Health Care Fraud a Growing Problem

On July 2, 2012, a federal judge approved an agreement by British drugmaker GlaxoSmithKline to pay $3 billion for criminal and civil violations involving 10 drugs, the largest health care fraud settlement in U.S. history. GlaxoSmithKline pleaded guilty to promoting the popular antidepressants Paxil and Wellbutrin for unapproved uses.

Prior to the Glaxo settlement, the record-setting case involved Pfizer Inc., the world’s biggest drugmaker. It paid the government $2.3 billion in 2009 in criminal and civil fines for improperly marketing 13 different drugs, including erectile-dysfunction drug Viagra and cholesterol fighter Lipitor, the top-selling drug in the world for years. Pfizer was accused of encouraging doctors to prescribe its drugs with free golf, massages and junkets to posh resorts.

In May 2012, Abbott Laboratories settled for $1.6 billion over its marketing of the antipsychotic drug Depakote. And an agreement with Johnson & Johnson on June 11, 2012, the company agreed to pay up to $2.2 billion, including a criminal penalty portion of as much as $600 million, to settle U.S. investigations and lawsuits into abusive marketing practices involving the antipsychotic Risperdal and other prescription drugs.

Government officials said in the original complaint against Glaxo that the company promoted Paxil as safe for children and adolescents, even though the U.S. Food and Drug Administration (FDA) hadn’t approved it for those patients and the company’s clinical trials raised concerns about an increased suicide risk.

Prosecutors had charged that the drugmaker promoted Wellbutrin for unapproved uses that included treating attention deficit disorder, bipolar disorder, obesity, sexual dysfunction and anxiety when it wasn’t shown to be safe and effective for those uses.

The company also admitted that it failed to report to the government some safety problems with Avandia. In 2010, the diabetes drug was restricted in the U.S. and banned in Europe after it was found to sharply increase the risks of heart attacks and congestive heart failure.

I have previously blogged about the GlaxoSmithKline case in the context of a whistleblower lawsuit brought against the company. In October 2010 it was reported that Cheryl Eckard, a quality-assurance manager at Glaxo who had blown the whistle on the safety of products made in its Puerto Rico plant, had been fired as a result of what the company called a “redundancy” related to the merger of Glaxo Wellcome and SmithKline Beecham a couple of years before. Of course, the suspicion was that Eckard was fired because she refused to go along in a cover-up of the quality assurance and compliance problems at the plant.

Eckard filed a federal lawsuit against Glaxo under the U.S. False Claims Act. The law prohibits people or businesses from defrauding the government, and provides incentives for people who suspect wrongdoing to come forward. Lawsuits are typically filed confidentially and the Justice Department determines whether the case has enough merit for it to take over. If the Justice Department is successful in recovering money – usually through a settlement – the whistleblower is generally entitled to receive from 15% to 25% of the award. Cheryl Eckard won $96 million as part of an initial $750 million penalty against Glaxo.

Last week it was announced that the company had settled lawsuits from claims made by four employees of GlaxoSmithKline, including a former senior marketing development manager for the company and a regional vice president, who tipped off the government about a range of improper practices from the late 1990s to the mid-2000s.

Prosecutors said the company had tried to win over doctors by paying for trips to Jamaica and Bermuda, as well as spa treatments and hunting excursions. In the case of Paxil, prosecutors claim GlaxoSmithKline employed several tactics aimed at promoting the use of the drug in children, including helping to publish a medical journal article that misreported data from a clinical trial.

A warning was later added to the drug that Paxil, like other antidepressants, might increase the risk of suicidal thoughts in teenagers. Prosecutors said the company had marketed Wellbutrin for conditions like weight loss and sexual dysfunction when it was approved only to treat major depressive disorder.

They said that in the case of Avandia, whose use was severely restricted in 2010 after it was linked to heart risks, the company had failed to report data from studies detailing the safety risks to the FDA.

The Glaxo settlement is the latest in a string of settlements related to pharmaceutical companies that put profits ahead of patients. In recent years, the government has cracked down on drugmakers’ aggressive tactics, which include marketing medicines for unapproved uses. While doctors are allowed to prescribe medicines for any use, drugmakers cannot promote them in any way not approved by the FDA.

The actions against pharmaceutical companies raise serious questions about the safety of medicines that are increasingly marketed to, and taken by, children and adolescents. It is a problem that should not be tolerated and threatens the health of young people in the US.

I have to wonder about the business ethics at companies like GlaxoSmithKline. I went online to look at its code of conduct. Here it is:

The actions of Glaxo violate just about every provision of its code. Unfortunately, all too many companies look at their code as a piece of paper that serves as a PR document and then it is filed away never to be seen again.  A code of conduct should be a living document that guides the actions of company employees and top management. Ethics training is essential to inform employees of the importance of the code and the ethical expectations in the workplace.  An effective code requires oversight including management involvement, a hot line and whistle-blowing procedures. Most important is for top management to set the proper ethical tone by their actions and to “walk the talk” of ethics.

Blog posted by Steven Mintz, aka Ethics Sage, on July 10, 2012