Predatory Pharma

http://money.cnn.com/2010/06/04/news/companies/astrazeneca_pharmaceutical_fines.fortune/index.htm

By Ken Stier, contributorJune 4, 2010: 3:23 PM ET


FORTUNE -- The federal government is fed up with the amount of fraud, especially recurring fraud from the same companies, happening in the pharmaceutical industry. So regulators have decided that when it comes to punishments, it's time to get personal.

From now on, individual executives risk being ejected from their jobs -- and perhaps even barred from the industry -- for fraud their companies commit, even if they did not participate or even know about the crimes.

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The initiative is part of the Obama Administration's effort to slash health care fraud, estimated to cost taxpayers 3% to 10% of total sector spending -- $27 to $80 billion this year. Pharmaceutical fraud cases are usually comprised of kickbacks to doctors, overpricing, or off-label marketing, or a mix of the three.

In the government's most recent major settlement -- in which AstraZeneca agreed to pay $520 million -- the fine represented 16.5% of the $8.6 billion income (between 2001-2006) from U.S. sales of Seroquel, a powerful anti-psychotic. AstraZeneca (AZN) turned this narrowly approved drug into a cash cow by marketing it for much wider use, including by the elderly and children, even though they are particularly vulnerable to "serious and debilitating side effects."

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http://www.nakedcapitalism.com/2010/06/guest-post-predatory-pharma-%E2%80%93-an-end-to-too-big-to-nail.html

One could reasonably ask why wouldn’t federal prosecutors sue and get a conviction of the corporation in court. Alas, there are rather thorny legal and practical problems involving a serial recidivist:

…when it came to prosecuting Pfizer for its fraudulent marketing, (of Bextra, Pfizer’s answer to Vioxx) the pharmaceutical giant had a trump card: Just as the giant banks on Wall Street were deemed too big to fail, Pfizer was considered too big to nail.

Why? Because any company convicted of a major health care fraud is automatically excluded from Medicare and Medicaid. Convicting Pfizer on Bextra would prevent the company from billing federal health programs for any of its products. It would be a corporate death sentence.

Prosecutors said that excluding Pfizer would most likely lead to Pfizer’s collapse, with collateral consequences: disrupting the flow of Pfizer products to Medicare and Medicaid recipients, causing the loss of jobs including those of Pfizer employees who were not involved in the fraud, and causing significant losses for Pfizer shareholders.

“We have to ask whether by excluding the company [from Medicare and Medicaid], are we harming our patients,” said Lewis Morris of the Department of Health and Human Services.

So, Pfizer and the feds cut a deal. Instead of charging Pfizer with a crime, prosecutors would charge a Pfizer subsidiary, Pharmacia & Upjohn Co. Inc.

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Both articles are worth reading in their entireties.

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