Capital G Award: Big Pharma, Agents for Fraud

Fraud is one of big-Pharma’s most profitable endeavours. Just consider Pfizer Inc., which is the world’s largest pharmaceutical company with approximately $50 Billion in annual revenue. This past September (2009), BusinessWeek reported that Pfizer, “plead guilty to one felony count to settle federal criminal and civil charges that it illegally promoted its Bextra painkiller and other drugs.” The admission of guilt comes with the largest criminal fine ever imposed in US history; $2.3 Billion. Pfizer will pay a criminal fine of $1.195 Billion, $1 Billion to resolve civil claims, and will enter a corporate integrity agreement with US HHS, which will monitor the company’s future marketing activities.

The same BusinessWeek article summarizes the underlying rational for the 2009 fines:

The settlement stems from a four-year investigation instigated by six whistleblowers, who between them will receive $102 million from the federal fines. The complaint charged that Pfizer sent doctors on all-expense-paid trips to resorts, gave out free massages, and paid kickbacks to doctors, all to get them to prescribe its drugs for off-label uses. Although it is legal for physicians to write such prescriptions, and a common practice, companies are barred from actually promoting their drugs for purposes other than those that have won Food & Drug Administration approval.

Pfizer however, has proven itself to be a recalcitrant corporate criminal, with no less than four additional settlements since 2002 resulting in $513 million in fines.

This past March, Pfizer was found guilty by an eight person jury for “engaged in a racketeering conspiracy over a 10-year period” Evidence provided during the trial found that Pfizer’s own studies showed that the drug in question, Neurontin, was completely ineffective and had no more effect than a placebo; a fact which Pfizer never disclosed to either doctors or patients. The jury described the activities conducted by Pfizer as pure fraud, a violation of RICO statutes, and California’s Unfair Competition Law. Under RICO, the initial damages found by the jury -$47.36 million- were tripled; i.e. $142.1 million in total.

Lawyers for the plaintiff, Kaiser-Permanente of California, described the verdict as a “triumph for evidence-based medicine over marketing-based medicine.”

Pfizer isn’t alone it is morbid fascination with bilking the sick and pushing useless products onto desperate people. Since May 2004, Pfizer, Eli Lilly & Co., Bristol-Myers Squibb Co. and four other drug companies have paid a total of $7 Billion in fines and penalties. Six of the companies admitted in court that they marketed medicines for unapproved uses.

Eli Lilly, an American based pharmaceutical company with annual revenue of $20 Billion was charged and fined by the US government $1.42 Billion, for bribing doctors to prescribe a schizophrenia drug, Zyprexa, to elderly patients suffering from dementia, despite clinical trial data, which indicating a death rate of 31 people out of 1,184 participants (double the placebo rate). Bloomberg News describes that, “Lilly already had a criminal conviction for misbranding a drug when it broke the law again in promoting schizophrenia drug Zyprexa for off-label uses starting in 1999.”

In September 2007, New York-based Bristol-Myers paid $515 million -without admitting or denying wrongdoing- to federal and state governments in a civil lawsuit brought by the Justice Department.

Impact of Fines

The deterrence factor of imposing these fines, even those in the Billon dollar range, is in question. For example, Zyprexa provided Lilly with $36 Billion in revenue from 2000 to 2008. A fine of a Billion dollars does not offset the profits to be made from off-label marketing. Bloomberg further elaborates:

The $2.3 Billion in fines and penalties Pfizer paid for marketing Bextra and three other drugs cited in the Sept. 2 plea agreement for off-label uses amount to just 14 percent of its $16.8 Billion in revenue from selling those medicines from 2001 to 2008.

The total of $2.75 Billion Pfizer has paid in off-label penalties since 2004 is a little more than 1 percent of the company’s revenue of $245 Billion from 2004 to 2008.

Lon Schneider, a professor at the University of Southern California’s Keck School of Medicine, states that Big-Pharma won’t stop pursuing this strategy of fraud and deceit. He argues that, “They’re drivers that knowingly speed. If stopped, they pay the fine, and then they do it again.”