A Fine Mess

Two years ago, a Pfizer public relations executive was giving a speech before a business group about communications outreach, and he confessed to having a certain amount of confusion over the bad image that has plagued the pharmaceutical industry.

“We develop life-saving medicines that you take, that will prolong your life, that will cure certain diseases,” said Ray Kerins, an aggressive, but affable public relations veteran, who candidly attributed some of the problem to the industry’s unwillingness to engage the media. “How in the hell do we have such a bad reputation? It makes no sense.”

Unfortunately for the pharmaceutical companies, it does make a certain amount of sense, at least if one has read any of the recent stories about the behavior of some drugmakers. One company after another has been fined and berated by the federal government for engaging in marketing practices that have raised questions about the extent to which such violations are now considered by the industry to be a cost of doing business.

Take Pfizer. The world’s biggest drug maker just a few weeks ago agreed to pay a record-breaking $2.3 billion fine to settle civil and criminal charges brought by prosecutors over fraudulent promotional activities concerning more than a dozen prescription medicines, most notably Bextra (painkiller), but also Geodon (antipsychotic), Zyvox (antibiotic) and Lyrica (epilepsy).

The deal was the culmination of a long-running and sweeping investigation by dozens of federal and state agencies that found the drugmaker engaged in a variety of illegal tactics to boost prescriptions. In particular, Pfizer sales reps were told to inform doctors of drugs that could be prescribed for uses that were not approved by the FDA.

Even worse, many Pfizer activities occurred after the drug maker had already paid a $430 million fine five years earlier and signed a corporate integrity agreement for illegally marketing Neurontin, another epilepsy treatment. In fact, the latest agreement marks the fourth time since 2002 that Pfizer has reached a settlement over its egregious marketing practices. In effect, the drug maker has been an incurable recidivist.

But when it comes to violations, Pfizer is not alone. The list is long. Earlier this year, Eli Lilly paid $1.4 billion to settle civil and criminal charges of illegally marketing Zyprexa (antipsychotic), which was the previous record-setting agreement. Also in 2009, federal prosecutors announced a civil lawsuit against Forest Laboratories for alleged off-label promotion of its Lexapro and Celexa antidepressants, a scheme that the government claims involved paying kickbacks to doctors to encourage prescriptions for children.

Who else has been tagged with corporate integrity agreements for bad behavior? Merck entered into one last year for failing to offer Medicare the same discounts given hospitals and for offering kickbacks to doctors to boost prescriptions of some drugs. The civil charges cost the drug maker $650 million. In 2007, Bristol-Myers Squibb paid $515 million to settle civil charges of fraudulent marketing and pricing, including illegally promoting an antipsychotic to children and the elderly. And three years ago, Schering-Plough paid $435 million to settle charges of marketing drugs for unapproved uses. Over the years, other drug makers that signed deals included Bayer Healthcare, AstraZeneca and Sanofi-Aventis.

And it’s not just big drugmakers that have come under scrutiny. Peruse the web site of the U.S. Department of Health & Human Services – oig.hhs.gov/fraud/cia/cia_list.asp – and the list of companies that have entered into corporate integrity agreements at one time or another also includes smaller players, such as Cell Therapeutics, Cephalon, Jazz Pharmaceuticals, King Pharmaceuticals, Medicis Pharmaceutical and Purdue Pharma.

In short, healthcare fraud is a trend and, as the most recent Pfizer deal suggests, the fines are likely to increase as the federal government looks for ways to crack down and generate systemic savings. And drugmakers, collectively, are clearly a growing target, despite industry anxiety over financial difficulties caused by expiring patents and the cost of discovering new medicines.

Just consider this remark by Tony West, an assistant attorney general for the civil division of the U.S. Department of Justice, during the Sept. 2 briefing in which the Pfizer settlement was announced: “Illegal conduct and fraud by pharmaceutical companies puts the public health at risk, corrupts medical decisions by healthcare providers and costs the government billions of dollars. This civil settlement and plea agreement by Pfizer represent yet another example of what penalties will be faced when a pharmaceutical company puts profits ahead of patient welfare.”

That last phrase is crucial: putting profits ahead of patients. Mr. West, of course, didn’t invent this slogan, but it’s become the unofficial war cry. The patients-versus-profits chant has been uttered by a cross-section of the population for years now, including AIDS activists, seniors who have taken bus rides to Canada, and families who filed lawsuits after alleging clinical trial data or side effect events were not fully disclosed – and someone got hurt or killed as a result. Which medications? There is a lot of litigation to choose from.

Still, there are allegations and then there are allegations. The point is that the pharmaceutical industry has been on the defensive for a decade now over safety, pricing and promotional practices – and the heat is coming from various segments of society. Little wonder, then, that drugmakers have become targets for some politicians. After all, dying patients, impoverished seniors and mourning parents are sympathetic characters.

The pharmaceutical industry, however, has been habitually slow to understand all this. For years, criticism has been met with predictable party lines about the complicated intersection between drug pricing and R&D spending, the need to maintain relationships with influential doctors who help educate their colleagues, and the integrity of data that surfaces in clinical trials and through adverse event reporting.

But the explanations never really sufficed. Not when litigation continually turned up instances where lines were crossed. The Vioxx lawsuits yielded some notorious examples, such as the famous ‘Dodgeball’ game in which sales reps were trained how to avoid probing questions from physicians about CV issues with the painkiller, which was withdrawn in 2004 after being linked to heart attacks and strokes. Merck lawyers and spokespeople endured some torturous moments trying to explain that the drugmaker wasn’t trying to avoid providing needed answers, but that the game was simply poorly named. “Bad judgment,” as it were.

There are some people who may be quick to dismiss much of the litigation as the devilish product of overzealous attorneys and others who may detest the pharmaceutical industry. Such lawsuits, however, can serve a useful purpose if a trial shows that a company has been conducting business improperly. After all, who would want to be on the wrong end of such behavior? Who doesn’t want medicine that is safe and effective, and was tested and marketed in a way that lends confidence to those who prescribe and use it?

It’s also worth remembering that many of the federal investigations – such as the one that resulted in the recent Pfizer settlement – don’t begin with product-liability litigation. Instead, these government probes are launched after qui tam, or whistleblower, lawsuits are filed by industry employees. These are the proverbial insiders. Sure, they may be dismissed as disgruntled workers, and there’s a nice pot of gold that awaits those whose lawsuits are joined by the federal government and a settlement is, ultimately, reached. The six whistleblowers who spurred the Pfizer probe will share $102 million of the fine.

Whistleblowers, however, may offer an inside view of what goes on at a company. Several times now, over the past several years, their tales have been vetted by teams of federal and state prosecutors. And we’ve heard the results. Of course, this doesn’t mean that every drug company executive or employee should be implicated, or that they condoned what took place. But the folks at the top must take responsibility for what occurs on their watch – and that includes fostering an environment that may lead to improper conduct. As the Pfizer settlement took shape, one former sales manager was found guilty earlier this year of obstructing justice by deleting computer files, and he was sentenced to home confinement for six months.

All of which to say is that it’s not entirely surprising the industry has developed the kind of reputation that drives Ray Kerins around the bend. Drug makers are filled with tens of thousands of people, and some aren’t going to follow the rules. But the series of settlements suggest the industry somehow looks the other way – or hasn’t gotten around to developing a sense of urgency about ongoing behavior that doesn’t look good. Until that happens, Mr. Kerins is likely to remain confused for a long time.

Ed Silverman is a prize-winning journalist who has covered the pharmaceutical industry for The Star-Ledger of New Jersey, one of the nation’s largest daily newspapers, for more than 12 years. During that time, he has closely followed a variety of topics of concern to those who work for, and with, pharmaceutical manufacturers – drug development, mergers and acquisitions, regulatory oversight, safety and pricing controversies, and marketing issues. For the past two years, Ed blogged about the drug industry at Pharmalot, which can now be found at twitter.com/pharmalot. Prior to joining The Star-Ledger, Ed spent six years at New York Newsday and previously worked at Investor’s Business Daily.