Pharma Strategy Blog

Commentary on Pharma & Biotech Oncology / Hematology New Product Development

This year we have seen the Office of Inspector General (OIG) of the US Department of Health and Human Services enter into a number of large settlement agreements with pharmaceutical companies for alleged violation of anti-kickback regulations which prevent companies from offering inducements to physicians to prescribe a drug, and for alleged violations of regulations that prevent billing of false or fraudulent claims to federal programs such as Medicare and Medicaid.

What is surprising is the extent that many companies have allowed their staff to violate rules and regulations for which companies have for several years required their staff to undertake mandatory training.  The scale of the lack of ethical oversight is both unprecedented and mind boggling.

As reported by the New York Times, in October this year AstraZeneca agreed to pay $520M to the Federal Government for alleged improper sale and promotion of antipsychotic Seroquel.  Since 2004, Seroquel has had $17billion of sales, so the settlement works out at around 3% of sales revenue.

Pfizer agreed to pay $2.3 billion to settle claims for illegal promotion of Bextra, Geodon,  Zyvox and Lyrica resulting in false or fraudulent claims for Medicare/Medicaid reimbursement to be submitted to the federal government.  If you read the settlement agreement, Pfizer allegedly paid illegal kickbacks from 2001 to 2004 to health care professionals to induce them to promote and prescribe Aricept, Celebrex, Liptor, Norvasc, Relpax, Viagra, Zithromax, Zoloft and Zyrtec. 

What is surprising is how widespread the problems were at Pfizer, despite the fact the company had entered corporate integrity agreements (CIA) with OIG in 2002 and 2004 as a result of previous non-compliance.  As part of the 2009 settlement with OIG, Pfizer has been required to sign yet another corporate integrity agreement with penalties for non-compliance built in.  The 2009 CIA makes informative reading for anybody with an interest in setting up a compliance program.

Eli Lilly agreed to pay $1.4 billion early this year for alleged improper marketing of Zyprexa to patients who did not have schizoprenia or bipolar disorder, its only approved indications.

Last week, Reuters reported that Omnicare the largest U.S. provider of pharmacy services would pay $98 million and Teva’s IVAX subsidiary would pay $14 to settle claims with the U.S. government that they solicited kickbacks in exchange for encouraging doctors to prescribe Johnson & Johnson’s anti-psychotic Risperdal.

A few weeks ago, the LA Times reported that 15 states are suing Amgen over accusations of offering kickbacks to doctors to prescribe Aranesp. The states accuse Amgen sales representatives of encouraging doctors to bill insurers for Aranesp that the practitioners received free from the company.

What is clear to all of us is an industry-wide failure of compliance programs and lack of ethical integrity by pharmaceutical marketers and sales professionals.  In its own way it is a sad reflection of the greed that gave rise to the excesses of Wall Street.   It is likely that more settlements will be announced, although one can naively hope not. 

Despite the 40,000 layoffs reported in the Pharma industry this year, there are going to be plenty of jobs for experienced compliance professionals as pharmaceutical companies attempt to put their houses in order.

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3 Responses to “Do the OIG guidelines keep U.S. pharma companies compliant?”

  1. A Twitter User

    I saw AZ were hiring a Sen Director Compliance.
    Their costs re Seroquel are already over $1 billion (inc legal fees). My guess is the final total will be over $3billion. That’s 17% of total lifetime sales.

  2. Anonymous

    A comment by Jane Chin, Phd on her blog after the AstraZeneca ‘buckets of money’ scandal:
    … based on recent events coming out of AstraZeneca, it proves that no amount of corporate lawyers and compliance officers and quarterly compliance training program can legislate ethics if the corporate culture rewards results that can come from questionable or unethical conduct.

  3. D V Nguyen

    This is another example of business startegies driving compliance rather than working with compliance to achieve the same goals legitimately. It’s worth noting that Pfizer shut down 6 R&D centers after its settlement with DOJ.

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