Tuesday, August 29, 2006

Schering-Plough Settles, Again, Again

'Tis the season to settle, so it seems...

Multiple media sources just reported that Schering-Plough has settled civil and criminal charges. Representative coverage is by the Boston Globe, and AP via the Houton Chronicle. The essence, quoted from the AP, follows:

Schering-Plough Corp. on Tuesday agreed to pay $435 million and plead guilty to conspiracy to settle a federal investigation into marketing of its drugs for unapproved uses and overcharging Medicaid for certain drugs.

Kenilworth, N.J.-based Schering-Plough said it will pay $255 million to resolve civil aspects of the previously disclosed investigation. A subsidiary, Schering Sales Corp., will pay a criminal fine of $180 million and plead guilty to one count of conspiracy to make false statements to the government. The agreement is subject to court approval.

Schering-Plough said the settlement resolves an investigation by the U.S. Department of Justice and the U.S. Attorney's Office in Boston that began before a new management team took over at the company in April 2003.

'With this agreement, we are putting issues from the past behind us,' said Brent Saunders, senior vice president for compliance and business practices.

The agreement comes two years after Schering-Plough agreed to pay $346 million to settle charges that it paid a kickback to a big health insurer to protect the market for its allergy drug, Claritin.

U.S. Attorney Michael Sullivan, who announced Tuesday's settlement in a news conference in Boston, said health care corruption 'erodes public confidence, compromises the patient/physician relationship and adds costs to important government programs.'

Investigators found evidence that Schering-Plough marketed drugs for so-called 'off-label' uses.... One such drug was Temodar, which the Food & Drug Administration in 1999 approved to treat anaplastic astrocytoma, a type of brain tumor, in patients who hadn't responded to other drug regimens. Sullivan said Schering promoted the drug to treat several other types of brain cancers and cancer that spread to the brain from elsewhere, which the FDA had not approved.

Saunders said the company has agreed to plead guilty to making false statements in marketing Temodar, related to its sales people promoting the drug to doctors for uses other than the approved one.

Investigators said they also found evidence of unapproved promotion of Intron A for the treatment of cancer on the surface of the bladder.

Drug manufacturers are required to report their best price on drugs provided to commercial customers, including HMOs, to the Health Care Financing Administration and to pay rebates to the Medicaid program to make sure Medicaid obtains the benefit of that low price.

Prosecutors said that from April 1998 through 1999, Schering Sales reported a false best price to HCFA to avoid paying millions of dollars in additional rebates to Medicaid.

The investigation also found evidence of pricing manipulation involving K-Dur, used to treat stomach conditions.
Notet that this was the second biggest settlement by Schering-Plough in two years. According to the Globe, it was the third big settlement in five years. The total that the company will pay out from all will be "about $1.3 billion."

It all is becoming so familiar, almost wearisome, yet the questions remain. Why do the mainly monetary penalties seem mainly to come out of the hides of stock-holders and consumers, rather than the people who actually made the decisions that lead to the offenses? And after all the indictments, prosecutions, settlements, and convictions involving large health care organizations, when will academics, policy makers and politicians, much less company CEOs and other organizational leaders admit we have a systematic problem here?


Martin said...


One of the challenges is that it is very difficult to hold executives and corporate offices to account due to state laws that require companies to indemnify their employees, thus few executives or officers would ever pay out of pocket in any settlement. In the end, one is left with finding ways to assert criminal wrongdoing that the public will accept as an offense punishable by prison sentences. I have to confess that it is astonishing that we are comfortable handing down long prison sentences for nonviolent drug offenses but seem to struggle with comprehending the need to either invalidate these state level indemnification laws or provide a means, and a political consensus, to levy similar penalties for white-collar crimes, including these sorts of pharmaceutical marketing fraud.

Roy M. Poses MD said...

Good point.

However, idemnification does not preclude internal corporate disincentives to the decision-making that leads to huge civil and criminal penalties. I admit I am not familiar with what happened to the former leaders of Schering-Plough, but I would guess at worst they lost their jobs (but got to keep their stock options, their luxurious retirement plans, etc). (If I'm wrong about this, someone please correct me, and I promise to try to look this up.)

But why not have a system within a corporation that would, for example, lead to forfeit of all stock options and most retirement benefits if one's poor decisions lead to the company paying civil or criminal fines of any magnitude?

Anonymous said...

Sometimes people get caught. The Aug. 28, 2006 WSJ reports that Charles Nemeroff is stepping down as editor of Neuropsycophararmacology for not disclosing financial ties to a device he reviewed for the magazine.

The Aug. 26, 2006 Akron Beacon Journal reports via AP's David Espo that there are questions regarding an "unrestricted educational grant" given by PHARMA to the US Chamber of Commerce and it's use in support of political campaigns with regard to the current Medicare drug benefit. Seems some of the candidates were not office holders when the vote was taken or voted against the plan.

One major political issue regarding this plan was the government's ability to negotiate drug prices. A common practice in the rest of the world and one used by the VA. This is not the first time PHARMA has supported or created organizations, to support their positions, without disclosing their involvement.

Steve Lucas

Anonymous said...

Everyone got caught. Unfortunatley, the system allows corporations to buy their way out. I know I turned them in.