Ralph Nader -- The Whistle Has Been Blown, But Where's the Enforcement? Drug Industry Fraud

Counter-Punch
December 28, 2010
By RALPH NADER

The corporate defrauding of taxpayers (eg. Medicaid and Medicare) and prescription drugs with skyrocketing prices was the subject of a report by Public Citizen's Dr. Sidney Wolfe and his associates (see citizen.org).

Dr. Wolfe's team compiled a total of 165 federal and state settlements since 1991 totaling $19.8 billion in penalties. A key finding is that the drug industry's penalties under the Federal False Claims Act exceed even those assessed against the overcharging defense industry for fraud.

Before we become overly impressed with the cumulative amount of the penalties, specialists in corporate crime law enforcement believe that adding more federal cops on the corporate crime beat, backed by a determined law and order Justice Department with White House backing, would have greatly increased the number of cases and imposition of penalties on these drug industry giants.

Nonetheless, Dr. Wolfe's study shows that the pace of penalties has picked up over the past five years. This is due to "a combination of increased violations by companies and increased law enforcement on the part of federal and state governments," says the report.

Many of these cases were initiated by company whistleblowers, who under the False Claims Act can receive a share of the settlements. Since the corporate bosses of these drug firms are almost never prosecuted, what these executives fear the most are company employees who go public with the evidence of corporate misdeeds.

These violations do more than financial damage to consumers and government health insurance programs. One of the worst violations involves companies promoting unproven, often dangerous uses for their medicines. Last year, Pfizer paid $1.2 billion for illegal off-label promotion -the largest criminal fine in U.S.history. Other major corporate violators were GlaxoSmithKline, Eli Lilly, Schering-Plough, Bristol-Myers Squibb, AstraZeneca, TAP Pharmaceutical, Merck, Serono, Purdue, Allergan, Novartis, Cephalon, Johnson & Johnson, Forest Laboratories, Sanofi-aventis, Bayer, Mylan, Teva and King Pharmaceuticals.

The violations by these and other drug companies point to the wide range of impacts, including taking many lives of patients, which stems from these recurrent activities. These criminal or civil illegalities cover (1) overcharging government health programs, (2) unlawful promotion, (3) monopoly practices, (4) kickbacks, (5) concealing study findings, (6) poor manufacturing practices, (7) environmental violations, (8) financial violations and (9) illegal distribution.

Outside the purview of the Public Citizen study are the ravages of counterfeit drugs and poorly inspected ingredients in drugs, now mostly coming from China and India, due to the outsourcing by U.S. and European drug companies in their thirst for even greater profits.

Drug company sales are huge, growing from $40 billion in 1990 to $234 billion in 2008, and far exceeding inflation with their annual price gouging. To make matters worse, in 2003, the Congressional Republicans, with decisive support from some Democrats, passed the drug benefit bill which explicitly prohibited Uncle Sam, the payer, from bargaining for volume discounts with drug companies.

With over 400 full-time drug company lobbyists putting pressure on Congress, and tens of millions of dollars flowing into the legislators' campaign coffers, budgets for federal investigators, prosecutors and inspectors are kept to a minimum. Unfortunately, crime in the suites pays over and over again, despite occasional penalties.

A bright spot is the increasing enforcement action at the state level.

By last year, 32 states had enacted false claims acts, including fourteen states that qualified as strong laws by federal standards.

Still, the Wolfe report concludes that the "current system of enforcement is not working." He gives the examples of the $7.44 billion in financial penalties assessed over the past twenty years on GlaxoSmithKline and Pfizer, as compared to their combined total of $16.5 billion in global net profits in one year alone.

What would deter these illegal practices and risks to public safety? Dr. Wolfe says "the lack of criminal prosecution that would result in jailing of company executives." is key. Moreover, the report notes that "a felony conviction could result in their companies becoming ineligible for reimbursement from federal and state health programs, a critical source of pharmaceutical company revenues."

A flicker of hope that a little change is on the way came from the Food and Drug Administration's Deputy Chief Counsel for Litigation, Eric Blumberg. He indicated that the government is considering going after drug company executives for violations such as off-label promotions. He stated: ".unless the government shows more resolve to criminally charge individuals-at all levels in the corporate hierarchy--.we can not expect to make progress in deterring off-label promotion."

The problem is that the final operating decision is in the hands of the Justice Department-historically short-staffed and short-willed to entreaties for prosecution by the FDA and other regulatory agencies.

Furthermore, for over 30 years, the Justice Department has stone-walled requests that it start a corporate crime database as it has done with street crimes. Congress likes it this way, as it continues to cash corporate campaign checks.

Just last week, however, outgoing Judiciary Committee Chairman, Democrat John Conyers introduced a bill (H.R. 6545) to create such a corporate crime data base in the Justice Department. Well, as the saying goes, everything starts with a gesture!

Ralph Nader is the author of Only the Super-Rich Can Save Us!, a novel.

Former Glaxo Lawyer Charged With Obstruction of Probe

The Wall Street Journal
November 2010
By THOMAS CATAN And PETER LOFTUS

Federal prosecutors charged a former GlaxoSmithKline PLC attorney with lying to obstruct a U.S. investigation into whether the pharmaceutical company illegally marketed an antidepressant as a weight-loss drug.

The Department of Justice on Tuesday indicted Lauren Stevens, a former vice president at the drug company, with four counts of making false statements to the Food and Drug Administration, as well as obstructing its investigation and withholding documents.

The indictment reflects a new U.S. effort to hold company executives legally accountable for criminal wrongdoing, rather than simply fining the companies for violations.

"This indictment shows that we will investigate those responsible for unlawful acts done on a company's behalf," said Richard DesLauriers, a special agent at the Federal Bureau of Investigation.

Ms. Stevens's lawyer said she did nothing wrong.

"Lauren Stevens is an utterly decent and honorable woman," Brien O'Connor said. "Everything she did in this case was consistent with ethical lawyering and the advice provided her by a nationally prominent law firm retained by her employer."

The indictment didn't identify the company or drug involved, but Glaxo confirmed that Ms Stevens formerly worked in its U.S. legal department and that the investigation involved its antidepressant Wellbutrin SR. It declined to comment further.

In its 2009 annual report, Glaxo disclosed that the government was inquiring about the company's response to an October 2002 letter from the FDA. The letter asked for information on the company's "alleged promotion of Wellbutrin SR for off-label use," meaning a use for which the drug didn't have FDA approval. Antidepressants have at times been associated with weight loss, though also with weight gain.

The U.S. attorney's office in Massachusetts has been leading a long-running investigation into Glaxo's marketing of several products between 1997 and 2004, including Wellbutrin SR, Glaxo has disclosed.

Glaxo first disclosed the existence of the investigation in 2004, and last year said it was taking a $400 million charge in relation to the probe, in a possible sign that it was approaching a settlement.

The Justice Department, acting on behalf of the FDA, has recently reached a slew of recent legal settlements with pharmaceutical companies for various violations, many of them prompted by information from whistleblowers.

Last month, GSK pleaded guilty to charges that it knowingly sold adulterated drugs made at its factory in Puerto Rico, paying $750 million in fines. The previous month, Allergan Inc. pleaded guilty to charges that the company actively promoted its top-selling product, the wrinkle-smoothing drug Botox, for unapproved medical uses such as treating headaches and pain. It paid $600 million to resolved the charges.

No individuals were indicted in those cases. To have an effective deterrent effect, the Justice Department has emphasized that it wishes to prosecute individual executives involved in corporate wrongdoing, so that the fines aren't simply seen as a cost of doing business.

The Wall Street Journal reported in March that the Food and Drug Administration planned to increase prosecutions of industry executives and corporate counsel.

Tuesday's indictment alleged that Ms. Stevens made a series of false statements and deliberately withheld potentially incriminating evidence from investigators. For example, she allegedly decided not to submit presentations made on the company's behalf by doctors who promoted the drug for unapproved purposes, prosecutors said.

A memorandum she requested to help decide whether she should hand over the slide sets warned that such a move would provide "incriminating evidence about potential off-label promotion of [the drug] that may be used against [the company] in this or in a future investigation," the indictment said.

Instead of providing the slides, Ms. Stevens wrote that the company's responses to the FDA's requests were "final" and "complete." The indictment says a company employee reported the alleged off-label promotion of the drug and sent the FDA some of the missing slides.
—Jeanne Whalen and Alicia Mundy contributed to this article.

Write to Thomas Catan at thomas.catan@wsj.com and Peter Loftus at peter.loftus@dowjones.com

Glaxo to Shift Away from Antidepressant Research CEO admits antidepressant research only based on subjective mood surveys

Wall Street Journal
By Jeanne Whalen
February 5, 2010

GlaxoSmithKline PLC said it will stop research into new antidepressants and focus on diseases for which it believes it can develop more valuable drugs, a major shift for a company that developed some of the biggest-selling antidepressants of the past 20 years.

Profits at the U.K. drug giant, which posted a 66% increase in fourth-quarter earnings Thursday, were long fueled by the antidepressants Paxil and Wellbutrin, which at their peak generated billions of dollars a year in sales. Similar medicines, such as Eli Lilly & Co.’s Prozac and Pfizer Inc.’s Zoloft, also generated big sales for those companies.

However, low-cost generic copies have eroded demand for name-brand antidepressants, which accounted for just 2.3% of Glaxo’s total sales last year, down from 14% in 2002. Chief Executive Andrew Witty said Thursday that the company thinks further investment in the market wouldn’t be prudent.

Part of the reason is financial risk. Clinical trials of antidepressants are among the “most expensive and highest-risk” of all drug trials, Mr. Witty said, because companies often don’t know until the end of very large studies whether a drug works. It is also hard to prove that a depression drug is working, he said, because patient improvement is measured by subjective mood surveys, and not by the clear-cut blood tests and biological measures used in other diseases.

That’s a drawback in an era when insurers and other health-care payers want to see clear value for their money, Mr. Witty said.

Payers “want big benefits to make it worth their while to invest their resources,” he said, adding that Glaxo would scrap research into pain drugs for the same reasons, focusing instead on diseases including Alzheimer’s, Parkinson’s, multiple sclerosis and a clutch of rare diseases.

$2.5M verdict over birth defects blamed on Paxil

Associated Press
By MARYCLAIRE DALE (AP)
October 14, 2009

PHILADELPHIA — A jury ordered GlaxoSmithKline to pay $2.5 million to a woman whose son was born with serious heart defects after she took the antidepressant Paxil during her pregnancy.

The closely watched verdict handed down Tuesday in Philadelphia was the first of about 600 similar cases pending across the country that blame Paxil for heart problems and other birth defects.

The jury found GlaxoSmithKline guilty of negligence but not outrageous conduct, and rejected punitive damages. The company vowed to appeal.

"The adverse events started to come in the late 1990s, early 2000. The evidence was overwhelming and alarming," said lawyer Jamie Sheller, who represented plaintiff Michelle David. "They could have known this way, way before they did, way before they changed the label in 2005."

Paxil was classified as a drug with no known link to increased birth defects from its introduction in 1992 through 2005. The Food and Drug Administration began warning in September 2005 that Paxil may be associated with birth defects and strengthened the warning four months later.

David, 28, of Bensalem delivered her full-term son, Lyam Kilker, in October 2005.

He was diagnosed with heart defects two months later and spent five months in a Philadelphia hospital, undergoing surgery to repair two holes in his heart, lawyer Jamie Sheller said Wednesday. He also has a third, separate heart defect and will need at least one more surgery as he grows, she said.

David, a dance teacher and former Philadelphia 76er cheerleader, has no history of heart defects in her family, her lawyer said.

GlaxoSmithKline argues that birth defects occur in 3 to 5 percent of all live births, whether or not the mother took medication during pregnancy.

"The scientific evidence does not establish that exposure to Paxil during pregnancy caused his condition," the drugmaker said in a statement. "Once approved for use, the company acted properly in marketing the medicine, including monitoring its safety, updating pregnancy information in the medicine's labeling as new information became available, and in communicating important safety information to regulatory agencies, the scientific community and the public.

Plaintiffs lawyers will continue to pursue punitive damages in the hundreds of remaining cases, the next of which is set for trial in Philadelphia in November.

"We're starting to chip away at this story, but even as we speak, we're still fighting them, documents are still being produced, depositions are still being taken," Sheller said.

Sales of Paxil totaled $849 million last year.

Paxil has competed fiercely in the marketplace at times with rival antidepressant blockbusters like Eli Lilly's Prozac and Pfizer's Zoloft. The drug no longer has patent protection and now competes against cheaper generic versions.

Copyright © 2009 The Associated Press. All rights reserved.

Pfizer's huge fine: A disturbing trend Do the increasing penalties against drug companies really cure the problem?

Salon.com
By Vincent Rossmeier
Sep. 03, 2009 |

$2.3 billion: That's the price pharmaceutical giant Pfizer agreed to pay in a settlement Wednesday over its misleading marketing for the painkiller Bextra, the antipsychotic Geodon, the antibiotic Zyvox, and another painkiller, Lyrica. It's a record settlement that included the highest fine charged in U.S. history and came as the result of a lengthy Department of Justice investigation into healthcare fraud.

Though Pfizer voluntarily withdrew Bextra from the market in 2005, in the settlement, the company concedes that they had pushed doctors to prescribe unsafe doses of the drug prior to that point. The drug was approved by the FDA in 2001 for the treatment of pain associated with menstrual cramps and arthritis, but Pfizer encouraged its sales representatives to entice doctors to prescribe the drug in doses higher than those approved by the FDA. The escalated doses increased the chances that users of the drug would suffer a heart attack or a stroke. Pfizer also marketed Zyvox as a treatment for specific kinds of bacteria on which the drug had no effect.

A former Pfizer sales representative, John Kopchinski, whose questioning of the company's marketing tactics helped lead to the investigation, will receive over $51 million from the settlement. Kopchinski lost his job as a result of blowing the whistle on Pfizer's illegal schemes. Pfizer will have to pay settlements in 42 states and the District of Columbia.

However, the hefty cost will probably barely affect Pfizer's overall profit margins: The company purchased rival Wyeth in January for $68 billion and had revenues of over $48 billion last year. As the New York Times pointed out, "While the government said the fine was a record sum, the $2.3 billion fine amounts to less than three weeks of Pfizer’s sales." This is the fourth time Pfizer has reached a settlement over fraudulent marketing since 2002.

In the wake of Pfizer's settlement, here's a look at some of the larger Big Pharma settlements in recent history:

* Zyprexa, 2009 -- Eli Lilly was accused of selling its top-selling drug Zyprexa widely -- even to those people without bipolar disorder or schizophrenia for which the drug was supposed to be used. The drug can cause severe weight gain, as well as increasing the risk of a patient developing diabetes. In January, Eli Lilly reached a settlement with the government for $1.4 billion.
* OxyContin, 2007 -- Introduced in 1996 by Purdue Pharma, OxyContin was advertised as a softer, gentler painkiller. However, the drug is actually highly addictive, acting like heroin if taken incorrectly. OxyContin has become a scourge to communities across the U.S. and has also led to numerous overdose deaths. Perhaps the most notorious abuser of OxyContin was conservative radio talk show host Rush Limbaugh. In 2007, Purdue Pharma agreed to cough up $634.5 million in fines for its false claims about the drug.
* Vioxx, 2007 -- When 47,000 people are involved in a lawsuit against you, you know you have a problem. Thus, Merck, the maker of the painkiller Vioxx, reached a $4.85 billion settlement in 2007 to get rid of all the pending cases brought against it due to Vioxx's negative side effects. Vioxx was found to double the risk of heart attacks and strokes and thus Merck pulled the pill from pharmacies in 2004.
* Serostim, 2005 -- Serono, a Swiss technology company, had to pay $700 million in 2005 as a result of its fraudulent marketing for the AIDS drug Serostim. Serono developed a test that inflated the seriousness of the symptoms of a patient afflicted with AIDS and also sponsored junkets for doctors in order to get them to prescribe the drug.
* Neurontin, 2004 -- Pfizer reached a settlement of $430 million to end criminal and civil charges about its practice of paying doctors to prescribe Neurontin, a drug for epilepsy, to patients with bipolar disorder, for which it was not approved.
* Cipro, 2003 -- Bayer reached a $257 million settlement in 2003, the largest Medicaid fraud settlement at that time, after being charged by federal investigators with overcharging for the antibiotic Cipro. Bayer, however, didn't act alone: It received advice on how to go about the scheme from healthcare giant Kaiser Permanente.
* Paxil and Flonase, 2003 -- GlaxoSmithKline allegedly didn't want to miss out on all the fun and profits Bayer was having in overcharging for Cipro. It was accused of running a scheme with Kaiser Permanente to bilk Medicaid for the antidepressant Paxil and the allergy spray medication Flonase. GlaxoSmithKline paid $87.6 million in 2003 to settle the case.
* Lupron, 2001 -- TAP Pharmaceuticals Inc. came up with a clever way to get doctors to use its prostate cancer drug, Lupron, instead of those of rival drug companies: namely, pay them. TAP offered one doctor $25,000 to go back to prescribing Lupron after he'd switched to a competitor's drug. But the doctor alerted authorities, who conducted a massive sting resulting in TAP dishing out a $875 million settlement in 2001.
* Fen-Phen, 1999 -- Billed as a miracle diet drug by the drug company American Home Products Corp. (AHP), Fen-Phen was just as good at promoting heart valve disease as it was at helping people shed excess pounds. AHP removed Fen-Phen in 1997 after a damaging report showed that those who took the drug for more than two years increased their risk of developing heart valve disease by 17 percent. Though AHP agreed to pay $3.75 billion to the users of the drug, it did not have to admit to any wrongful actions in its marketing of Fen-Phen.

Glaxo used ghostwriting program to promote Paxil

Associated Press
August 19, 2009

By MATTHEW PERRONE (AP)

WASHINGTON — Drugmaker GlaxoSmithKline used a sophisticated ghostwriting program to promote its antidepressant Paxil, allowing doctors to take credit for medical journal articles mainly written by company consultants, according to court documents obtained by The Associated Press.

An internal company memo instructs salespeople to approach physicians and offer to help them write and publish articles about their positive experiences prescribing the drug.

Known as the CASPPER program, the paper explains how the company can help physicians with everything from "developing a topic," to "submitting the manuscript for publication."

The document was uncovered by the Baum Hedlund PC law firm of Los Angeles, which is representing hundreds of former Paxil users in personal injury and wrongful death suits against GlaxoSmithKline. The firm alleges the company downplayed several risks connected with its drug, including increased suicidal behavior and birth defects.

A spokeswoman for London-based Glaxo said the published articles noted any assistance to the main authors.

"The program was not heavily used and was discontinued a number of years ago," said Mary Anne Rhyne.

According to the memo, which dates from April 2000, the CASPPER program was designed to "strengthen the product positioning and overcome competitive issues."

At the time, Paxil was competing with rival antidepressant blockbusters like Eli Lilly's Prozac and Pfizer's Zoloft. Paxil has since lost its patent protection and competes against cheaper generic versions. Sales of Paxil last year totaled $849 million.

Drug companies frequently hire outside firms to draft a manuscript touting a company's drug, retain a physician to sign off as the author and then find a publisher to unwittingly publish the work.

But the use of ghostwriting by drug companies has come under increased scrutiny by members of Congress, including Sen. Charles Grassley, R-Iowa, a longtime critic of the industry's influence over physicians. Grassley and Sen. Herb Kohl, D-Wis., are pushing a bill that would require companies to disclose all payments to physicians over $100.

According to ghostwriting expert Dr. Leemon McHenry, Glaxo's program was unusually intertwined with its internal sales and marketing department.

"We know that GSK has engaged in ghostwriting for many years," said McHenry, who works as a research consultant for Baum Hedlund. "But to create an internal ghostwriting program and have the gall to name it after a cartoon ghost demonstrates their juvenile attitude and careless disregard for patients."

McHenry acknowledged that ghostwriting is legal in principal, but said it could contribute to illegal activity if the information is misleading and causes harm.

"If these ghostwritten publications are contributing to the harm of patients because they're making false claims, then that's illegal," McHenry said.

Articles from the company's program appeared in five journals between 2000 and 2002, including the American Journal of Psychiatry and the Journal of the American Academy of Child and Adolescent Psychiatry.

Drug company salespeople often present medical journal articles to physicians as independent proof that their drugs are safe and effective.

Publication in a medical journal also is a point of prestige for physicians, a fact Glaxo's memo seems to acknowledge: "Physicians will be eager to participate in CASPPER regardless of their professional stature," the brief notes.

(This version CORRECTS spelling of 'Baum' in graf 4.)

Copyright © 2009 The Associated Press. All rights reserved.