What a Piece of Work is Pharma

"The beauty of the world, the paragon of animals," on one hand; a "quintessence of dust," on the other, says Shakespeare's Hamlet of humankind. Human institutions, like their inventors, are also dual-natured, it seems. Take the pharmaceutical industry, for example.

Michelle Hoffman

What can be more noble than the job of healing and curing the sick? And then there's the other side of the industry, the one reflected in a report released in mid-December by Public Citizen's Health Research Group. The title says it all: Rapidly Increasing Criminal and Civil Monetary Penalties Against the Pharmaceutical Industry: 1991 to 2010. According to the report, the pharmaceutical industry now holds the dubious honor of being the biggest defrauder of the federal government under the False Claims Act, surpassing even the defense industry, which used to hold that title.

Although most of the penalties are the result of the rise in illegal off-label promotion of pharmaceuticals, pharma companies are also deliberately overcharging state health programs, mainly Medicaid, notes the report. Other violations included monopoly practices, kickbacks, concealing study findings, environmental violations, financial violations, and illegal distribution.

The report also notes that these incidents have risen precipitately in recent years. According to the report, approximately three-fourths of all settlements and total dollars paid out during the 20-year study period were made in just the past five years.

The good news, if there is any, is that of the 20 largest settlements in the past 20 years, only one was for poor manufacturing practices, which the study authors define as "selling drug products that fail to meet FDA standards or specifications (e.g., contaminated or adulterated products, or products that fail to meet size or dosage specifications)." That settlement cost Schering-Plough $500 million in 2002 for GMP violations in manufacture of Claritin. The single largest settlement was $3.4 billion paid out by GlaxoSmithKline in 2006 for unspecified financial violations, and the smallest was a state settlement of $258 million by Johnson & Johnson in 2010 for unlawful promotion of Risperdal.

In fact, overall, only 3% of all 184 violations accounted for in the study were for manufacturing violations, for which the industry paid out a total of $1.3 billion in fines to federal and state governments. But the study notes that the data set for all violations may not be complete and therefore "may understate the extent of criminal and civil violations by the pharmaceutical industry."

The study concludes by saying "the current system of enforcement is not working," a theme we've heard in many instances—greater enforcement being a cornerstone of the current FDA's new policy as well. In fact, the study quotes Eric Blumberg, FDA's Deputy Chief Counsel for Litigation as saying "...unless the government shows more resolve to criminally charge individuals—at all levels in the corporate hierarchy—...we can not expect to make progress in deterring ...off-label promotion." The same kind of enforcement might deter any number of the violations appearing in the report. Sadly, an enterprise that can so often perform noble deeds still falls short of being a paragon of industry.

(To obtain a copy of the full report, go to http://www.citizen.org/hrg1924)

Michelle Hoffman is the editorial director of BioPharm International, mhoffman@advanstar.com.