Friday, September 17, 2010

Forest Pharmaceuticals Pleads Guilty to Obstruction of Justice, No Individual Pays Any Penalty

The parade of legal settlements marches on.  The latest story is about Forest Laboratories and its marketing of Celexa (citalopram ) and Levothyroid (l-thyroxin).  Here is the most complete version, courtesy of Natasha Singer reporting for the New York Times. First, the lead sentence:
A unit of Forest Laboratories, the maker of the antidepressant Celexa, agreed on Wednesday to pay more than $313 million to settle criminal and civil complaints, including a claim that it had illegally promoted the drug for use in children.

Here are the charges:
Among the criminal charges was one that the subsidiary, Forest Pharmaceuticals, marketed Celexa, which was approved only for adult depression, to treat children and adolescents. The government also claimed that, in conjunction with the company’s off-label promotion, Forest publicized the positive results of a study on Celexa in adolescents while failing to tell doctors about a similar study that had negative results.

'Forest Pharmaceuticals deliberately chose to pursue corporate profits over its obligations to the F.D.A. and the American public,' Carmen Ortiz, the United States attorney for the District of Massachusetts, said in a statement Wednesday.

In addition, federal prosecutors accused Forest of paying doctors to induce them to prescribe Celexa and another antidepressant, Lexapro. The remuneration included 'cash payments disguised as grants or consulting fees, expensive meals and lavish entertainment, and other valuable goods and services,' the government said in its civil complaint.

Among the items that Forest sales representatives gave to doctors from 1998 to 2005, the complaint said, were tickets to St. Louis Cardinal games, which were to be 'leveraged and sold as a reward for prescriptions'; a $1,000 gift certificate to Alain Ducasse, a gourmet French restaurant, for a high-prescribing child psychiatrist; a deep-sea fishing trip off Cape Cod for a doctor and his three sons; $400 in Broadway theater tickets for a doctor and his wife; and Red Sox tickets worth $2,276 to be used for doctors in the Boston area.

So we not just off-label marketing, but suppression of clinical research (of course, a study whose results were not favorable to the product being marketed), and payments to doctors as an "inducement to prescribe."

But wait, there is more:
As part of the criminal settlement, Forest Pharmaceuticals, which is based in St. Louis, agreed to plead guilty to one felony count of obstructing justice, acknowledging that employees had lied to F.D.A. officials during a plant inspection in 2003.

The company also agreed to plead guilty to two misdemeanors, one of which covers the company’s misbranding of Celexa by marketing the antidepressant for use in children from 1998 to 2002.

The other misdemeanor covers the illegal distribution from 2001 to 2003 of an unapproved drug, Levothroid, to treat a thyroid hormone deficiency. Such thyroid pills, made by various drug makers, had been sold in the United States since the 1950s without F.D.A. approval. But in 2001, the agency told drug makers that they needed to reduce their distribution of such medications until the companies obtained agency approval to market the pills.

The criminal charges accused Forest of making a deliberate decision to continue distributing the drug in quantities exceeding the F.D.A.’s directive. After the agency sent a warning letter to Forest, the company directed employees to work until 1 a.m. to continue shipping as much Levothroid as possible, according to the criminal complaint.

So there was also obstruction of justice in the form of lying to the FDA, and selling drugs that the FDA had ordered not to be sold.

So what are the penalties?
The criminal settlement calls for the company to pay a $150 million fine and to forfeit an additional $14 million in assets. Forest will also pay more than $88 million to the federal government and more than $60 million to the states to resolve a civil complaint that its actions caused false claims to be submitted to federal health care programs. In addition, two whistle-blowers will split $14 million from the federal share of the settlement.

Forest has also entered into a five-year corporate integrity agreement, requiring an independent expert to review the company’s compliance with drug marketing regulations.

So here we go again. A large drug company was up to no good, suppressing research, paying doctors for their prescriptions, lying to the FDA, and disobeying its orders.

The penalty seemed large, over $300 million. However, Celexa was a big revenue generator at the time the events above occurred, topping $1 billion in revenue first in 2002 (per Forbes here). Furthermore, as noted by Ed Silverman on Pharmalot, it seems no individual will suffer any negative consequences for authorizing, directing, or implementing the conduct described above. Finally, as best I can tell, despite the fact that a Forest subsidiary will plead guilty to a felony, the company is not going to be barred from doing business with the government. 

So, despite pleading guilty to a felony and three misdemeanors, neither Forest as a company nor any individual working for the company will really suffer very much.  On the other hand, the leaders of Forest have been doing very well.  The company's CEO, Howard Solomon, was number 18 on Wall Street Journal list of the 25 highest paid CEOs over the last decade.  His total realized compensation was over $385 million over the last 10 years.  According to the company's 2010 proxy statement, his total compensation in 2009 was $8,267,236.  The four other highest paid executives made from just over $2.5 million to $5.3 million.

So here we go again.  Another large health care organization has been found to have done wrong, but the only penalty is a fine that whose impact will be diffused across the whole company, and ultimately be paid by its employees, its customers, including patients, and its stockholders.  Meanwhile, the people who authorized, directed, or implemented the wrong doing apparently will pay nothing and receive no negative incentives.  Furthermore, the top leaders of the company, whose huge compensation in the past was increased by the results of the wrong doing, will continue to prosper.

As we have said again and again,  we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

By the way, the current case offers an avenue for those who do not like what Forest did to ask those who are supposed to be ultimately responsible for its behavior how this was allowed to happen.  The board of directors of the company is supposed to be ultimately accountable for the company's actions.  As we have noted before, these directors are supposed to "demonstrate unyielding loyalty to the company's shareholders." [Per Monks RAG, Minow N. Corporate Governance, 3rd edition. Malden, MA: Blackwell Publishing, 2004. P.200.]

The current directors of Forest Laboratories, according to the company's 2010 proxy statement, include Dr Nesli Basgoz, "Associate Chief for Clinical Affairs, Division of Infectious Diseases, Massachusetts General Hospital (MGH)," and "Associate Professor of Medicine at Harvard Medical School."  Also, it includes Dr Lester B Salans, "Clinical Professor" at Mount Sinai Medical School, not to mention Dr Peter J Zimetbaum, "Director of Clinical Cardiology" at Beth Israel Deaconess Medical Center in Boston (BIDMC), and "Associate Professor of Medicine at Harvard Medical School."   Maybe some enterprising student journalist will get to ask the good doctors how they let things at Forest get so ethically out of hand.


Anonymous said...

After reading this article for the first time I was watching television and was struck by a commercial by Martha Stewart. Here was a woman convicted of insider trading, with a net gain of barely six figures, who was sent to federal prison.

Now we have a company that is messing with kids, withholding information from the public, paying kickbacks to doctors that would in total, exceed Martha Stewart’s material gain on a company wide basis. The company will now pay essentially a $313,000,000.00 parking ticket since no one person will be held responsible, and no business will be lost.

Martha Stewart’s gain did not amount to a rounding error on the 10 total income of the CEO.

I have no relationship with Martha Stewart or any of her companies.

What I do have to question is here is a person who personally made a phone call to sell a security based on insider information. Vs In the case of Forest we have people directing others to circumvent the law, endanger children and engage in criminal activity. Where is the equity?

Martha Stewart paid personally for her transgression. The stockholders and employees will pay for the transgressions of the Forest executives involved; all the while the executives will receive bonuses for increased sales.

Steve Lucas

Reul of Law not Rule by Lawyers said...

What does it take to fix this? I am numb from reading these stories day after day after year after year.

This is clearly due to the prosecutors in the executive branch of government making too easy a deal. Can't the legislative branch direct the executive branch? Can't the judicial branch reject the deals made by the executive branch?

Don't the branches of government balance each other?

Marc said...

There were severe penalties for the executives of Enron and WorldCom, so is the Forest case that of a different class of wrong doing, or a lesser offence?

Nancy Wilson said...

One wonders how universities will deal with ‘star’ faculty who accepted the kickbacks from Forest Laboratories, how the regents will deal with university administrators who participated in the illegal activities, and how medical boards will discipline the physicians who were engaged in the illegal activities.

As of today, The University of Texas regents have not responded to the news:

UT Southwestern Ethics faculty have remained silent as well:

I have no doubt that the Texas Medical Board is looking closely at this case...

Anonymous said...

Oh, I can personally beat the Martha Stewart thing by a league. I was indicted in June on Federal felony charges of health care fraud in an amount exceeding $100. My infraction? While a contract pharmacist in the IHS, I dispensed injectable vitamin K to an EMT, who was a tribal member, to treat his dog after she had ingested a large amount of rat poison. The EMT was on call, so he couldn't leave the area, and the dog was terminal (i.e. she wouldn't have made it the 45 mile trip to the nearest vet), so it wouldn't have mattered anyway.

The dog survived, and the EMT thanked me every time I saw him for the remainder of my tenure in that clinic. Thanked me for saving his friend's life, even though it meant professional risk for me. I didn't realize the extent of the risk, however. Because the medication in question cost $120, I became an instant felon in the eyes of the federal government.

Even though all this came to light last July, the feds didn't indict until this June. High priority white collar crime and all. Essentially, there is a great deal of pressure by Sen. Dorgan on the IHS right now about shenanigans in the Aberdeen area clinics and hospitals. The IHS and the feds needed heads to post on stakes outside the village gates, to show everyone "just how concerned and serious we are about this situation". So, instead of addressing the egregious, inexcusable behavior that has plagued this health care setting for 30 years that I know of, they come after the real dangerous cats. Like me.

So, for $120 worth of meds dispensed to satisfy the legal and ethical requirements of my profession, I will forever lose my ability to practice my profession, to keep and bear firearms, to vote in any election, as well as 6 months to 2 years of my freedom when I am convicted of felony health care fraud. That's if I plead guilty or nolo contedere, so I can get a change of venue to Oregon from South Dakota (I live in Oregon, worked in South Dakota for 3 years). You know. So my family has an easier time of visiting me in prison.

Only, I still don't have a list of particulars from the government. I don't know the extent of the basis for the indictment, so, if I enter a plea on Friday, Oct 15th at my hearing, I could be copping to God knows what.

I offered to pay out of pocket for the vitamin K. Either way, the charges against me do not come close to satisfying the legal requirements of a felony fraud indictment. I'm broke, can't afford my own attorney, and am most royally screwed.

After Tommy Chong served 18 months in the federal pen for some B.S. charge against him because his likeness appeared on a line of drug paraphernalia ("Chong's Bongs" or some such nonsense), he responded to the question "Wow, prison, what's that like"? with the assertion "You'll find out. You will all find out".

God help us. He was absolutely right.