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

At its best, the industry produces medicines that have saved the lives of millions and alleviated the suffering of millions more. Better still, many leading pharma companies are working toward sustainable, environmentally friendly manufacturing practices. Many companies are also practicing corporate philanthropy and are working hard to produce drugs to treat diseases in developing nations at affordable prices. Highly laudable activities, all.

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. American spending for prescription drugs has increased almost 600%, in the period covered by the report, from $40 billion in 1990 to $234 billion in 2008. The report suggests that a nontrivial part of that increase derived from corporate malfeasance, for which pharma companies paid out nearly $20 billion in fines and penalties over the past 20 years. The rise in illegal off-label promotion of pharmaceuticals accounts for much of the fraud. In fact, according to the report, the pharmaceutical industry now holds the dubious honor of being the biggest of all industrial defrauders of the federal government under the False Claims Act, surpassing the defense industry, which used to hold that title. Pharma companies are equal-opportunity defrauders, the report notes, and deliberately overcharging state health programs, mainly Medicaid. This act "has been the most common violation against state governments and is responsible for the largest amount of financial penalties levied by these governments." Other violations include monopoly practices, kickbacks, concealing study findings, environmental violations, financial violations, and illegal distribution.

Furthermore, the report 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 the 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.

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 industry that is so often noble in its deeds still falls short from being a paragon of industry.

Michelle Hoffman is editorial director of Pharmaceutical Technology. Send your thoughts and story ideas to mhoffman@advanstar.com