Friday, January 13, 2012

Pharma and Phraud

Here's a report from Public Citizen summarizing the recent trend in payments by the pharmaceutical industry of civil and criminal monetary penalties. It seems that pharma has now eclipsed the defense industry as the leading defrauder of the US government under the False Claims Act. Some of the report's findings:

In the last twenty years, pharma firms have made 165 settlements for $19.8 billion in penalties. Three-quarters of these (both in terms of numbers of settlements and in terms of fines paid) have occurred in the last five years. GlaxoSmithKline, Pfizer, Eli Lilly, and Schering-Plough accounted, together, for more than half of the twenty years' penalties. Illegal off-label promotion of drugs has triggered the largest number of federal fines. Overcharging state Medicaid programs triggered the largest state-level fines. Actions initiated by industry whistleblowers gave rise to 67 percent of payouts over the last decade.

The report concludes that fines are probably not sufficient motivation to get high-profit-margin firms to behave. It recommends the application of the "Park Doctrine" to pharma executives--a doctrine under which individual executives can be convicted of criminal misdemeanors based on corporate misbehavior, even if they weren't personally aware of the problem. The doctrine is designed to motivate executives to become pro-active in preventing their firms from engaging in criminal misconduct.

The report's call for the FDA to revive the long-neglected Park Doctrine in fact follows recent signals from the FDA that it intends to do just that. The law firm of Hyman, Phelps and McNamara has an informative powerpoint presentation on the FDA's past and future use of the Park doctrine, here. The clear message from the FDA has been, "Expect some prosecutions of pharma executives soon!"

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