Do government fraud settlements deter illegal pharma behavior?
Two new stories that came out today call the question of what effect US Attorney settlements have on illegal promotional activities by pharmaceutical companies. The first story, from AP, “Drug Firms Flout FDA,” suggested that
“Even when drug makers are forced to pay huge fines, the amounts are small, compared with the money that can be made by promoting drugs for off-label uses.”
A guilty plea and $635 million settlement concerning Oxycontin marketing was widely reported today. (See, e.g. the New York Times: “In Guilty Plea, OxyContin Maker to Pay $600 Million”) The Times reported that Purdue’s sales from 1995 to 2001 were $2.8 Billion. The drug continued to be a $1 billion+ per year blockbuster for at least three years after that. So what then is the deterrent effect of a $635 million settlement? At best, it represents a small fraction of Oxycontin sales that were procured through the illegal and deceptive practices alleged in the case. And it’s just under 23% of Purdue’s $2.8B in sales for 1995-2001. Thus, this settlement notwithstanding, Oxycontin was — and remains — a very profitable drug.
In addition, despite the fact that today’s settlement covers only up to 2001, the marketing has a continued and lingering effect to the present day. The tactics alleged helped create the market for Oxycontin, both licit and illicit, and thus the barn door is closing long after the horse has gone.
A unique feature of today’s settlement was the inclusion of restitution for some unspecified group of individual consumers. Details of the settlement at this point are scant, so it’s unclear who they are, what their claims were, and how (and how much) they’ll be compensated. Hopefully more will be forthcoming soon.
Obviously, government prosecutions and settlements are and will continue to be important to punish, expose and hopefully deter illegal marketing tactics by the industry. But unless and until the sums really begin to hurt, these settlements run the risk of being chalked us as merely a cost of doing business and not a deterrent. David Franklin, the whistleblower in the Neurontin case, said in the AP story, “The $430 million penalty [in the Neurontin case] was widely referred to as a slap on the wrist.”
US Attorneys and state Attorneys General need to push for broad-reaching injunctive relief that truly prevents future misconduct. And perhaps they need other tools at their disposal. Right now, the biggest tool in their toolbox is to bar a company from participation in Medicare and Medicaid. But the ones most harmed by such a step in most cases would be patients, who are deprived of the company’s other medications. For this reason, this tool is rarely used, or, as in the case of last year’s $704 million settlement with Serono, a subsidiary that really doesn’t sell drugs to Medicare or Medicaid is barred. Other tools are needed, that can thoroughly punish the wrongdoing without hurting patients on Medicare and Medicaid.