Public Citizen, a key industry watchdog advocating public interests in Washington, has released its newest update to a major 2012 report, which analyzed the most significant court judgments and settlements between pharmaceutical corporations and the federal and state governments.
In its first analysis, which covered settlements between 1991 and July 2012, the non-profit found that prominent players in the pharmaceutical industry had paid governments more than $30 billion, often over allegations of unlawful “off-label” marketing. From 2013 to 2015, years just added to the study’s data set, financial penalties dropped “sharply,” Public Citizen’s team of doctors and public health researchers discovered.
Steep Decline In Government – Pharma Settlements
While the federal government secured $8.7 billion in settlements and verdicts between 2012 and 2013, only a modest $2.4 billion in penalties were collected from 2014 to 2015. But the number of settlements only decreased by two over the same period, from 22 to 19. The government isn’t leveling fewer allegations against pharmaceutical companies, but it’s settling for much less, from an average of $395 million in 2012 to an average of $126 million in 2014.
States, however, seem to have decreased their enforcement efforts drastically. While 95 settlements were reached between 2012 and 2013, only 20 were secured from 2014 to 2015, an almost 80% decline. This sharp drop accounts for most of the overall reduction in verdicts and settlements, despite the fact that Public Citizen only began including settlements lower than $1 million in its review halfway through 2012.
Two alleged violations continue to account for the vast majority of penalties: off-label promotion, or the marketing of a drug for unapproved purposes, and fraudulent drug pricing that overcharges state Medicaid programs. While alleged Medicaid fraud is the most common violation, according to lead author Sammy Almashat, MD, MPH, off-label promotion results in the largest penalties, either financial settlements or court verdicts. But the federal government collected only $263 million over allegations of off-label promotion between 2014 and 2015, compared to almost $2.8 billion in the previous two-year period. Again, the researchers attributed this sharp decline, not to fewer alleged violations, but smaller settlements.
Criminal penalties, all of which have originated at the federal, were cut in half from 2012 to 2015, dropping from $2.7 billion in 2012-2013 to a mere $44 million in 2014-2015.
GlaxoSmithKline Tops Public Citizen’s “Worst Offenders” List
While nearly every major pharmaceutical corporation had been embroiled in legal trouble at some point during the study period, GlaxoSmithKline and Pfizer topped the list of “Worst Offenders,” both in number of settlements and size of criminal and civil penalties.
Both GlaxoSmithKline and Pfizer entered 31 settlements with the federal and state governments between 1991 and 2015, paying totals of $7.9 billion and $3.9 billion respectively. While those numbers certainly sound large, they pale in comparison to drug company profits. Between 2003 and 2012 (only 10 out of the 25 years studied), the world’s 11 largest pharmaceutical companies made $711 billion in net profits. $35.7 billion, the total amount collected by federal and state governments during the entire 25 year period, is equal to only 5% of those profits.
Even more striking is the disparity between how much companies made off specific drugs and the penalties assessed for violations related to those drugs. In 2012, for example, GlaxoSmithKline agreed to settle numerous allegations of fraud and off-label promotion for a staggering $3 billion. Far more staggering is how much Paxil, Wellbutrin SR and Avandia – the three drugs over which the company entered a criminal plea agreement – had made for GlaxoSmithKline during the time period covered by the settlement: $28 billion, about nine times the total fine.
Whistleblowers Relied On By Feds, But Not States
Today, GlaxoSmithKline is facing more than 200 personal injury lawsuits, which claim the company’s nausea drug Zofran was unlawfully promoted for unapproved use during pregnancy, an allegation first raised in a qui tam (or “whistleblower”) lawsuit filed by two former employees.
Public Citizen’s researchers found that while the majority of federal lawsuits against pharmaceutical companies begin with the revelations of private whistleblowers, state governments have largely failed to pick up on the allegations leveled by qui tam complainants. Only 4 states, California, Florida, New Jersey and Texas, were able to assess penalties by using information first brought to light by whistleblowers between 1991 and 2015.