More than 200 families have now filed lawsuits against GlaxoSmithKline, claiming the company deceived physicians and patients into using the anti-nausea drug Zofran, a prescription approved only for cancer and surgical patients, as a treatment for morning sickness. In large part, their lawsuits are based on allegations first raised in a qui tam, or whistleblower, lawsuit filed by two former GlaxoSmithKline employees in 2003.
Thomas Gerahty and Matthew Burke, in a complaint originally filed in the US District Court of Massachusetts, said their former employer had exploited pre-existing relationships with obstetricians and gynecologists to promote Zofran as an “off-label” medication for use during pregnancy. Nearly a decade later, after the US federal government and numerous states had taken up Gerahty and Burke’s claims as their own, GlaxoSmithKline decided to settle the case, agreeing to pay $3 billion to “resolve” the government’s allegations.
Once Common, Huge Off-Label Settlements Now Rare
At one point, such settlements were common practice. It would not be hyperbole to say that pharmaceutical companies are routinely sued by the federal and state governments, often over alleged violations of the laws that prohibit off-label promotion. Nor would it be inaccurate to say that the government frequently requires these companies to pay significant financial penalties, sums that can reach into the billions of dollars. But a new report, just released by the industry watchdog Public Citizen, suggests that this trend is changing.
Between 1991 and July of 2012, the pharmaceutical industry paid the federal and state governments more than $30 billion, in both settlements and court verdicts, to resolve allegations that ranged from off-label promotion to defrauding Medicare and Medicaid. That was the result of Public Citizen’s first report on this topic, which was published in September of 2012. But in more recent years, covered in the non-profit’s newest paper, the government has been settling for far less than it once did.
Feds Settle For Less, States Pursue Fewer Cases
From 2012 to 2013, the federal government secured $8.7 billion in 22 settlements with, or verdicts against, major players in the pharmaceutical industry. The following two years, however, tell a very different story.
While the federal government resolved 19 different cases between 2014 and 2015, nearly identical to the number from 2012 – 2013, it recovered only $2.4 billion, more than 72% less. So it’s not that the government has stopped taking Big Pharma to task, but that it’s demanding smaller penalties, from an average of $395 million in 2012 – 2013 to an average of $126 million in 2014 – 2015.
More specifically, the federal government seems to be demanding less money for alleged off-label promotion, allegations like those raised by Gerahty and Burke over Zofran. While off-label promotion cases garnered the government $2.8 billion in 2012 – 2013, these cases led to settlements totaling only $263 million in 2014 – 2015, a decline of more than 90%.
Cases filed by the states, on the other hand, have dropped off sharply. Between 2012 and 2013, state governments settled a total of 95 lawsuits against pharmaceutical companies, securing $1.2 billion. But over the following two-year period, the states recovered nearly 65% less, with total penalties of only $424 million secured in just 20 settlements or court verdicts. The decline for single-state settlements was even sharper, from 73 in 2012 – 2013 to 5 in 2014 – 2015.
3 Theories For The Drop In Accountability
Is this the beginning of a new trend, in which states sue pharmaceutical companies less, and the federal government settles its claims for less? Or was 2012 – 2013 itself a blip, a two-year period in which governments pursued health care violators with rare zeal?
Looking at the total number of settlements from 2003 to 2015, it seems obvious that the high reached in 2013 was not an outlier, but itself the result of a clear trend towards increased enforcement:
So what changed? Although few of these cases end with an admission of liability or guilt from a pharmaceutical company, we can assume that some, if not all, of the government’s allegations are well-founded. Did the companies just stop breaking the law?
1. Off-Label Promotion & Free Speech
One possible explanation is that the law, or at least the way courts interpret the law, actually changed.
In 2008, Alfred Caronia, a former sales rep for the small pharmaceutical company Orphan Medical was convicted of promoting a narcolepsy drug, Xyrem, for off-label uses. Caronia appealed, arguing that the government’s case infringed on his First Amendment right to free speech, since none of the things he’d said about Xyrem were untrue. Perhaps surprisingly, the Second Circuit Court of Appeals, which is one step beneath the Supreme Court and often serves as the final arbiter on legal disputes, agreed. Overturning Caronia’s conviction, the court wrote that “the government cannot prosecute pharmaceutical manufacturers and their representatives under the FDCA for speech promoting the lawful, off-label use of an FDA-approved drug.”
Did the government become more reticent, unwilling to investigate potential off-label promotion, in the wake of United States v. Caronia? It’s hard to tell, although it would be a mistake to overemphasize the case’s ramifications.
After all, Caronia hinged on “speech,” on whether or not a pharmaceutical rep has the right to make truthful, but off-label claims about a specific drug. Caronia, for that matter, was only one man. While most lawsuits filed by the federal government over off-label promotion involve some sort of off-label “speech,” they rarely involve only that “speech,” and usually come to encompass systemic, or company-wide, efforts to defraud public insurance programs by misrepresenting the safety and / or efficacy of a medication. In short, the federal government usually pursues bigger cases, lawsuits alleging far more egregious violations than were alleged in Caronia.
At least one recent court decision, delivered in Manhattan, has doubled-down on the judgment in Caronia, allowing a small pharmaceutical company to continue the off-label promotion of an Omega-3 fatty acid drug, so long as its statements about the product remain “truthful and non-misleading.”
2. Pharmaceutical Companies Started Following The Law
Another possibility is that Big Pharma just cleaned up its act. But Public Citizen could find no evidence to support that idea, noting that the number of whistleblower lawsuits, which often serve as the first hint of corporate wrongdoing, have not declined substantially over the last 6 years.
Even more persuasive, and troubling, is the researchers’ second argument. In their minds, there just isn’t a good reason for drug companies to stop breaking the law. The penalties for doing so are “minuscule,” they write, far-outweighed by the potential gains that off-label promotion promises.
Pharmaceutical corporations lost around $35.7 billion in settlements and court verdicts between 1991 and 2015. But that sum equals only 5% of the 11 largest drug companies’ net profits from the same period, a mere drop in a very large bucket. Executives, even those who guided the decisions of corporations found guilty of systemic fraud, are rarely, if ever, prosecuted. No parent company, Public Citizen writes, has ever been “excluded from participation in Medicare and Medicaid for illegal activities.”
The government’s bark is far worse than its bite and, in recent years, its bark has been almost silenced.
3. Big Pharma Found A New Way To Increase Sales
The pharmaceutical landscape is changing, at least where marketing practices are concerned. Until recently, many of the government’s lawsuits had focused on specific doctors, physicians who had been hired by drug companies to promote medications off-label and rewarded for their efforts through illegal kick-backs. But those tactics have become far more difficult to pull off.
For one, the Affordable Care Act established an online database, at https://openpaymentsdata.cms.gov/, where drug companies are required to report their financial relationships with doctors. Teaching hospitals have been under increasing pressure to cut their ties with the industry, since the American Medical Student Association began grading academic medical facilities on the strength of their conflict of interest policies.
To a certain extent, traditional off-label promotion, often the result of backroom handshakes between doctors and pharmaceutical representatives, is just harder to do with all this new-found transparency. But other, “as-yet undetected” techniques for boosting drug sales are possible, Public Citizen says. If it’s true that the tactics of drug companies have evolved, we may just be slow in catching up.