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Pharmaceutical Companies Behaving Badly

In the public health arena, when new cases of a particular disease during a given period substantially exceed what might be expected based on past experience, we call it an “epidemic.”  So what, then, are we to make of several stories from last month about pharmaceutical companies admittedly or allegedly breaking the law?

These stories involve illegal bribes and kickbacks to encourage the use of particular drugs, marketing of unapproved drugs, marketing drugs for off-label doses and uses, false advertising, and improper stifling of generic competition.  The allegations include that the pharmaceutical companies, in their quest for additional profits, were willing to engage in improper and illegal practices that drove up the costs for payors and potentially jeopardized patient health.

While some of these cases relate to the past, others reflect more recent behavior.  What are we to make of so many stories in just one month?  Does the large number simply reflect a desire to resolve open cases before the end of the year?  Or is this one-month snapshot just the tip of the iceberg, suggesting widespread misbehavior by drug companies?

Insurance companies, PBMs, and other payors will want to take note of not just the individual cases, but the possible trend of pharmaceutical company misbehavior.  Fraud prevention measures already in place will need to be reviewed to see if they are geared to picking up the types of misconduct alleged in these cases.

Let’s look at some of December stories:

  • On December 6, 2012, the U.S. Department of Justice announced that Healthpoint Ltd. and DFB Pharmaceuticals had agreed to pay up to $48 million to settle allegations that Healthpoint caused false claims to be submitted  to Medicare and Medicaid for an unapproved drug, Xenaderm, which was ineligible for reimbursement by those programs.  According to allegations in the case, Healthpoint launched Xenaderm, a prescription skin ointment for the treatment of nursing home patients’ bed sores, without any FDA approval and without necessary pre-introduction clinical studies to establish safety and effectiveness.  The Justice Department’s Stuart Delery said, “Today’s settlement once again demonstrates our commitment to making sure that taxpayer dollars are not spent on unapproved or less-than-effective drugs.”
  • On December 12, the Justice Department announced that Pfizer Inc. had agreed to pay $55 million plus interest to resolve allegations that Wyeth LLC illegally promoted Protonix, a “proton pump inhibitor” or “PPI,” for off-label use during 2000 and 2001.  According to the government’s allegations, “Wyeth’s illegal promotional campaign for Protonix was multifaceted.”  Despite warnings from the FDA that its proposed promotional materials were misleading, the government alleges that Wyeth trained its sales force to promote Protonix for all forms of gastro-esophageal reflux disease (sometimes called “acid reflux”) beyond its limited approval for treatment of erosive esophagitis.  Wyeth allegedly promoted Protonix as the “’best PPI for nighttime heartburn,’ even though there was never any clinical evidence that Protonix was more effective than any other PPI for nighttime heartburn.”  And, the government alleged that Wyeth used continuing medical education programs to promote Protonix for unapproved uses.  The Justice Department stated that “Wyeth tried to cheat the system by obtaining a limited FDA approval for Protonix, fully intending to promote this drug for additional unapproved use.”  The Justice Department press releases makes it clear that the settlement involves only allegations, and that Pfizer denies those allegations.  Since August 2009, Pfizer (which acquired Wyeth in October 2009) has been under a Corporate Integrity Agreement with the Department of Health and Human Services.”
  • On December 19, Amgen Inc. entered a guilty plea to charges of illegally introducing a misbranded drug, Aranesp, into interstate commerce.  The guilty plea was part of a global settlement with the United States in which Amgen agreed to pay $762 million to resolve criminal and civil liability arising from its sale and promotion of certain drugs.  According to the Justice Department press release, “In order to increase sales of Aranesp and reap the resulting profits, Amgen illegally sold the drug with the intention that it be used at off-label doses that the FDA had specifically considered and rejected, and for an off-label treatment that the FDA had never approved.”  The civil settlement resolved claims that Amgen had caused false claims to be submitted to Medicare, Medicaid, and other governmental insurance programs.  The civil allegations were that Amgen (1) promoted Aranesp and two other drugs, Enbrel and Neulast, for off-label uses and doses not approved by the FDA and not properly reimbursable by federal insurance programs, (2) offered illegal kickbacks to a wide range of entities in an effort to influence health care providers to select its products for use, regardless of whether they were reimbursable by federal health care programs or were medically necessary, and (3) engaged in false price reporting practices involving several of its drugs.
  • Also on December 19, the Justice Department announced that Sanofi’s U.S. subsidiaries, Sanofi-Aventis U.S. Inc. and Sanofi-Aventis U.S. LLC, agreed to pay $109 million to resolve allegations that the U.S. entities violated the False Claims Act by giving physicians free units of Hyalgan, a knee injection, in violation of the Anti-Kickback Statute, to induce them to purchase and prescribe the product.  The settlement also resolved allegations that the U.S. entities submitted false average sales price (ASP) reports for Hyalgan that failed to account for the free units distributed contingent on purchases, and that the false ASP reports, used to set reimbursement rates, caused government programs to pay inflated amounts for Hyalgan and a competing product.
  • A news story from December 19, 2012, revealed that drug maker GlaxoSmithKline (GSK) had agreed to settle with plaintiffs for a total of $195 million over allegations that the company monopolized the market for its nasal spray Flonase.  The plaintiffs, including direct purchasers, indirect purchasers, and 30 large commercial insurers, alleged that GSK caused the caused the class to pay more for branded and generic Flonase by unlawfully delaying the sale of generic fluticasone propionate after the exclusivity period expired in 2004.  GSK is alleged to have filed successive citizen petitions with the FDA to exclude generic competition and extend its Flonase monopoly.  And, GSK allegedly impeded generic market entry by “strategically drafting and causing a monograph for fluticasone propionate to be submitted … knowing that the FDA would require any generic to meet those specifications.”  GSK denied the allegations.
  • On December 20, the Securities and Exchange Commission announced that Eli Lilly and Company had been charged with violations of the Foreign Corrupt Practices Act (FCPA) for improper payments its subsidiaries made to foreign government officials to win millions of dollars of business in Russia, Brazil, China, and Poland.  The company agreed to pay $29.4 million to settle the charges and, without admitting or denying the allegations, consented to a judgment permanently enjoining the company from violating various provisions of the FCPA.
  • And, finally, on December 27, the Justice Department announced that Victory Pharma Inc., a San Diego, CA specialty pharmaceutical company, had agreed to pay $11.4 million to settle federal civil and criminal liability arising from its marketing of the pharmaceutical products Naprelan, Xodol, Fexmid, and Dolgic.  The settlement resolved allegations that Victory engaged in a scheme to promote its drugs by paying kickbacks to doctors to induce them to write prescriptions for patients covered by Medicare and other federal health insurance programs.  The kickbacks included tickets to sporting events, concerts, and plays, spa outings, golf and ski outings, and dinners at expensive restaurants.  The Justice Department’s Stuart Delery said, “Kickback schemes undermine the integrity of medical decisions, subvert the health marketplace, and waste taxpayer dollars.”