Fines for Drug Companies Ineffective?

Marcia Frellick

December 20, 2013

A study of a recent escalation of fines paid by multinational drug companies to US federal and state governments shows that neither the amount of the penalties nor the measures to stop illegal practices are working, according to a report published online December 18 in BMJ. However, some experts think the problem lies, in part, with a complicated legal environment.

In the current study, Sidney Wolfe, MD, founder and senior adviser to the Health Research Group at Public Citizen in Washington, DC, reviewed all civil and criminal penalties paid to the US federal and state governments by pharmaceutical companies from January 1991 to July 2012 and found that they totaled $30.2 billion. Amid that total, the analysis shows:

  • More than half of the penalties were for illegal promotion or for illegally overcharging government programs, such as Medicaid, for drugs.

  • GlaxoSmithKline (GSK) was the most egregious repeat offender, with total criminal and civil penalties of $7.56 billion since 1991. Pfizer was next, with $2.96 billion in penalties. Since 1991, 11 other pharmaceutical companies also had criminal or civil settlements (or both) of more than $50 million at least twice.

  • Criminal fines grew more than 5-fold, going from $920 million in 2005-2008 to $5.1 billion from 2009 to mid-2012.

  • In 2012, profits for GSK were $7.7 billion and profits were $10 billion for Pfizer. Both amounts are greater than the total sum the companies paid the government from January 1991 to mid-2012.

Dr. Wolfe's analysis shows that from 2002, GSK and Pfizer were repeatedly fined, with penalties in the billions, for practices including fraudulent drug pricing, illegal off-label marketing of drugs, and paying kickbacks to healthcare professionals to encourage them to promote and prescribe drugs.

During this time, Dr. Wolfe notes, both companies signed several corporate integrity agreements, which are designed to prevent these offenses. The Office of the Inspector General negotiates such agreements with companies as part of the settlement of federal investigations. The terms include requiring companies to hire compliance officers or committees, develop written policies, and establish employee training programs.

On the basis of an analysis of the fines, Dr. Wolfe concludes, "There is a pathological lack of corporate integrity in many drug companies."

Healthcare Policy Expert Blames Confusing Laws

Uwe Reinhardt, PhD, professor at the Woodrow Wilson School of Public and International Affairs, Princeton University, New Jersey, and a national health policy expert, says that assessment is "a pretty harsh indictment." He said the fault may lie more with the complicated laws governing these drug-selling practices and lobbyists' successful efforts to get exceptions included in laws passed in Congress.

Dr. Reinhardt said that although he does not know whether murky rules were at the root of the particular violations Dr. Wolfe describes, he is seeing "a penchant of criminalizing corporate activity by having these arcane rules that sooner or later these corporations will run afoul of."

Pfizer and GSK also took issue with the report.

In an email to Medscape Medical News, Pfizer spokesman Christopher Loder said, "The Public Citizen report looks backwards and unfairly holds Pfizer responsible for some conduct that occurred in other companies prior to Pfizer's acquisition of them. More importantly, the report ignores the significant steps Pfizer has taken not only to comply with state and federal laws but also to meet the high standards that patients, physicians, and the public expect."

He continued, "For example, Pfizer's compliance program has long included mandatory training for every one of our employees, proactive monitoring and surveillance, and strict enforcement of all federal and state healthcare laws. In addition, Pfizer has a dedicated chief compliance officer reporting directly to the chief executive officer, a corporate compliance committee, a code of conduct, a compliance hotline, and extensive procedures to investigate and remediate potential issues of noncompliance."

A GSK spokesperson said in response to the report: "We have a clear priority to ingrain a culture of putting patients first, acting transparently, respecting people inside and outside the organization, and displaying integrity in everything we do.

"Just this week, we announced further changes to the ways in which our medicines will be sold and marketed to ensure the interests of patients come first. We will roll out a new sales force compensation program which removes individual sales targets. We will also begin a process to end direct payments to doctors for speaking [at] programs or attendance at medical conferences."

Dr. Wolfe has disclosed no relevant financial relationships.

BMJ. Published online December 18, 2013. Full text


Comments on Medscape are moderated and should be professional in tone and on topic. You must declare any conflicts of interest related to your comments and responses. Please see our Commenting Guide for further information. We reserve the right to remove posts at our sole discretion.