Do Fewer Settlements by Pharmaceutical Companies Mean Even Less Accountability for Their Execs?

Yves here. Author Roy Poses is under no illusion about past cost of doing businesses settlements in Pharma land having much deterrent effect. However, they at least served to make bad conduct visible and help counter regular drug company efforts to present themselves as public spirited, as opposed to profit driven.

Note that Poses doesn’t indulge the idea that drug companies might be behaving better….

By Roy Poses, MD, Clinical Associate Professor of Medicine at Brown University, and the President of FIRM – the Foundation for Integrity and Responsibility in Medicine. Originally published at Health Care Renewal

Introduction

We have long been discussing the legal settlementsmade by health care organizations of alllegations like fraud, bribery, and kickbacks.  Despite the unsavory nature of the behaviors revealed by most settlements, which often appeared to risk patient harms, the companies involved usually have had to pay fines that were tiny relative to their multi-billion dollar revenues.  They companies only seldom have had to admit responsibility, and almost never did a settlement cause company managers and leaders to  suffer any negative consequences for enabling, authorizing, directing or implementing the bad behavior.

So these settlements also provided a window onto the impunityof top leaders of health care organizations.  Lack of deterrence caused by such impunity appears to be a major cause of  the epidemic of continuing unethical behavior, crimeand corruptionon the part of large health care organizations.

However, at least these settlements seemed to be useful markers of the such bad behavior apparently sanctioned by the leadership of these organizations.  But now even these markers seem to be fading away.

We had an ongoing enterprise trying to discuss what appeared to be the most interesting and significant legal settlements by major health organizations.  This year, however, things have seemed slow. Our last major wrap-up of recent legal settlements appeared on October 1, 2017.  On December 3, 2017, we did comment on a significant but barely noticed settlement by Pfizer of allegations of fraud done to prevent generic competition.  But since then it has seemed very quiet.

A new settlement by Pfizer was just announced yesterday.  This inspired me to review the files I had lying around, which did include a few US settlements by pharmaceutical companies from 2017 which I had not discussed.  However, I found nothing from 2018.  Fortuitously while I considered all this, I found a new article that corroborates my perception that things are changing, probably not for the better.  That I will discuss below.

But first I will review the latest single entry in the march of legal settlements,   (Note that the missed 2017 cases appear at the end of this post in an Appendix.)

Pfizer Settled Charges of Giving Kickbacks to Patients Through Disease Advocacy Organization to Mask the Prices of Its Drugs

On May 24, 2018, Bloomberg reporteda rather unusual case involving a company that has often provided grist for our mill,

Pfizer Inc. used a ‘purportedly independent’ charity to help it sharply raise the price of a heart drug, shielding patients from the increase while Medicare picked up the higher costs, the U.S. Justice Department said Thursday in a civil settlement announcement.

Pfizer will pay about $24 million in the anti-kickback settlement,the government said in a statement. It’s the latest agreement in a long-running U.S. investigation into drugmaker ties to patient charities. Pfizer will also enter into a five-year monitoring agreement with the Department of Health and Human Services Office of Inspector General.

In particular,

The Pfizer settlement is focused on three drugs: Sutent and Inlyta for kidney cancer, and the heart-rhythm drug Tikosyn. Sutent had U.S. sales of $374 million last year, while Inlyta sold $126 million. Tikosyn sold $153 million in 2016, according to the company.

In the case of the heart rhythm drug, Pfizer worked with the Patient Access Network Foundation to finance a fund for heart patients at the same time it was taking a huge price increase.The drugmaker raised the price of Tikosyn — by 44 percent during the last three months of 2015, according to the government.

‘Pfizer coordinated the timing of the opening of the fund for these patients with the implementation of a Tikosyn price increase,’ the government said. For the next nine months, patients on the drug accounted for virtually all the beneficiaries of the charitable fund, the Justice Department said.

In 2015, Pfizer gave more than $10 million to the Patient Access Network Foundation, according to a summary by the drugmaker. It doesn’t specify how much of that went to the heart drug fund.

In the case of the kidney cancer drugs, the New York-based drugmaker worked with a third-party pharmacy company to steer patients to the foundation for financial help, instead of giving out free drug. It tracked data from the pharmacy to confirm that some that Pfizer’s donations were going to patients on its products, according to the Justice Department.

As is usual in legal settlements made by big health care organizations,

Pfizer said the settlement isn’t an admission of liability. None of the company’s executives were charged or fined.

So the company got to say

This resolution reflects the company’s desire to put this legal matter behind it and focus on the needs of patients,…

And the impunity of managers of big health organizations continues.

Also, the amount of money involved in the settlement, $24 million, seems to be a drop in the bucket compared to the money Pfizer was making from the drugs involved, thus making it unlikely to deter future bad behavior by Pfizer or other organizations.

The settlement doesn’t mention price increases for the cancer drugs, which can cost tens of thousands of dollars a year. Inlyta currently costs about $239 per 5-milligram tablet, or more $14,000 a month, according to data compiled by Bloomberg Intelligence. Sutent costs more than $600 for a 50-milligram capsule, or more than $17,000 for a six-week treatment cycle that includes four weeks on the drug and two off.

It also is an even tinier drop in the bucket compared to Pfizer’s revenues,which were $52.5 billion in 2017, according to Pfizer.

Finally, the settlement did not seem informed by Pfizer’s long track record of bad behavior, including settlements almost too numerous to count, and involving billions in fines.  For our most recent summary of this, look here.

But the settlement at least provided some insight into the clever, if likely unethical ways pharmaceutical companies are now using to maintain the extremely high prices of drugs, an important reason US health care is the most expensive, if not the best in the world.

But why have there been so few settlements in 2018 besides this one?

Drop in Law Enforcement Targeting White Collar Crime Under the Trump Administration

Today, I also noticed the report of a study that provides a bit of evidence that my perception of recent diminution of the march of legal settlements was not far off.  It suggests that there has been a recent drop-off not just in settlements, but in law enforcement efforts targeting white-collar crime in general.

Asreported by Bloomberg, with the headline, “White-Collar Prosecutions Fall to 20-Year Low Under Trump,” on May 25, 2018,

The number of white-collar prosecutions is on track to hit a 20-year low under President Donald Trump, after reaching a high in 2011 during the Barack Obama administration, according to a nonprofit research center that analyzes government data.

A total of 3,249 cases were brought during the first seven months of the U.S. government’s 2018 fiscal year, which runs from October 2017 to April 2018, according to a case-by-case analysis of government data by Syracuse University’s Transactional Records Access Clearinghouse, or TRAC.

That’s a 4.4 percent drop from the same period in 2017, a decline of 33.5 percent from five years ago, and 40.8 percent fewer cases than in 1998, according to the report. The analysis is of data obtained by TRAC under the Freedom of Information Act.

Discussion

So my perceptions that the number of the sorts of legal settlements of interest to us has likely been diminishing was accurate.  Unfortunately, rather than the decrease being due to better behavior, decresed reporting, or my laxity in case-finding, it now looks that US government efforts to combat bad behavior by big health care corporations and to hold top leaders of these organizations accountable is getting even more lax.

So once again, with feeling…

We seem to be sliding backwards in efforts to make the leaders of large health care organizations accountable, and particularly to combat the worse manifestation of their lack of accountability, impunity.

The system appears to be rigged to favor of leadership and management of large companies, as opposed to health professionals, and particularly as opposed to patients.  For years now we have discussed stories like this, which include allegations of severe misbehavior by large health care companies affirmed by legal settlements, but which only involve paltry financial penalties to the companies, and almost never any negative consequences to any humans. Furthermore, as in this case, these stories are often relatively anechoic, noted often only briefly in the media, and have inspired no real action by the US government.

We have called for years for what we sometimes term “true health care reform” to derig the system. Unfortunately, despite our hopes, perceptions of a rigged system may not always inspire honest reform. Instead, they can enable the rise of demagogues and would be dictators who promise only they can solve the problem.  Donald Trump cried out that only he could fix our problems and drain our swamps.  However, at least in terms of policing white-collar crime, particularly in health care, he seems to be letting the swamp waters rise.

While we thus have bigger problems to solve than the impunity of health care leaders, let us remember the need for wholesale, real health care reform that would make health care leaders accountable for what their organizations do, particularly when these organizations misbehave.

Appendix – For the Record, Previously Missed US Settlements from 2017 

(January) Shire paid $350 million to settle allegations that it gave kick-backs to physicians and clinics to promote Dermagraft, and promoted it for unapproved uses (per the Wall Street Journal) .  One unusual aspect of this case was that three executives of a Shire subsidiary which sold this product were also convicted.

(April) Sanofi agreed to pay $19.8 million to settle allegations it overcharged the US Department of Veterans Affairs (per Modern Healthcare).

(May) Merck and Upsher-Smith Laboratories agreed to pay $60.2 million to settle an anti-trust class action lawsuit alleging they conspired  to delay a generic version of a potassium product.  Note that the FTC had sued the companies over this matter, but lost their case. (per Reuters).

(June) Allergan agreed to pay $13 million to settle allegations that it paid kick-backs to promote sales of various opthalmic preparations (per thePhiladelphia Inquirer).