat PepsiCo (PEP.N) chief executive Indra Nooyi resigned from in February.<br /><br />Regional Federal Reserve banks' boards of directors offer recommendations on Fed policy, but have no policy-making powers. They also provide anecdotal information about the business conditions that help inform the central bank.<br /><br />Regional Fed banks have three classes of directors: Class A, elected by member banks to represent banks; Class B, elected by member banks but representing the public; and Class C, which represent the public but are chosen by the Board of Governors in Washington.<br /><br />Kindler and Tisch join Jeffrey Immelt, chairman and chief executive of General Electric (GE.N) as Class B directors.<br /></blockquote><br /><br />I suppose Kindler could offer quite a bit of "anecdotal information" about bad behavior in the pharmaceutical industry. But it seems rather comic to think about the CEO of the world's biggest, and lately baddest pharmaceutical company as "representing the public." Rather, and more seriously, this is just the latest example of how leaders of health care organizations have joined the superclass, and how the superclass protects its own.

Pfizer (in the Guise of Pharmacia) Pfound to Violate Pfraud Law, While Pfizer CEO Made Pfederal Reserve Advisor

It was only a month ago that Pfizer Inc, the world's largest pharmaceutical company, submitted to a gargantuan $2.3 billion settlement and yet another corporate integrity agreement. As we posted here,…

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Intermune Executive Convicted of Fraud

<a href="http://www.nytimes.com/2009/09/30/business/30drug.html">From today's New York Times </a>comes word of an unusual legal case,<br /><blockquote><br /><em>In a verdict that could strike fear into pharmaceutical industry executive suites, the former head of a drug company was convicted of wire fraud Tuesday for issuing what federal prosecutors called a misleading press release that contributed to off-label sales of his company’s drug.<br /></em><br />But the executive, W. Scott Harkonen, the former chief executive of InterMune, was acquitted by the federal jury in San Francisco of a related charge of off-label marketing itself, known as 'misbranding,' the Justice Department said.<br /><br /><em>The case was unusual because off-label marketing cases are often settled with the company paying a fine. It is rare for prosecutors to press charges against individual executives</em>.<br /><br /><em>'Today’s verdict demonstrates that pharmaceutical executives will not be able to hide behind a corporate shield</em> when they promote drugs using false or fraudulent information,' Thomas P. Doyle, a special agent in the Food and Drug Administration’s office of criminal investigations, said in a statement Tuesday.<br /><br />InterMune’s drug, Actimmune, was approved for two rare genetic conditions. But the main sales of the drug, which peaked at $141million in 2003, came from an unapproved use: treating idiopathic pulmonary fibrosis, a scarring of the lungs that can be fatal.<br /><br />InterMune conducted a large clinical trial testing Actimmune as a treatment for the lung disease. The drug did not achieve the goal of the trial, which was to improve lung function compared with a placebo. But InterMune found that if only the patients in the trial with mild or moderate disease were considered, those who got the drug lived longer than those who received the placebo. The company highlighted the 'survival benefit' in a news release, issued in August 2002. [Editor's note - if the primary study outcome was improvement of lung function, and the only 'positive' result was improvement of survival in one sub-group, that result may have been due to chance alone, due to multiple statistical comparisons. If one does analyses on multiple sub-groups and for multiple endpoints, the likelihood of finding a 'significant' result increases with the number of such analyses done.]<br /><br />Prosecutors said the news release was part of a scheme to induce off-label sales of Actimmune, also known as interferon gamma, which costs about $50,000 a year.<br /><br />[The company's attorney] Mr. Topel said interpretation of the clinical trial results was a matter of debate. 'One position in a scientific dispute has been criminalized — quite an astonishing thing,' Mr. Topel said in an interview.<br /><br />Wire fraud carries a maximum sentence of 20 years in prison and a $250,000 fine. Dr. Harkonen, who remains free on bail, has not been sentenced.<br /><br />A medical doctor by training, he was chief executive of InterMune from February 1998 until June 2003.<br /><br /><em>InterMune agreed to pay about $37 million in 2006 to settle charges related to Actimmune marketing</em>. The company, based in Brisbane, Calif., also <em>entered into a five-year corporate integrity agreement</em> with the Department of Health and Human Services.<br /><br />In 2007, <em>a second big trial of Actimmune found that the drug did not prolong lives of patients with pulmonary fibrosis</em>. Sales of the drug have dwindled year by year. [Editor's note - this suggests again that the result in the sub-group from the first trial might have been a false positive due to multiple comparisons.]</blockquote><br />This case is unusual because it involved the prosecution of an individual who appeared to be responsible for the allegedly unlawful conduct. In most cases of unethical or unlawful conduct alleged on the part of health care organizations, at most it is the organization itself that has paid the penalty, usually in the form of a fine, sometimes accompanied by a corporate integrity agreement or deferred prosecution agreement. (See relevant posts <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">here</a>.)<br /><br />We have argued that such penalties applied to corporations do little to deter bad behavior. A fine can just be a cost of doing business. The cost of the fine may diffuse across the whole organization. For public for-profit corporations, the fine may finally be paid by stockholders (through lower dividends or lower stock appreciation), employees as a group (through lower pay), and customers, clients, or patients (through higher prices). So the penalty may ultimately be spread over a large number of people, hardly any of which were actually responsible for the bad behavior. The few people responsible, who could include people who implemented, directed, or approved the behavior, usually have suffered no consequences. So what is to deter such people from again behaving badly?<br /><br />So this case seems to be a step forward. One may argue whether off-label marketing should be illegal, but it currently is illegal. Corporate leaders who do not like this law ought to strive to change it, not violate it. If the law is to be upheld, when someone within a corporation implements, directs or approved illegal off-label marketing, then that person should suffer the consequences.

Intermune Executive Convicted of Fraud

From today's New York Times comes word of an unusual legal case,In a verdict that could strike fear into pharmaceutical industry executive suites, the former head of a drug company was convicted of wi…

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Pfour Legal Settlements for Pfizer - Why is the Company "Recidivist?"

We recently posted about Pfizer's $2.3 billion dollar settlement with the US government (<a href="http://hcrenewal.blogspot.com/2009/09/pfizers-2300000000-settlement-no-longer.html">here</a>), which we first mentioned six months ago (<a href="http://hcrenewal.blogspot.com/2009/02/pfizer-settles-for-mere-2300000000.html">here</a>). It is worth reviewing what we know about this settlement. We will start with quoted from the article by Gardiner Harris writing <a href="http://www.nytimes.com/2009/09/03/business/03health.html">in the New York Times</a>. We will also use quotes from other articles listed below:<br /><br /><strong>A Big Settlement</strong><br /><br />(from the NYT)<br /><br /><br /><blockquote>The pharmaceutical giant Pfizer agreed to pay <em>$2.3 billion to settle civil and criminal allegations</em> that it had illegally marketed its painkiller Bextra, which has been withdrawn.<br /><br />It was the <em>largest health care fraud settlement and the largest criminal fine of any kind ever</em>. </blockquote>The penalties include a very large criminal fine, an even larger civil fine, and a corporate integrity agreement (from the NYT).<br /><br /><br /><br /><blockquote>Under the agreement with the Justice Department, <em>Pfizer will pay a $1.3 billion criminal penalty related to Bextra and $1 billion in civil fines related to other medicines.</em> In addition, a Pfizer subsidiary, Pharmacia and Upjohn, will <em>plead guilty to violating the Food, Drug and Cosmetic Act</em> for its promotion of Bextra. The company has agreed to <em>sign another corporate integrity agreement</em> that requires senior company executives to annually certify legal compliance and mandates that Pfizer post on its Web site many of its payments to doctors.<br /></blockquote><strong>For Specific Unethical and Illegal Activities</strong><br /><br /><em>The activities for which Pfizer incurred the penalties included marketing drugs for "off-label" indications</em> for which the company did not have US Food and Drug Administration (FDA) approval, and <em>other deceptive marketing practices</em> (from the NYT).<br /><br /><blockquote>The government charged that executives and sales representatives throughout Pfizer’s ranks <em>planned and executed schemes to illegally market not only Bextra but also Geodon, an antipsychotic; Zyvox, an antibiotic; and Lyrica, which treats nerve pain.<br /></em><br />[Acting US Attorney for Massachusetts] Mr. Loucks, the prosecutor, accused Pfizer of aggressive marketing tactics.<br /><br />'Among other things, Pfizer did the following: <em>Pfizer invited doctors to consultant meetings, many in resort locations. Attendees expenses were paid; they received a fee just for being there,</em>' he said. Such weekend getaways for doctors are still common throughout the drug and medical device industries. </blockquote>Also, <a href="http://www.nj.com/news/ledger/jersey/index.ssf?/base/news-14/1251938706305590.xml&coll=1">per the Newark Star-Ledger</a>,<br /><br /><br /><blockquote><br />The government said the company promoted four prescription drugs, including the pain killer Bextra, as treatments for medical conditions different from those the drugs had been approved for by federal regulators. Authorities said Pfizer's sales representatives often <em>created phony doctor requests for medical information</em> in order to send unsolicited information to doctors about unapproved uses and dosages.<br /><br />The civil settlement covered Pfizer's promotions of Bextra, blockbuster nerve pain and <em>epilepsy treatment Lyrica, schizophrenia medicine Geodon, antibiotic Zyvox and nine other medicines</em>. The agreement with the Justice Department resolves the investigation into promotion of all those drugs, Pfizer said.<br /><br />The government said Pfizer also paid kickbacks to market a host of big-name drugs: <em>Aricept, Celebrex, Lipitor, Norvasc, Relpax, Viagra, Zithromax, Zoloft and Zyrtec</em>.<br /></blockquote><br /><strong>Pfizer's Previous Unethical Behavior<br /></strong><br />Pfizer has previously been charged with unethical conduct, and the penalties it paid for this conduct did not seem to deter it (from the NYT).<br /><br /><br /><blockquote>It was Pfizer’s <em><strong>fourth settlement over illegal marketing activities since 2002</strong></em>.<br /><br />'Among the factors we considered in calibrating this severe punishment was <em>Pfizer’s recidivism</em>,' said Michael K. Loucks, acting United States attorney for the Massachusetts district.<br /><br />Much of the activities cited Wednesday occurred <em>while Pfizer was in the midst of resolving allegations that it illegally marketed Neurontin</em>, an epilepsy drug for which the company <em>in 2004 paid a $430 million fine and signed a corporate integrity agreement</em> — a companywide promise to behave. </blockquote><br />Some more details of these settlements, <a href="http://www.philly.com/philly/business/homepage/20090903_FDA__Pfizer_ignored_warnings__gets_record_fine.html">from the Philadelphia Inquirer</a>,<br /><br /><br /><blockquote>Repeat Offender: Previous Pfizer Settlements<br /><br />April 2007: Pfizer agreed to pay $34.7 million in fines to settle Department of Justice allegations that it improperly promoted the human growth hormone product Genotropin. The drugmaker's Pharmacia & Upjohn Co. subsidiary pleaded guilty to offering a kickback to a pharmacy-benefits manager to sell more of the drug.<br /><br />May 2004: Pfizer agreed to pay $430 million to settle DOJ claims involving the off-label promotion of the epilepsy drug Neurontin by subsidiary Warner-Lambert. The promotions included flying doctors to lavish resorts and paying them hefty speakers' fees to tout the drug. The company said the activity took place years before it bought Warner-Lambert in 2000.<br /><br />October 2002: Pfizer and subsidiaries Warner-Lambert and Parke-Davis agreed to pay $49 million to settle allegations that the company fraudulently avoided paying fully rebates owed to the state and federal governments under the national Medicaid Rebate program for the cholesterol-lowering drug Lipitor. </blockquote><br />On Health Care Renewal, we have posted about other instances of unethical behavior by Pfizer. Most recently, these included producing allegedly misleading direct to consumer (DTC) advertising about Lipitor (see post <a href="http://hcrenewal.blogspot.com/2008/02/rower-mis-impresses-pfizer-ends-its.html">here</a>), and conducting unethical research in Africa (see post <a href="http://hcrenewal.blogspot.com/2009/08/pfizer-settles-trovan-case-with-kano.html">here</a>).<br /><br />So it appears that Pfizer is, as the prosecutor put it above, recidivist. Why has the company repeatedly behaved unethically? One argument is that company executives have learned that the rewards of unethical behavior exceed its costs (thus, are responding to a form of perverse incentives.)<br /><br /><strong>Perverse Incentives Favoring Unethical Behavior</strong><br /><br />The fines paid by Pfizer were not that large for a company of Pfizer's size (from the NYT).<br /><br /><blockquote><br />While the government said the fine was a record sum, the $2.3 billion fine amounts to <em>less than three weeks of Pfizer’s sales</em>.<br /></blockquote><br /><br />In lieu of other punishments, the company's managers may just look upon paying fines as the cost of doing business. <a href="http://abcnews.go.com/Health/PainManagement/story?id=8476391">Per ABC News</a>,<br /><br /><br /><blockquote><br />Industry insiders say drug companies often <em>forgo legal considerations in favor of profit.<br /></em><br />If companies, people or entities 'are able to make that decision and determine that <em>there's an economic incentive to break the law, they'll break the law</em>,' said Reuben Guttman, attorney for Glen Demott, a former Pfizer drug representative.<br /><br />Change in a financially driven industry <em>depends on whether a few billion dollars of penalty will affect the company's net profits or share costs. In 2008, Pfizer earned $48.3 billion in revenue. </em><br /></blockquote><br /><br />Bloomberg commentator Ann Woolner <a href="http://www.bloomberg.com/apps/news?pid=20601039&sid=ahodmf54hyPA">said</a> one reason the penalties have not been stiffer is that somehow the government views the company as too big to fail.<br /><br /><br /><blockquote><br />So how does Pfizer get away with civil settlements given its history? The penalties have ranged from hand slaps to a light punch in the gut, none of which have hurt the company enough for things to change. Last year Pfizer earned $8.1 billion on sales of $48.3 billion.<br /><br />The New York-based company repeatedly winds up as the target of government accusations. Its misdeeds cost federal and state programs hundreds of millions of dollars, says the Justice Department, not to mention the human suffering that comes with taking the wrong drug in the wrong dosage.<br /><br />But Pfizer is <em>the pharmaceutical equivalent of insurance giant American International Group Inc., which was too interwoven into the global economy to be allowed to fail. Likewise, if Pfizer were convicted of a crime, it would face debarment from federal programs</em>. And that would mean that Medicaid and Medicare patients would have to either somehow pay pocket for vital medicines the company produces or go without.<br /><br />'You have to balance the desire, an appropriate desire, to punish the company against the harm to patients,' says attorney Kelton.<br /></blockquote><br /><br />This begs the question about why no people, save for two relatively low level managers, no individuals paid any penalties. The unethical behaviors listed above must have been implemented by scores of line personnel, lead by mid-level managers. They, in turn, were acting at the behest of a hierarchy of managers and executives, culminating in "C-level" officers, lead by the CEO. Finally, these executives all reported, in theory at least, to the board of directors.<br /><br />So almost none of the people responsible for the unethical activities paid any penalty. No individuals had to pay fines, or even lose their jobs, much less face criminal proceedings. Maybe the apparent ability of company personnel, starting with those in the trenches, all the way up through levels of management to the CEO, and thence to the board of directors to act with impunity has lead to a culture of amorality.<br /><br /><strong>A Culture of Amorality</strong><br /><br />Some evidence that the culture of the company is pathologic comes from former Pfizer insiders charged that the comany's culture promotes unethical behavior (from the NYT).<br /><blockquote><br />John Kopchinski, a former Pfizer sales representative whose complaint helped prompt the government’s Bextra case, said that company managers told him and others to dismiss concerns about the Neurontin case while pushing them to undertake similar illegal efforts on behalf of Bextra.<br /><br /><em>'The whole culture of Pfizer is driven by sales, and if you didn’t sell drugs illegally, you were not seen as a team player</em>,' said Mr. Kopchinski<br /></blockquote><br /><br />Also, per ABC News,<br /><br /><br /><br /><blockquote>'At Pfizer, I was expected to <em>increase profits at all costs, even when sales meant endangering lives,</em>' Kopchinski said, in a statement. 'I couldn't do that.' </blockquote><br />In light of the list of unethical behaviors documented above, that company leaders deny any big problems itself becomes a problem (from the NYT).<br /><br /><blockquote>Amy W. Schulman, Pfizer’s general counsel, said that Pfizer had reformed — again.<br /><br />'The reasons to trust Pfizer are because, as I have walked the halls at Pfizer, you would see that the <em>vast majority of our employees spend their lives dedicated to bringing truly important medications to patients and physicians in an appropriate manner</em>,' she said. </blockquote>Note that the majority of Pfizer employees may be ethical, but all it takes to accomplish unethical behavior is a few people in key leadership positions willingo to direct unethical activities to increase sales and profits, and for their subordinates to be willing to just follow orders.<br /><br />Also, per a <a href="http://www.bloomberg.com/apps/news?pid=20601087&sid=aFFALMOwjfrg">report in Bloomberg News</a>, Ms Schulman added,<br /><blockquote><br />This gives us a very important opportunity to put final closure on the universe of material open items involving our U.S.-based operations.<br /><br />This is a significant opportunity because it allows Pfizer to return its attention to the things that really should matter most to a biopharmaceutical company, which is the practice of developing innovative medications and bringing them to market in an appropriate fashion.<br /></blockquote><br /><strong>Summary: What is to be Done?</strong><br /><br />So will even a $2,300,000,000 settlement and yet another corporate integrity agreement make Pfizer or any other health care corporation act more ethically? I doubt it.<br /><br />Remember, Pfizer may be a corporation, and thus be before the law a sort of pseudo-person. However, it is not really a person.<br /><br />In this settlement, like others before it, it was people who implemented the behavior, made the decisions which lead to the behavior, and condoned the behavior. The people involved ranged from those in the trenches, through layers of management, to C-level executives, to the board of directors. In my humble opinion, until the people responsible for the bad behavior experience negative consequences from that behavior, they will continue to perform, direct, and condone bad behavior.<br /><br />Finally, I say again that we cannot improve health care until we address this sort of unethical behavior. As reported by ABC News,<br /><blockquote><br />'It won't make a dent <em>if the conduct that led to the settlement is not addressed as part of health care reform</em>,' said [Harvard Medical School faculty member Dr Jon]Abramson, who was the expert consultant for the plaintiff attorneys in the Bextra case in 2007.<br /><br />'The real problem is this behavior is not isolated to Bextra nor Pfizer but in essence is the way the pharmaceutical industry expands the sales of its drugs,' Abramson said. <em>'Unless health care reform can address misrepresentations, withholding science and control claims made to consumers, Americans will continue to pay too much for health care that is not as effective and is expensive.'</em><br /></blockquote><br /><br />PS - According to Bloomberg commentator Ann Woolner, one of the whistle-blowers in this case was a physician who noticed that a Pfizer drug representative was pushing him to use drugs off-label,<br /><br /><blockquote>Pfizer Inc. sales folks had one tough customer in psychiatrist Stefan Kruszewski. He didn’t buy their pitch to prescribe the anti-psychotic drug Geodon to children, a use that hadn’t been approved by federal regulators.<br /><br />Nor did he go for the so-called off-label uses they suggested, such as treating dementia in the elderly.<br /><br />Kruszewski didn’t just say no. He went and checked the research and saw Geodon could have serious cardiac side effects not mentioned by the salesmen, who boasted of its relative safety, according to his lawyer, Brian Kenney. And he noticed that Pfizer was paying his peers to promote the drug to other psychiatrists.<br /><br />But the worst for Pfizer was that Kruszewski didn’t keep it to himself. He found a lawyer, Kenney, who specializes in whistleblower cases, and they took what they had to the government. </blockquote><br />So to all you physicians out there, this shows that you can succesfully blow the whistle on unethical practices by health care organizations. And you may even make some money doing so. Apparently several of the whistle-blowers in this case will get sizable payments under the US False Claims Act.<br /><br />ADDENDUM (8 September, 2009) - See also comments <a href="http://alison-bass.blogspot.com/2009/09/pfizers-23-billion-fine-is-only-tip-of.html">by Alison Bass </a>on the Alison Bass Blog, and <a href="http://brodyhooked.blogspot.com/2009/09/pfizer-assessed-record-fine-why-we-need.html">by Dr Howard Brody </a>on the Hooked: Medicine, Ethics and Pharma blog.

Pfour Legal Settlements for Pfizer - Why is the Company "Recidivist?"

We recently posted about Pfizer's $2.3 billion dollar settlement with the US government (here), which we first mentioned six months ago (here). It is worth reviewing what we know about this settlement…

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