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When drug makers' profits outweigh penalties http://www.washingtonpost.com/wp-dyn/content/article/2010/03/19/AR.
When drug makers' profits outweigh penalties
By David EvansBloomberg NewsSunday, March 21, 2010; G01 Prosecutor Michael Loucks remembers clearly when attorneys for Pfizer, the world's largest drug company,looked across the table and promised it wouldn't break the law again. ¶ It was January 2004, and thelawyers were negotiating in a conference room on the ninth floor of the federal courthouse in Boston, whereLoucks was head of the health-care fraud unit of the U.S. Attorney's Office. One of Pfizer's units had beenpushing doctors to prescribe an epilepsy drug called Neurontin for uses the Food and Drug Administrationhad never approved. ¶ In the agreement the lawyers eventually hammered out, the Pfizer unit, Warner-Lambert, pleaded guilty to two felony counts of marketing a drug for unapproved uses. New York-basedPfizer agreed to pay $430 million in criminal fines and civil penalties, and the company's lawyers assuredLoucks and three other prosecutors that Pfizer and its units would stop promoting drugs for unauthorizedpurposes. ¶ What Loucks, who was acting U.S. attorney in Boston until November, didn't know until yearslater was that Pfizer managers were breaking that pledge not to practice off-label marketing even beforethe ink was dry on their plea. On the morning of Sept. 2, 2009, another Pfizer unit, Pharmacia & Upjohn, agreed to plead guilty to the samecrime. This time, Pfizer executives had been instructing more than 100 salespeople to promote Bextra -- adrug approved only for the relief of arthritis and menstrual discomfort -- for treatment of acute pain of allkinds.
For this new felony, Pfizer paid the largest criminal fine in U.S. history: $1.19 billion. On the same day, it paid$1 billion to settle civil cases involving the off-label promotion of Bextra and three other drugs with theUnited States and 49 states.
"At the very same time Pfizer was in our office negotiating and resolving the allegations of criminal conductin 2004, Pfizer was itself in its other operations violating those very same laws," Loucks, 54, says. "They'verepeatedly marketed drugs for things they knew they couldn't demonstrate efficacy for. That's clearlycriminal." The penalties Pfizer paid for promoting Bextra off-label were the latest chapter in the drug's benightedhistory. The FDA found Bextra to be so dangerous that Pfizer took it off the market for all uses in 2005.
Across the United States, pharmaceutical companies have pleaded guilty to criminal charges or paid penaltiesin civil cases when the Justice Department finds that they deceptively marketed drugs for unapproved uses,putting millions of people at risk of chest infections, heart attacks, suicidal impulses or death.
It used to be legal for companies to promote drugs in the United States for any use. Congress banned thepractice in 1962, requiring pharmaceutical companies to first prove their drugs were safe and effective forspecific uses.
If the law is clear, why do drug companies keep breaking it? The answer lies in economics. Pharmaceuticalcompanies spend about $1 billion to develop and test a new drug. To recoup their investment, the companieswant doctors to prescribe their drugs as widely as possible.
Since May 2004, Pfizer, Eli Lilly, Bristol-Myers Squibb and four other drug companies have paid a total of $7 When drug makers' profits outweigh penalties http://www.washingtonpost.com/wp-dyn/content/article/2010/03/19/AR.
billion in fines and penalties. Six of the companies admitted in court that they marketed medicines forunapproved uses. In September 2007, New York-based Bristol-Myers paid $515 million -- without admittingor denying wrongdoing -- to federal and state governments in a civil lawsuit brought by the JusticeDepartment. The six other companies pleaded guilty in criminal cases.
In January 2009, Indianapolis-based Lilly, the largest U.S. psychiatric drugmaker, pleaded guilty and paid$1.42 billion in fines and penalties to settle charges that it had for at least four years illegally marketedZyprexa, a drug approved for the treatment of schizophrenia, as a remedy for dementia in elderly patients.
In five company-sponsored clinical trials, 31 people out of 1,184 participants died after taking the drug fordementia -- twice the death rate for those taking a placebo, according to an article in the Journal of theAmerican Medical Association.
"Marketing departments of many drug companies don't respect any boundaries of professionalism or the law,"says Jerry Avorn, a professor at Harvard Medical School. "The Pfizer and Lilly cases involved the illegalpromotion of drugs that have been shown to cause substantial harm and death to patients." The widespread off-label promotion of drugs is yet another manifestation of a health-care system that hasbecome dysfunctional.
"It's an unbearable cost to a system that's going broke," Avorn says. "We can't even afford to pay foreffective, safe therapies." About 15 percent of all U.S. drug sales are for unapproved uses without adequate evidence the medicineswork, according to a study by Randall Stafford, a medical professor at Stanford University.
As large as the penalties are for drug companies caught breaking the off-label law, the fines are tiny comparedwith the firms' annual revenue.
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 thosemedicines 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 thecompany's revenue of $245 billion from 2004 to 2008.
Lilly already had a criminal conviction for misbranding a drug when it broke the law again in promotingschizophrenia drug Zyprexa for off-label uses beginning in 1999. The medication provided Lilly with $36billion in revenue from 2000 to 2008. That's more than 25 times as much as the total penalties Lilly paid inJanuary.
Companies regard the risk of multimillion-dollar penalties as just another cost of doing business, says LonSchneider, a professor at the University of Southern California's Keck School of Medicine in Los Angeles. In2006, he led a study for the National Institute of Mental Health of off-label use of drugs, including Zyprexa.
"There's an unwritten business plan," he says. "They're drivers that knowingly speed. If stopped, they pay thefine, and then they do it again." Paying the doctors
In pushing off-label use of drugs, companies find ready and willing partners in physicians. Under thefragmented system of U.S. medical regulation, it's legal for doctors to prescribe FDA-approved drugs for anyuse. The FDA has no authority over doctors, only over drug companies, regarding off-label practices. It's up When drug makers' profits outweigh penalties http://www.washingtonpost.com/wp-dyn/content/article/2010/03/19/AR.
to the states to oversee physicians.
"I think the physician community has to take some ownership responsibility and do their own due diligencebeyond the sales and marketing person," says Boston's former U.S. Attorney Michael Sullivan.
Doctors generally don't tell people they're prescribing drugs pitched to them by pharmaceutical salespeoplefor unapproved treatments, says Peter Lurie, former deputy medical director of Public Citizen, aWashington-based public interest group. Most doctors don't keep track of FDA-approved uses of drugs, hesays.
"The great majority of doctors have no idea; they don't even understand the distinction between on- andoff-labeling," he says.
Pfizer's marketing program offered doctors up to $1,000 a day to allow a Pfizer salesperson to spend timewith the physician and his patients, according to a whistle-blower lawsuit filed by John Kopchinski, whoworked as a salesman at Pfizer from 1992 to 2003.
"By 'pairing up' with a physician, the sales representative was able to promote over a period of many hours,without the usual problems of gaining access to prescribing physicians," Kopchinski says. "In essence, thisamounted to Pfizer buying access to physicians." Pfizer spokesman Chris Loder says the company stopped what it calls "mentorships" in 2005. He says Pfizerpaid doctors $250 a visit. The goal was clear: Get doctors to prescribe a new drug as widely as possible.
Pfizer's Neurontin is a case in point. The FDA approved the drug as a supplemental medication to treatepilepsy in 1993. Pfizer took in $2.27 billion from sales of Neurontin in 2002. A full 94 percent -- $2.12billion -- of that revenue came from off-label use, according to the prosecutors' 2004 Pfizer sentencing memo.
Since 2004, companies that are now Pfizer divisions have pleaded guilty to off-label marketing of two drugs.
Pfizer continued off-label promotions for these medications after buying the firms, according to documents.
Pfizer first stepped into an off-label scheme in 1999, when it offered to buy Warner-Lambert, based in NewJersey. Prosecutors charged that Warner-Lambert marketed Neurontin off-label between 1995 and 1999.
Warner-Lambert admitted doing so for one year in a May 2004 guilty plea for which Pfizer paid $430 millionin fines and penalties.
When the FDA approved Neurontin in 1993 to be used only along with other epilepsy drugs, the agencywrote that as a side effect, the drug can induce depression and suicidal thoughts in patients.
The whistle-blower
Much of what prosecutors learned about Warner-Lambert's marketing of Neurontin comes from a formeremployee, David Franklin, who holds a Ph.D. in microbiology.
Franklin, 48, whose title at Warner-Lambert was medical liaison, says his job involved more salesmanshipthan science. He told doctors that Neurontin was the best drug for a dozen off-label uses, including pain relief,bipolar disease and depression.
"Technically, I had responsibility for answering physician questions about all of Parke-Davis's drugs,"Franklin says. "In practice, my real job was to promote Neurontin for off-label indications heavily -- to theexclusion of just about everything else." When drug makers' profits outweigh penalties http://www.washingtonpost.com/wp-dyn/content/article/2010/03/19/AR.
Franklin says he knew such uses of the drug had no scientific support for effectiveness and safety.
"I was actually undermining their ability to fulfill the Hippocratic oath," Franklin says, referring to aphysician's pledge to "First, do no harm." After working for Warner-Lambert for three months, Franklin quit and filed a whistle-blower lawsuit onbehalf of taxpayers to recover money the government paid for illegally promoted drugs. He stood to collect asmuch as 30 percent of any settlement the company made with the government.
Franklin had to wait four years -- until 2000 -- before the Justice Department began a criminal investigation.
In November 1999, Pfizer made its public offer to buy Warner-Lambert. In January 2000, a federal grand juryin Boston issued subpoenas to Warner-Lambert employees to testify about the marketing of Neurontin.
That March, Warner-Lambert's annual report disclosed that prosecutors were building a criminal case.
Undeterred, Pfizer bought Warner-Lambert in June for $87 billion -- the third-largest merger in U.S. history.
More sales than Viagra
A year after the acquisition, the FDA discovered that Neurontin was still being marketed off-label. In a June,2001 letter to the company, the agency wrote that Pfizer's promotion of the drug "is misleading and inviolation of the Federal Food, Drug and Cosmetics Act." Pfizer marketed Neurontin off-label after receiving that letter, agency records show. For 2001, Pfizer reportedrevenue of $1.75 billion from Neurontin sales, making it the company's fourth-largest-selling drug that year,ahead of impotence pill Viagra, which Neurontin topped for four years.
As Neurontin sales soared to $2.27 billion in 2002, the FDA found that Pfizer was improperly claiming thatthe drug was useful for a broader range of brain disorders than scientific evidence had established.
The agency sent a letter dated July 1, 2002, that said the company's marketing practices were in violation ofFDA rules. It asked Pfizer to stop using misleading promotions. Pfizer reported $2.7 billion in revenue fromNeurontin in 2003. Overall, the drug has provided Pfizer with $12 billion in revenue.
Pfizer spokesman Chris Loder says, "Regarding the 2001 and 2002 FDA letters, we do not believe that theywere suggestive of any continuing off-label promotion." For blowing the whistle on his employer, Franklin collected $24.6 million under the False Claims Act.
Prosecutors Loucks and Sullivan got involved in the case after Franklin filed his suit, relying on informationfrom Franklin and their own investigation. Before 2004, prosecutions for off-label marketing were rare.
"Until a couple of these cases became public, companies were probably saying, 'Everybody does it this way,' "Sullivan says.
Loucks had a track record in off-label prosecutions. In 1994, he negotiated a $61 million settlement with C.R.
Bard of New Jersey, which pleaded guilty to promoting off-label use of a heart catheter that led to patientdeaths.
The off-label campaign
In the January 2004 settlement negotiations with Loucks, Sullivan and two other prosecutors, Pfizer's lawyersassured the U.S. Attorney's Office that the company wouldn't market drugs off-label.
When drug makers' profits outweigh penalties http://www.washingtonpost.com/wp-dyn/content/article/2010/03/19/AR.
"They asserted that the company understood the rules and had taken steps to assure corporate compliancewith the law," Loucks says. "We remember those promises." What Pfizer's lawyers didn't tell the prosecutors was that Pfizer was at that moment running an off-labelmarketing promotion using more than 100 salespeople who were pitching Bextra, according to a Pfizer salesmanager who pleaded guilty to misbranding a drug in March 2009.
Pharmacia & Upjohn developed Bextra, which was approved by the FDA in 2001 for only the treatment ofarthritis and menstrual discomfort.
P&U and Pfizer had by then crafted a joint marketing agreement to sell the drug. In November 2001, MaryHolloway, a Pfizer Northeast regional manager, began illegally training and directing her sales team to marketBextra for the relief of acute pain, Holloway admitted in the plea.
On Dec. 4, 2001, Pfizer executives sent Holloway a copy of a nonpublic FDA letter to the company. Theagency had denied Pfizer's application to market Bextra for acute pain. Clinical trials had shown Bextra couldcause heart damage and death.
Pfizer bought Pharmacia & Upjohn in April 2003. From 2001 through 2003, P&U, first as an independentcompany and then as a unit of Pfizer, paid doctors more than $5 million in cash to lure them to resorts, wheresalespeople illegally pitched off-label uses for Bextra, P&U admitted.
In her guilty plea, Holloway said her team had solicited hospitals to create protocols to buy Bextra for theunapproved purpose of acute pain relief. Her representatives didn't mention the increased risk of heart attacksin their marketing.
They told doctors that side effects were no worse than those of a sugar pill, Holloway said.
In 2003, Holloway reported her unit's off-label promotions of Bextra up the corporate ladder at Pfizer,according to a presentencing memo to the judge written by Robert Ullmann, Holloway's attorney. Topmanagers didn't attempt to halt the illegal conduct, the memo said.
By late 2004, Bextra reached blockbuster status, with annual sales of $1.29 billion. Holloway promotedBextra until the FDA asked Pfizer in April 2005 to pull it from the market for all uses.
The agency concluded that the drug increased the risk of heart attacks, chest infections and strokes in cardiacsurgery patients. In June 2009, Holloway, 47, was sentenced to two years on probation and fined $75,000.
She didn't return phone calls seeking comment.
'We regret . . . '
By 2007, the criminal and civil cases against Pfizer, its employees and its subsidiaries had begun to mount.
The tally of drugs cited by federal prosecutors for off-label promotion reached six by 2009. In April 2007,P&U pleaded guilty to a felony charge of offering a $12 million kickback to a pharmacy benefit manager.
Pfizer paid a criminal fine of $19.7 million. In September 2009, Pfizer agreed to pay $2.2 billion in fines andpenalties. P&U pleaded guilty to a felony charge of misbranding Bextra with the intent to defraud. After thesettlement, Pfizer general counsel Amy Schulman said the company had learned its lesson.
"We regret certain actions we've taken in the past," she said. "Corporate integrity is an absolute priority forPfizer." One reason drug companies keep breaking the law may be because prosecutors and judges have beenunwilling to use the ultimate sanction -- a felony conviction that would exclude a company from selling its When drug makers' profits outweigh penalties http://www.washingtonpost.com/wp-dyn/content/article/2010/03/19/AR.
drugs for reimbursement by state health programs and federal Medicare.
At Pfizer's Pharmacia sentencing in October, U.S. District Court Judge Douglas Woodlock said companiesdon't appear to take the law seriously. "It has become something of a cost of doing business for some of thesecorporations, to shed their skin like certain animals and leave the skin and move on," he said.
As prosecutors continue to uncover patterns of deceit in off-label marketing, millions of patients across thenation remain in the dark. Doctors often choose the medications based on dishonest marketing by drugcompany salesmen.
Loucks says that putting an end to the criminal off-label schemes will be difficult. As drugmakers repeatedlyplead guilty, they've shown they're willing to pay hundreds of millions of dollars in fines as a cost ofgenerating billions in revenue.
The best hope, Loucks says, is that drug companies actually honor the promises they keep making -- and keepbreaking -- to obey the law of the land.
As much as $100 million for health-care fraud enforcement is tied up in the stalled reform legislation,according to Loucks.
"It will be increasingly hard for the threat of exclusion to seem credible and thus serve as a deterrent to badcorporate behavior," he says, "unless Congress supports health-care fraud prosecutions with more money." A version of this story originally appeared in Bloomberg Markets Magazine. It was awarded a 2010 Societyof American Business Editors and Writers award for enterprise reporting and general excellence. Post a Comment
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