December 1 , 2009 – Every other month, it seems, another pharmaceutical company is called on the carpet and forced to pay millions — or billions — to settle allegations of fraud.
So far in 2009, five major government cases against drug companies have been made public: Eli Lilly ($1.43 billion), Aventis Pharmaceuticals ($95.5 million), Mylan Pharmaceuticals/UDL Laboratories ($118 million), Pfizer ($2.3 billion), IVAX Pharmaceuticals ($14 million). And the year isn’t over yet.December 1 , 2009 – Every other month, it seems, another pharmaceutical company is called on the carpet and forced to pay millions — or billions — to settle allegations of fraud.
“This has been going on for years and people know there are these enforcement actions,” said Michael Theis, at Hogan & Hartson’s health care practice in Denver, Colo. “The word has been out for a long time and (manufacturers) generally understand the need for compliance. But these cases just keep coming.”
Part of the problem, he said, is an ingrained corporate culture that fails to prioritize internal communication between company sales and marketing staff on one hand, and compliance and legal staff on the other. Combine that with a relentless pressure on the sales force to move products — and you have a recipe for trouble, Theis said.
Feds, states, consumer groups pursuing cases
At the same time, the federal government is stepping up enforcement activities and inspiring states to do the same, increasing pressure on pharmaceutical companies that have never before found themselves under the microscope. Consumer groups are also jumping into the fray.
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Casual Messages Can Incriminate
When looking for evidence against a manufacturer, the government often begins with the electronic conversation that occurs in every office environment: e-mails. “Hopefully, the whistleblower has already come in with one or two of these e-mails to get us started,” said Assistant U.S. Attorney Viveca Parker. “Then we do some investigation without going to the company right away — for example by interviewing former employees. After that, I may call the company to ask to see the e-mail traffic between the manager, a particular doctor and the sales rep.” If the violation occurred because of an honest mistake, she added, investigators won’t find messages that point to infractions such as exclusive breaks for certain doctors crafted to raise sales of certain products. |
“Consumer protection agencies are becoming much more active about suing the companies to recover treatment costs for patients who were harmed by off-label drug use,” said Viveca Parker, an assistant U.S. attorney who led the Merck nominal price investigation that resulted in a $400-million settlement last year.
“We’re also seeing a lot of states hiring their own law firms to pursue their own trial and settlement strategies,” she said. “Typically the government will try to get everybody at the table to achieve a global settlement of claims, but we can no longer be sure that this will happen because states are going off on their own.”
She and Theis made a presentation at the Medicaid Drug Rebate Program summit in Chicago in September, exploring why pharmaceutical fraud cases continue to crop up and how manufacturers can protect themselves against liability.
It was a well-attended event and it was easy to see why.
“The government has become very sophisticated in investigating and prosecuting these cases and I don’t see it abating anytime soon — particularly not in the Medicaid rebate and ‘best price’ arena,” Theis noted.
Weak internal communication pitfall for manufacturers
Their first advice to the drug company representatives in the room was to look over their company communication channels and procedures — all the way to the top.
“The guy who makes the deal often isn’t sufficiently connected to the person who must account for the deal,” Parker said.
That can be true even at companies that officially play by the rules. Wyeth, for example, sent its compliance people to large national conferences, had manuals on hand, hired a prestigious national law firm as legal counsel — and still managed to get into trouble.
In May, the U.S. government and 16 states joined two whistleblower suits against the company, alleging that Wyeth had knowingly offered steep discounts to thousands of hospitals nationwide without extending the same discount to the Medicaid program as required by federal law. This, the plaintiffs alleged, deprived Medicaid of millions of dollars in savings.
“The only thing I can imagine went wrong is that the people who knew what to do either weren’t communicated with, or didn’t have the authority to impose the right decisions,” Parker said.
The art of saying no
There is also an inherent tension inside companies that must balance compliance with market pressures, the speakers agreed.
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340B Providers Often Included in Settlements
So far this century, 340B providers have been included in 14 Medicaid fraud settlements. Here are the most recent 340B recoveries: 2008 2009 Source: SNHPA |
“People in general counsel or compliance find themselves in the position of constantly having to say no,” Theis said. “The marketing people come to them with an idea, and they have to say no. The sales people come to them, and they have to say no.
“And at some point they have to say yes to something, because after all, the whole idea here is to make money; these are profit-making ventures we’re talking about. So sometimes the sales and marketing people may just stop asking.”
But the illegal conduct can also reach all the way to the top, as was the case with Purdue Pharma. In 2007, three of the company’s top executives; the president, chief operating officer, and general counsel; pleaded guilty to misbranding the highly addictive painkiller oxycontin.
According to settlement documents, the company trained its sales force to distribute false information about the drugs’ addictiveness. Purdue’s total settlement charge: $600 million.