Ho-hum, Another Month, Another Set of Multi-Million Dollar Settlements by Health Care Corporations Acting Badly

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Ho-hum, Another Month, Another Set of Multi-Million Dollar Settlements by Health Care Corporations Acting Badly

Unknown 2/21/2016 Komentar

Amazingly, with a US presidential election looming, there is finally some public discussion here of the impunity of top corporate executives.  Columnist Gretcher Moregenson wrote on February 6, 2016 in the New York Times,

Ho-hum, another week, another multimillion-dollar settlement between regulators and a behemoth bank acting badly.

Then,

As has become all too common in these cases, not one individual was identified as being responsible for the activities. Once again, shareholders are shouldering the costs of unethical behavior they had nothing to do with.

It could not be clearer: Years of tighter rules from legislators and bank regulators have done nothing to fix the toxic, me-first cultures that afflict big financial firms.

Similarly, but more broadly, Senator Elizabeth Warren (D - Massachusetts) published a report in January, 2016, entitled "Rigged Justice: 2016 - How Weak Enforcement Lets Corporate Offenders Off Easy." She summarized its main conclusions in a New York Times op-ed,

Corporate criminals routinely escape meaningful prosecution for their misconduct.

Furthermore,

In a single year, in case after case, across many sectors of the economy, federal agencies caught big companies breaking the law — defrauding taxpayers, covering up deadly safety problems, even precipitating the financial collapse in 2008 — and let them off the hook with barely a slap on the wrist. Often, companies paid meager fines, which some will try to write off as a tax deduction.

The failure to adequately punish big corporations or their executives when they break the law undermines the foundations of this great country. Justice cannot mean a prison sentence for a teenager who steals a car, but nothing more than a sideways glance at a C.E.O. who quietly engineers the theft of billions of dollars.

These enforcement failures demean our principles. They also represent missed opportunities to address some of the nation’s most pressing challenges.

In particular, she cited this example involving health care.

When Novartis, a major drug company that was already effectively on federal probation for misconduct, paid kickbacks to pharmacies to push certain drugs, it cost taxpayers hundreds of millions of dollars and undermined patient health. Under the law, the government can boot companies that defraud Medicare and Medicaid out of those programs, but when Novartis got caught, it just paid a penalty — one so laughably small that its C.E.O. said afterward that it 'remains to be seen' whether his company would actually consider changing its behavior.

Note that we discussed the Novartis settlement here.  The case referred to by Senator Warren was just the latest in a series of ethical misadventures by Novartis which led to legal actions in the US and around the world, but feeble penalties.

But while Ms Morgenson wrote about financial institutions, now we can also write:

Ho-hum, another month, another set of multimillion-dollar settlements between regulators and  behemoth health care companies acting badly.

In chronological order, since mid-January, 2016...

For $830 Million, Merck Settled Shareholders Lawsuit Alleging Deceptions by Corporate Management

On January 15, 2016, the Wall Street Journal reported,

Merck said Friday it agreed to pay $830 million to resolve a class-action lawsuit brought by shareholders, alleging the drug maker and its executives made false and misleading statements about the safety of Vioxx between its introduction in 1999 and its market withdrawal in 2004.

The shareholders alleged they paid inflated prices for Merck shares because of the company’s conduct.

Note that if the company misled its shareholders, it also misled health care professionals and the public about the harms of Vioxx,  putting many patients at risk. Of course, the Vioxx case is now old news, but it continues to be an example of a case in which the corporation paid fines, presumably at the expense of shareholders, employees and patients, but in which no one who authorized or directed the bad behavior paid any penalty.

As is typical in such cases,

Merck, which is based in Kenilworth, N.J., said Friday the settlement of the shareholders’ lawsuit doesn’t constitute an admission of liability or wrongdoing by the company or individual executives named as defendants in the case.

Merck has paid billions to settle multiple lawsuits related to Vioxx, yet what it paid was much less than the revenue produced by the drug.

The bulk of Merck’s Vioxx-related costs came from its 2007 agreement to pay $4.85 billion to settle thousands of product-liability lawsuits alleging that patients’ use of Vioxx caused heart attacks and strokes, and that Merck failed to properly warn people of the risks. Merck didn’t admit liability in that settlement.

In addition, Merck agreed in 2011 to pay $950 million to resolve allegations by the U.S. Justice Department and state governments that the company deceived the government about the safety of Vioxx, and marketed it for uses not included in the prescribing label approved by the Food and Drug Administration.

Merck recorded more than $11 billion in Vioxx sales during the drug’s years on the market from mid-1999 to September 2004.

The company did plead guilty to one criminal charge related to Vioxx.

 As part of the 2011 settlement, Merck pleaded guilty to a misdemeanor criminal violation of a federal drug law, admitting that it promoted Vioxx to treat rheumatoid arthritis before that use was approved by the FDA.

But apparently no Merck manager was ever charged with a crime, much less convicted.  We have discussed the Vioxx case here, and other issues with Merck here.

Note that this settlement comes soon after a smaller settlement in 2015 that was barely mentioned in the press,Merck to pay $5.9 million for misleading marketing of pink eye drug: U.S [Reuters]

For $785 Million, Pfizer Settled Suit Alleging Overcharging of Medicaid

On February 16, 2016, per the Wall Street Journal,

Drugmaker Pfizer Inc. on Tuesday said it reached an agreement in principle to pay $784.6 million to settle a long-running U.S. government investigation of allegations that its Wyeth unit overcharged government Medicaid health programs for the heartburn drug Protonix.

Of course,

Pfizer said the agreement doesn’t include any admission of liability by Wyeth.

Much less did the agreement include any penalties for anyone at Wyeth or Pfizer who authorized or directed the overcharging. Yet some people must have.

Note that this settlement did not seem informed by Pfizer's amazingly lengthy record of legal settlements, and some guilty pleas and/or convictions (for illegal marketing/ misbranding, and for violating the racketeering influenced corrupt organization [RICO]  statute), as most recently summarized here.

Note also, pertinent to the report by Senator Warren mentioned above, every week people pay severe penalties for defrauding Medicaid, Medicare, or other federal health programs.  Today, a quick Google search for "medicaid fraud prison" found such stories from the last month as a woman sentenced to five years in Louisville, and another women sentenced again to five years in Dallas. Yet no person at Pfizer paid any penalty for for practices that deprived the government of hundreds of millions of dollars.  

For $250 Million, Fresenius Settled Lawsuits Alleging it Withheld Information About the its Products' Hazards

Per the New York Times, January 18, 2016,

The world’s largest provider of kidney dialysis equipment and services has agreed to pay $250 million to settle thousands of lawsuits from dialysis patients and their relatives claiming that the company’s products had caused heart problems and deaths.

The settlement was announced by Fresenius Medical Care, a German company whose North American division is one of the two large dialysis providers in the United States.

The lawsuits arose after Fresenius’s own medical office sent an internal memo to doctors in the company’s dialysis centers saying that failure to properly use one of the company’s products appeared to be causing a sharp increase in sudden deaths from cardiac arrest.

But the company did not warn doctors in non-Fresenius clinics who were also using the product, called GranuFlo. It did so only after the internal memo was sent anonymously to the Food and Drug Administration, which began an investigation.

 The company conducted a recall, which was actually a change in the label, not the removal of the product from the market.

Note that this settlement was of allegations not of financial chicanery, but of behavior that put patients in harms way. Nonetheless,

Kent Jarrell, a spokesman for the company, said the initial internal memo was actually incorrect and contradicted by further careful analysis. He said the warning language added to the GranuFlo label in 2012 was eventually removed. GranuFlo, and a related product called NaturaLyte, are used in dialysis machines to help cleanse patients’ blood.

In the first case to go to trial, a jury in Massachusetts state court ruled that Fresenius was negligent, for not distributing the memo more widely, but that a patient’s death could not be attributed to GranuFlo, so no monetary damages were awarded, according to Mr. Jarrell and to Christopher Seeger, a lawyer who led the settlement negotiations for the plaintiffs.

But if the initial concern was unwarranted and Fresenius won the first trial, why would it pay $250 million to settle? Mr. Jarrell suggested that a reason was to put the more than 10,000 lawsuits behind it.

'Fresenius deeply regrets the confusion and concern temporarily generated by the November 2011 memorandum,' he said in an emailed statement.

Again, there were no admissions or findings of guilt, no apologies (except for causing "confusion and concern"), and no negative consequences for the corporate managers who authorized or directed the actions in question.  While the FDA apparently issued a recall notice for GranuFlo, no federal agency apparently took action against the company or any individuals within it.    Also, this settlement seemed uninformed by previous settlements made by Fresenius, which were made in 2011 of allegations of false claims, in 2010 again of allegations of false claims, and in 2007 of allegations of restraint of trade (look here).

Summary

We first discussed how legal settlements may serve as markers for misbehavior by large health care organizations, but not as deterrents to future bad behavior in 2006.  Then we wrote ...

 Why do the mainly monetary penalties seem mainly to come out of the hides of stock-holders and consumers, rather than the people who actually made the decisions that lead to the offenses?

In 2008, we wrote,

After all, a fine or settlement paid years later can just be written off as a cost of doing business. Furthermore, although such a payment may have a (minimal) effect on the company's bottom line, it has no real effect on the people whose decisions and actions lead to the problem.

So rather than repeating our usual verbiage about the impunity of health care leaders, let me defer to Senator Warren:

Laws are effective only to the extent they are enforced. A law on the books has little impact if prosecution is highly unlikely.

This country devotes substantial resources to the prosecution of crimes such as murder, assault, kidnapping, burglary and theft, both in an effort to deter future criminal activity and to provide victims with some degree of justice. Strong enforcement of corporate criminal laws serves similar goals: to deter future criminal activity by making would-be lawbreakers think twice before breaking the law and, sometimes, by helping victims recover from their injuries.

When government regulators and prosecutors fail to pursue big corporations or their executives who violate the law, or when the government lets them off with a slap on the wrist, corporate criminals have free rein to operate outside the law. They can game the system, cheat families, rip off taxpayers, and even take actions that result in the death of innocent victims—all with no serious consequences.

The failure to punish big corporations or their executives when they break the law undermines the foundations of this great country: If justice means a prison sentence for a teenager who steals a car, but it means nothing more than a sideways glance at a CEO who quietly engineers the theft of billions of dollars, then the promise of equal justice under the law has turned into a lie. The failure to prosecute big, visible crimes has a corrosive effect on the fabric of democracy and our shared belief that we are all equal in the eyes of the law.

Under the current approach to enforcement, corporate criminals routinely escape meaningful prosecution for their misconduct. This is so despite the fact that the law is unambiguous: if a corporation has violated the law, individuals within the corporation must also have violated the law. If the corporation is subject to charges of wrongdoing, so are those in the corporation who planned, authorized or took the actions. But even in cases of flagrant corporate law breaking, federal law enforcement agencies – and particularly the Department of Justice (DOJ) – rarely seek prosecution of individuals. In fact, federal agencies rarely pursue convictions of either large corporations or their executives in a court of law. Instead, they agree to criminal and civil settlements with corporations that rarely require any admission of wrongdoing and they let the executives go free without any individual accountability.

Keep in mind that the impunity of health care leaders, especially in contrast with the tough enforcement efforts against small fry health care offenders, not only has a corrosive effect on the fabric of democracy but endangers patients' and the public's health, and makes health care more expensive and inaccessible.

Maybe now that the impunity of corporate leaders is becoming a mainstream topic of discussion, we can start talking about, and then doing something about the impunity of corporate leaders in health care. 

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Pfizer's Latest International Pfiascos - Charges of Anti-Competitive Practices, Inflated Prices, Deception and Secrecy

adverse effects antitrust deception executive compensation health care prices legal settlements marketing Pfizer suppression of medical research vaccines

Pfizer's Latest International Pfiascos - Charges of Anti-Competitive Practices, Inflated Prices, Deception and Secrecy

Unknown 9/14/2015 Komentar

Many big health care organizations seem to just be unable to keep out of trouble, and the bigger they are, the more kinds of trouble.  Pfizer Inc, considered to be one of the world's largest pharmaceutical companies, has supplied us with plenty of stories.  Enough new stories about Pfizer have accumulated since last year to do a roundup.   

Presented in chronological order....

Italy Demands Damages from Pfizer for Anti-Trust Violations

This story came out in May, 2014, via Reuters,

Italy said on Wednesday it was seeking more than a billion euros in damages from multinational drug companies following a ruling by the country's antitrust authority that their policies had been detrimental to Italy's national health service.

The health ministry said in a statement it was requesting a total 1.2 billion euros ($1.6 billion) from Novartis and Roche for the damages incurred in 2012-2014, and was requesting 14 million euros from Pfizer.

It cited several recent antitrust rulings that the companies' repeated anti-competitive actions had caused the national health service 'considerable damage'.

The specific charges against Pfizer were:

Italy's state council, the highest administrative court, in February ruled that Pfizer had abused its dominant position relating to the glaucoma drug Xalatan 'with a clear and persistent intention to suppress competition'.

At least in English language news sources, I have not seen how this turned out, but note that this was apparently an administrative court finding, not just a prosecutor's allegation.

Pfizer Accused of Overcharging for Pediatric Vaccines

This appeared in January, 2015, here via Ed Silverman's PharmaLot blog (when it was affiliated with the Wall Street Journal),

In a bid to widen access to vaccines, Doctors Without Borders is calling on Pfizer and GlaxoSmithKline to lower the prices for their pneumococcal vaccines to $5 per child in developing countries. The non-profit claims the drug makers are 'overcharging' donors and developing countries for vaccines that 'already earn them billions of dollars in wealthy countries.'

The non-profit, which regularly advocates for lower prices for medicines, maintains that, in general, the price to vaccinate a child against several diseases is now a 'colossal' 68 times more expensive than in 2001. In a new report, Doctors Without Borders attributes 45% of that increased cost to the price tags for pneumococcal vaccines sold by the drug makers. Pneumococcal disease, by the way, kills about 1 million children per year, mostly in poor and developing nations.

Think about the children.

The non-profit maintains that the current price tag makes it difficult to supply the vaccine to large numbers of children, and the drug makers have already received $1 billion in incentives to manufacturer the vaccine for developing countries. 'We think it’s time for Glaxo and Pfizer to do their part to make vaccines more affordable for countries in the long term, because the discounts the companies are offering today are just not good enough,' says Malpani in a statement.

Moreover, Doctors Without Borders warns that pricing may eventually make it harder for a growing number of middle-income countries to afford vaccines. Over time, some of these countries will eventually ‘graduate’ from the subsidized vaccine pricing established by Gavi and, when that happens, Doctors Without Borders estimates costs may rise up to six times what is the countries pay today.

The post included a statement from Pfizer about how hard it is to manufacture the vaccine, and an update to the post included a statement from Pfizer that it was already selling its pneumococcal vaccine, Prevenar 13, below cost to GAVI, which buys up vaccines and provides them to poor countries. A week later, again via (the old version of) PharmaLot, Pfizer announced an additional 6% price cut. Furthermore, Bill Gates, whose foundation supports GAVI, insisted that cutting vaccine prices would discourage pharmaceutical companies from investing in vaccine research and supplying products to poor countries, according to the Guardian.

However, neither Pfizer nor Mr Gates acknowledged how much money Pfizer already is making from Prevenar in developed countries, amounts which likely do far more than offset any losses in poorer countries. Specifically, in July, 2015 FierceVaccines reported that

The world's biggest vaccine by sales--Prevnar 13--just keeps getting bigger. And in doing so, the shot helped Pfizer notch 44% vaccines growth for the second quarter as the unit saw sales grow from $1.09 billion in last year's Q2 to $1.58 billion during the period this year.

For the quarter, the superstar pneumococcal disease-blocker notched a U.S. sales increase of 87% versus the same period last year, a jump Pfizer CEO Ian Read attributed to 'continued strong uptake' in U.S. adults.

Also,

Prevnar 13, which reeled in $4.29 billion in sales last year, is expected to grow to $5.83 billion in 2020 and remain atop the vaccines sales charts.

And,

The company is also working 'country by country' to broaden the vaccine's reach in G7 countries....

So there seems to be some evidence in support of the Doctors Without Borders claim that Pfizer could easily afford some small losses selling vaccines for use by poor children in less developed countries while it makes billions of dollars from vaccine sales in developed countries.  


Pfizer Settles Shareholder Suit for $400M

This settlement was just the latest that has resulted from allegations of illegal drug marketing by Pfizer.  As reported again by the redoubtable Ed Silverman in the old version of PharmaLot,

Pfizer has reached an agreement in principle to pay $400 million to settle a class-action securities lawsuit that alleged the drug maker illegally marketed several medicines and, subsequently, caused investors to lose money, according to a filing with the U.S. Securities and Exchange Commission.

The lawsuit alleged that, between January 2006 and January 2009, Pfizer marketed several drugs on an off-label basis. The medicines included the Bextra painkiller that was withdrawn from the market in 2005; the Geodon antipsychotic; the Zyvox antibiotic and the Lyrica epilepsy treatment.

The lawsuit, which was filed in federal court in 2010, alleged that the sales boost the drug maker received from the marketing prompted Pfizer executives to make 'false and misleading statements about Pfizer’s financial performance and sales practices [that] caused Pfizer stock to trade at artificially inflated prices.'

This settlement followed an even larger one back in 2009 when,

the drug maker revealed plans to pay $2.3 billion to resolve criminal and civil allegations that these drugs were marketed illegally.

We discussed that settlement in 2009 here, here, and here.  Note that the 2009 settlement included a guilty plea to a criminal charge (albeit to a misdemeanor), and was of allegations including paying kickbacks to doctors for use of Pfizer drugs.  So this additional settlement of deceiving investors just ices that cake. 

UK Competition and Markets Authority Stated Pfizer Abused Market Dominance

This story appeared in August, 2015, via the Telegraph,

The Competition and Markets Authority (CMA) has issued a statement of objections alleging the companies breached UK and EU law by raising the prices they charged for phenytoin sodium sold to the NHS.

In particular,

The CMA says that for years industry giant Pfizer, which is listed in the US, and Flynn, a Stevenage-based company, between them sold the drug at a price up to 27 times higher than it had been previously priced.

Before September 2012, Pfizer manufactured and sold phenytoin sodium capsules to UK wholesalers and pharmacies under the brand name Epanutin.

Pfizer then sold the UK distribution rights for Epanutin to Flynn, which 'de-branded' the drug and started selling its version in September 2012. Pfizer continued to manufacture the drug, which it sold to Flynn at prices the CMA says were 'significantly higher' than those at which it had previously sold Epanutin.

The CMA claims Pfizer sold the drug at between 8 and 17 times its historic prices to Flynn, which then sold on phenytoin sodium at between 25 to 27 times more than the prices previously charged by Pfizer.

Before Flynn bought the rights for Epanutin, the NHS spent about £2.3m on phenytoin sodium capsules a year, according to the CMA. After the deal this spend rose to just over £50m in 2013 and more than £40m in 2014.

While the CMA findings were apparently "provisional," but the agency has the power to find that the law has been breached and "has the power to fine then up to 10pc of their global annual turnover - last year Pfizer had revenue of almost $50bn."  So this is the second government finding of anti-competitive behavior by Pfizer in a little over one year.

Pfizer Resists AllTrials Calls for Transparency

Late in August, 2014, per the Guardian,

Pfizer, one of the world’s largest pharmaceutical groups, has said it will resist demands from investors and transparency campaigners that it disclose results from all historical drug trials.

We have been discussing how pharmaceutical, biotechnology, and device companies have manipulated the clinical trials they sponsor to increase the likelihood that the results make their products look good, and may suppress trials whose results cannot be made to look good enough. This clinical research suppression and manipulation can lead to poor clinical decisions, may harm patients, and abuses the trust of patients who volunteer to participate in clinical research. This situation has led to the AllTrials campaign to make clinical research transparent (look here). However,

Pfizer said it had a 'longstanding commitment to clinical trial transparency' and it already published data for trials from 2007. Requests for earlier data are considered on an individual basis. But it added: 'We don’t believe that further investment beyond this would offer value to patients, health services or to our shareholders.'

This despite arguments above about the harms of research suppression.  Given how much money Pfizer has spent on lawsuits, including one above about allegations of its management's deception of shareholders, one might think it would be worth it for management to make a little investment in transparency.

Pfizer Found to Have Withheld Reports of Adverse Drug Events in Japan

Finally, reported in September, 2015 by in-PharmaTechnologist.com,

Pfizer failed to report hundreds of serious adverse drug reactions (ADRs) in the required timeframes according to Japan’s Ministry of Health, Labor and Welfare (MHLW) which has issued the US firm with a business improvement order. 

That website has copy protection so I cannot quote further, but the order involved 11 drugs, including Enbrel and Lyrica.  So here is yet another example of a government agency finding that Pfizer was less than transparent, if not overtly deceptive.

Summary

So in a little more than a year, Pfizer has been accused of anti-competitive practices raising drug costs in Italy, excess pricing of vaccines for use by poor children in undeveloped countries, deceiving its own investors about illegal marketing activities in the US, abuse of market dominance leading to excessive drug costs in the UK, stonewalling clinical trial transparency measures globally, and failing to disclose adverse drug effects in a timely manner in Japan.  This is on top of an already impressive record of misbehavior (See our summary of Pfizer mischief at the end of the post.)

However, as seems usual these days, no one at Pfizer who might have authorized, directed or implemented any of this bad behavior has ever seemingly paid any sort of penalty for it.  Instead, while this was going on, the top leadership of Pfizer just gets richer faster and faster.  In fact, in March, 2015, the Wall Street Journal reported the current Pfizer CEO's total compensation in 2014,

Pfizer Inc. said Thursday that Chief Executive Ian Read’s total compensation rose 23% last year, lifted by an increase in pension value that offset a reduced annual bonus and equity award.

Furthermore,

Mr. Read’s 2014 pay package totaled $23.3 million. The board raised the CEO’s salary to $1.83 million from $1.79 million but decreased his annual bonus by $400,000 and his equity award by nearly $1 million despite concluding that Mr. Read’s leadership during the year was 'outstanding.'

[Even though] Over the course of 2014, shares in the New York-based pharmaceutical company gained about 2% amid a 4% decrease in revenue.

It is not obvious that the rise in CEO pay is even remotely correlated to any rise in share-holder value.  Moreover, there seems to be a total disconnect between the rewards given the CEO and the ethical record of the company he leads, especially since Pfizer, which calls itself "one of the world's premier pharmaceutical" corporations, announces its aspirations thus,

we at Pfizer are committed to applying science and our global resources to improve health and well-being at every stage of life. We strive to provide access to safe, effective and affordable medicines and related health care services to the people who need them.

Never mind all those pesky allegations of overpricing, anti-competitive practices, deception and opaqueness, and never mind that current executives are becoming exceedingly risk in part from the continuation of such practices.  So it seems the board of Pfizer will just continue handing its executives piles of money, despite, or for all I know, because of the company's continuing bad behavior.  Given these incentives, is it any wonder that the bad behavior continues?  Pfizer seems to be just another example - albeit a big one - of how health care is dominated by an oligarchy of unaccountable leaders who continue to demonstrate their impunity hidden by aspirational but hollow public relations and marketing.

Of course, it is doubtful such bad behavior would continue if there risks of external penalties, e.g., from law enforcement.  But there never seem to be any.

In the past, US law enforcement authorities have announced they would use the responsible corporate officer doctrine, a legally tested rationale for prosecuting corporate managers for bad behavior by those who report to them (e.g., in 2010, look here),  But it seems they have never done so, at least in cases involving large health care organizations.  Last week, the US Department of Justice announced it would start going after executives of companies that misbehave, and would press the companies to give up the name of responsible executives in exchange for more lenient treatment of the companies themselves (e.g., see this report in the NY Times).  Meanwhile, however, the march of legal settlements for bad behavior in health care continues, absent any penalties for organizational leaders who might have authorized or directed it, much less for those who simply put incentives in place to foster bad behavior while looking away from what those incentives inspired.    

I hope these current promises by law enforcement officials are not as hollow as earlier ones, because continuing our society's continuing failure to rein in corrupt business practices via law enforcement and regulation may lead a desperate populace to more radical approaches. The UK Labor Party just elected a Marxist leader (see this Reuters report.)  One wonders how long it will be before anger at the larger oligarchy, of which health care leadership is merely a part, boils over in other countries, and in more radical ways.

Instead, we continue to advocate for true health care reform with the immediate priority of changing how health care organizations are led, and ensuring leadership that upholds health care values, is willing to be accountable, and is open, honest, transparent and ethical.  We still may have time to reform.  But the reform will have to be big and true.  If not, moderate voices may be drowned out, and the results may be worse than anyone could imagine.

Appendix - Pfizer's Previous Settlements


For all our posts on Pfizer, look here.

In the beginning of the 21st century, according to the Philadelphia Inquirer, Pfizer made three major settlements,
- In 2002, Pfizer and subsidiaries Warner-Lambert and Parke-Davis agreed to pay $49 million to settle allegations that the company fraudulently avoided paying fully rebates owed to the state and federal governments under the national Medicaid Rebate program for the cholesterol-lowering drug Lipitor.
- In 2004, Pfizer agreed to pay $430 million to settle DOJ claims involving the off-label promotion of the epilepsy drug Neurontin by subsidiary Warner-Lambert. The promotions included flying doctors to lavish resorts and paying them hefty speakers' fees to tout the drug. The company said the activity took place years before it bought Warner-Lambert in 2000.
- In 2007, Pfizer agreed to pay $34.7 million in fines to settle Department of Justice allegations that it improperly promoted the human growth hormone product Genotropin. The drugmaker's Pharmacia & Upjohn Co. subsidiary pleaded guilty to offering a kickback to a pharmacy-benefits manager to sell more of the drug.

Thereafter,
- Pfizer paid a $2.3 billion settlement in 2009 of civil and criminal allegations and a Pfizer subsidiary entered a guilty plea to charges it violated federal law regarding its marketing of Bextra (see post here).
- Pfizer was involved in two other major cases from then to early 2010, including one in which a jury found the company guilty of violating the RICO (racketeer-influenced corrupt organization) statute (see post here).
- The company was listed as one of the pharmaceutical "big four" companies in terms of defrauding the government (see post here).
- Pfizer's Pharmacia subsidiary settled allegations that it inflated drugs costs paid by New York in early 2011 (see post here). 
- In March, 2011, a settlement was announced in a long-running class action case which involved allegations that another Pfizer subsidiary had exposed many people to asbestos (see this story in Bloomberg).
- In October, 2011, Pfizer settled allegations that it illegally marketed bladder control drug Detrol (see this post).
- In August, 2012, Pfizer settled allegations that its subsidiaries bribed foreign (that is, with respect to the US) government officials, including government-employed doctors (see this post).
- In December, 2012, Pfizer settled federal charges that its Wyeth subsidiary deceptively marketed the proton pump inhibitor drug Protonix, using systematic efforts to deceive approved by top management, and settled charges by multiple states' Attorneys' General that it deceptively marketed Zyvox and Lyrica (see this post).
- In January, 2013, Pfizer settled Texas charges that it had misreported information to and over-billed Medicaid (see this post).
- In July, 2013, Pfizer settled charges of illegal marketing of Rapamune (see this post.)
- In April, 2014, Pfizer settled allegations of anti-trust law violations for delaying generic versions of Neurontin( see this post).
- In June, 2014, Pfizer settled another lawsuit alleging illegal marketing of Neurontin (see this post).

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Same Old, Same Old - Johnson and Johnson Settles Charges it Concealed Adverse Effects of Risperdal, Vaginal Mesh Device, Pleads Guilty to Selling Adulterated Tylenol, Announces CEO Got 48% Raise to $25 Million

adulterated drugs adverse effects Alex Gorsky crime deception Johnson and Johnson legal settlements manufacturing problems William Weldon

Same Old, Same Old - Johnson and Johnson Settles Charges it Concealed Adverse Effects of Risperdal, Vaginal Mesh Device, Pleads Guilty to Selling Adulterated Tylenol, Announces CEO Got 48% Raise to $25 Million

Unknown 3/19/2015 Komentar

We have devoted a lot of bytes over the years to the stream of allegations and ethical questions about Johnson and Johnson, the giant pharmaceutical/ biotechnology/ device company, and resulting legal actions.  Meanwhile, the company has bestowed a gushing stream of money on its top executives.  Its almost spring, 2015, and it seems nothing has changed.

Johnson and Johnson's Latest Legal Misadventures

Jury Verdict that Company Concealed Harms of Risperdal

Let us start with the latest legal news about J&J.  In late February, 2015, as reported on the PharmaLot blog by Ed Silverman,

In a setback to Johnson & Johnson , a Philadelphia jury decided the health care giant must pay $2.5 million in damages for failing to warn that its Risperdal antipsychotic could cause gynecomastia, which is abnormal development of breasts in males. The lawsuit was brought by the family of an autistic boy who took the drug in 2002 and later developed size 46 DD breasts, according to a lawyer for the family.

The case has drawn attention for a few reasons. For one, this was the first lawsuit claiming J&J hid the risks of gynecomastia to go to trial after a handful of cases were settled in recent years. The trial also served as a reminder that J&J paid $2.2 billion two years ago to resolve criminal and civil allegations of illegally marketing Risperdal to children and the elderly.

Moreover, former FDA commissioner David Kessler served as a paid expert witness for the family and testified that J&J knew about the risks associated with Risperdal, but failed to disclose the data showing the extent to which youngsters may develop gynecomastia. In a report prepared for a 2012 case that was settled, Kessler wrote that J&J’s Janssen unit, which marketed the drug, had violated the law.

Note that the central allegation in this case was not simply that the drug had adverse effects, but that the company knew about these effects, and hid them.  In my humble opinion, since we entrust pharmaceutical companies to provide safe and effective products, withholding information about adverse effects is a fundamental violation of this trust. 

As noted above, this follows on another case with a much bigger financial settlement about questionable marketing of Risperdal. In addition, as the PharmaLot post noted, there are many more individual cases like this one waiting in the wings, "J&J says there are about 1,200 such lawsuits filed in courts around the country,..."

Jury Verdict that Company Concealed Harms of  Vaginal Mesh Device

Similarly, as reported by Reuters in early March, 2015,

A California jury on Thursday ordered Johnson & Johnson's Ethicon Inc unit to pay $5.7 million in the first trial over injuries blamed on the TVT Abbrevo, one of numerous transvaginal mesh products that are the subject of thousands of lawsuits.

Following more than three days of deliberations in Kern County, California, jurors found Ethicon liable for problems with the TVT Abbrevo's design and for failing to warn about its risks, according to a lawyer for plaintiff Coleen Perry.

Perry was awarded $700,000 in compensatory damages and an additional $5 million in punitive damages after jurors in the Bakersfield court found Ethicon's conduct amounted to 'malice,' her lawyer said.

Again, note that this lawsuit was not merely about the adverse effects of, in this case, a device, but about allegations that the company knew about these effects, but hid them.  My comments about violation of a fundamental trust above apply. 

Again, this is but one of the earlier cases of a cohort that may number 36,000.

Company Pleads Guilty to Selling Adulterated Tylenol

Finally, as reported in mid-March, 2015, by Reuters,

A Johnson & Johnson subsidiary pleaded guilty on Tuesday to selling liquid medicine contaminated with metal and agreed to pay $25 million to resolve the case, the U.S. Department of Justice said on Tuesday.

The subsidiary, McNeil Consumer Healthcare, pleaded guilty to one federal criminal charge in the case.

In 2010, the company launched mass recalls of certain children's over-the-counter-medicines, including Infants' Tylenol and Children's Motrin, made at its Fort Washington, Pennsylvania plant.

It was the latest in a series of recalls at the time. There were far-reaching multiple recalls from 2008 to 2010 involving hundreds of millions of bottles and packages of consumer brands such as Tylenol, Motrin, Rolaids, Benadryl and other products due to faulty manufacturing. The recalls kept widely used products such as Children's Tylenol off pharmacy shelves and seriously tarnished J&J's once-sterling reputation.

In addition to metal particles getting into liquid medicines, there were moldy odors and labeling problems.

Furthermore, as emphasized in a report in the Philadelphia Business Journal, this case also involved allegations that the company seemed to conceal the problem.

McNeil, after receiving the consumer complaint, did not initiate or complete a 'corrective action preventive action' plan as required by the federal government.

The federal government also alleged other instances in which McNeil found metal particles in bottles of infants' Tylenol at its Fort Washington facility, but failed to initiate or complete a corrective action plan.

Note that in this case, the company pleaded guilty and so could not claim it was merely settling to put the case behind it.  Furthermore, note that this was not the first case arising from charges that the company sold adulterated products made in the Pennsylvania and other factories (for example, see this post.)   We posted frequently about a long string of recalls of presumed defective or adulterated Johnson and Johnson products (here, here, here and here).  Again, in my humble opinion, we we trust drug companies to sell pure, unadulterated products.  Selling adulterated products again fundamentally violates this trust.

Unfortunately, these three cases, like many of the legal settlements we discuss, involved relatively small penalties that only accrued to the company as a whole.  The monetary penalties, while they may seem large to regular citizens, could appear as relatively trivial costs of doing business to company management.  Furthermore, no individual who authorized, directed, or implemented the behavior identified in these cases suffered any kind of penalty.  So these cases added to the many examples of the impunity of managers of large corporations who almost never seem to bear any legal responsibility for their actions.  In the case of Johnson and Johnson managers, this is all the more striking, since the current cases are just the latest in a very long string.  (See Appendix below for a list of Johnson and Johnson legal misadventures we have discussed since 2010.)


Johnson and Johnson CEO's Latest Raise


Finally, a day later, the Wall Street Journal reported on the continuing good fortune of the Johnson and Johnson CEO, to be contrasted with the company's poor fortunes in the courts of law.

Johnson & Johnson said Chairman and Chief Executive Alex Gorsky’s total compensation jumped 48% to $25 million last year, lifted by an increase in stock and option awards. Mr. Gorsky’s stock and option awards rose to a total value of $13.6 million from $8.7 million a year earlier. The board also raised Mr. Gorsky’s base salary to $1.5 million from $1.45 million in 2013, and the CEO also benefited from a jump in pension value.

In a filing Wednesday, the pharmaceutical giant said Mr. Gorsky’s compensation increase was based on the board’s conclusion that J&J successfully executed near-term priorities, exceeded financial goals and built on momentum in its pharmaceutical business.

As a result, J&J awarded Mr. Gorsky an annual performance bonus of 135% of target and long-term incentives at 130% of target. Awards at J&J are capped at 200% of target.

The article noted that at least one other top Johnson and Johnson manager also was raking it in.

Paulus Stoffels, world-wide chairman of Pharmaceuticals, made $18.3 million last year, more than double his 2013 total compensation, boosted by a stock award of $10.7 million.

Funny, the board's rosy view of Mr Gorsky's performance seemed totally uninformed by the company's latest legal misadventures.

(By the way, to anyone who would argue that many of these misadventures were the results of behavior that occurred before Mr Gorsky became CEO, note that his official company biography stated that he joined the company's Executive Committee in 2009, implying some shared responsibility for overall company management since then.)

Same Old, Same Old

A few weeks back, one of our commentators complained that our posts have a certain sameness.  Unfortunately, we agree.  We keep seeing variants of the same sorts of outrageous stories in the news media that we began to post about in 2004.   The problems are not getting better.  Perhaps they are getting worse.

In particular, we have previously contrasted this particular company's recurrent legal and ethical problems with its top managers' accumulating wealth.  In 2011 we posted about the contrast between previous Johnson and Johnson CEO William Weldon's enlarging fortune and political influence with some of the earlier legal cases that raised questions about the trustworthiness of the company.

But the point of this blog is not to come up with titillating stories to make people chuckle.  The point is to challenge the continuing, severe problems afflicting the leadership and governance of health care, the resulting incompetent, unethical, and sometimes criminal behavior, and the downstream effects on patients' and the public's health.  Do not blame the messenger for the sameness of the problem.  Blame those who are getting wealthy and powerful from the ongoing decline in health care. 

If we truly want to see more accessible, more effective, less costly health care in our life times, we need to first call out the bad leadership that has kept such aspirations at bay for so long, and second start to hold current leadership accountable for the mess they have made.


Appendix - Johnson and Johnson Legal Record since 2010-
2010
- Convictions in two different states for misleading marketing of Risperdal
- A guilty plea for misbranding Topamax
2011
- Guilty pleas to bribery in Europe  by Johnson and Johnson's DePuy subsidiary
- A guilty plea for marketing Risperdal for unapproved uses  (see this link for all of the above)
- A guilty plea to misbranding Natrecor by J+J subsidiary Scios (see post here)
2012 
 - Testimony in a trial of allegations of unethical marketing of the drug Risperdal (risperidone) by the Janssen subsidiary revealed a systemic, deceptive stealth marketing campaign that fostered suppression of research whose results were unfavorable to the company, ghostwriting, the use of key opinion leaders as marketers in the guise of academics and professionals, and intimidation of whistleblowers. After these revelations, the company abruptly settled the case (see post here).
-  Johnson & Johnson was fined $1.1 billion by a judge in Arkansas for deceiving patients and physicians again about Risperdal (look here).
-  Johnson & Johnson announced it would pay $181 million to resolve claims of deceptive advertising again about Risperdal (see this post).
2013
-  Johnson & Johnson settled case by shareholders alleging that management made misleading statements and withheld material information about manufacturing problems (see this post)
-  Johnson & Johnson Janssen subsidiary pleaded guilty to a charge of misbranding Risperdal, and settled for a total of $2.2 billion allegations that it promoted the drug for elderly demented patients and adolescents without an indication, and despite evidence of its harms (see this post).
 -  Johnson & Johnson DePuy subsidiary agreed to settle with multiple plaintiffs for $2.5 billion allegations that it sold defective mental-on-metal artificial hip, and hid evidence of its harms .
- Johnson & Johnsonn Janssen subsidiary was found by two juries to have concealed harms of its drug Topamax (see this post for this and above case).
- Johnson & Johnson Ethicon subsidiary's Advanced Surgical Products and two of its executives agreed to settle charges by US FDA that is sold mislabeled products used to sterilize equipment such as endoscopes (see this post).
- Johnson & Johnson fined by European Commission for anticompetitive practices, that is, collusion with Novartis to delay marketing generic version of Fentanyl (see this post).
2014 
- Johnson & Johnson DePuy subsidiary settled Oregan state charges that it marketed the ASR XL metal-on-metal hip joint prosthesis without disclosing its high failure rate (see this post). 

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