The Proposed Abbott Laboratories Settlement
Last month Bloomberg reported:
Abbott Laboratories (ABT) agreed to pay at least $1.3 billion to settle claims by the U.S. government and 24 states alleging the company illegally marketed its Depakote epilepsy drug, people familiar with the accords said.
Abbott executives, federal prosecutors and state officials reached a tentative agreement calling for the drugmaker to pay about $800 million to resolve civil claims over Depakote and about $500 million in criminal penalties for marketing the epilepsy medicine for unapproved uses, said three people familiar with the settlement who declined to be identified because the agreement hasn’t been made public. Abbott said earlier this week it was reserving $1.5 billion to cover costs of the potential settlement.
A billion here, and billion there, it begins to add up:
The settlement would be the third-largest illegal pharmaceutical marketing accord in U.S. history, behind the $2.3 billion Pfizer paid in 2009 over the marketing of its Bextra painkiller and other drugs and the $1.4 billion Eli Lilly & Co. paid the same year over sales of its Zyprexa anti-psychotic medicine.
Encouraging Dishonesty, Giving Kick-Backs
The Bloomberg report only briefly discussed the behavior by Abbott that lead to the settlement:
In February, the government joined cases brought by former Abbott employees alleging the company engaged in so-called off-label marketing starting in the late 1990s. The suits contend the illegal sales practices resulted in false claims being submitted to government health programs.
The whistle-blowers claim the drugmaker marketed Depakote for unapproved uses including agitation and aggression in patients with dementia, autism, sexual compulsion and other disorders.
However, an article published last week in the Chicago Tribune further described the allegations made by the whistle-blowers. In summary,
The lawsuits against Abbott allege that the company encouraged and trained sales reps to market Depakote off-label to nursing home directors, geriatric doctors and other long-term care facilities. The company also gave doctors illegal kickbacks to talk about off-label uses of the drug in an effort to boost sales, according to the lawsuits, which were filed in federal courts in Virginia, Illinois and the District of Columbia.
The FDA approved Depakote in 1983 to treat certain seizures in adults and children over 10. Since then, the drug has received approval for the treatment of other types of seizures, manic episodes of bipolar disorder and the prevention of migraine headaches.
However, Depakote was never approved to treat Alzheimer's disease or other types of dementia or for general treatment of bipolar disorder.
According to the whistle-blower lawsuits, though, Abbott sales reps specifically marketed Depakote to treat agitation and aggression associated with dementia.
One whistle-blower alleged that Abbott encouraged doctors to make false diagnoses that would enable the government to pay for the use of Depakote:
During a nationwide conference call in 2007, an Abbott trainer allegedly coached sales reps on how to explain to doctors that they could miscode a patient's illness in order to bypass federal regulations. For example, a physician could code a patient as having 'late onset of bipolar' or 'underlying seizure disorder' instead of 'agitation associated with dementia,' according to her complaint.
Abbott held training sessions focused on off-label promotion but brought in outside consultants and held the training away from its North Chicago headquarters.
At one training event, McCoyd and another sales representative allegedly were asked to share their techniques for off-label marketing but were forbidden from preparing or distributing any written materials about the topic.
Upper-level management who attended the sales training purposely left the room when the off-label training sessions began, according to the complaint.
The whistle-blowers also alleged that Abbott gave kick-backs (presumably the same idea as bribes) to doctors for prescribing Depakote:
The complaints also allege that doctors were given kickbacks to talk about off-label uses of Depakote.
According to McCoyd's filing, Abbott salespeople were given about $20,000 to $30,000 each year to 'educate' physicians and other heath care providers about off-label use of Depakote.
Abbott paid doctors who promoted the drug between $500 and $2000 per speech, the complaint states. The money allegedly was funneled through intermediaries and associations, including the Alzheimer's Association, although the association told the Tribune it has 'no knowledge' of such activities.
Using the organizations to pay doctors was done to 'disguise the direct payments to doctors and Abbott's substantial and direct involvement' in the events, the complaint alleges.
So it appears that Abbott is about to settle a case involving some very serious allegations, including training physicians to make false diagnoses, and giving physicians kick-backs. These sort of actions seriously subvert physicians' core values (and any physicians who made such false diagnoses or accepted such kick-backs would have seriously violated core ethical principles.)
These actions also may have directly harmed patients. There appears to be no good evidence that Depakote has benefits that exceed its harms for patients with dementia, autism, etc. So encouraging doctors to prescribe the medicine for these patients was likely to have subjected some patients to side-effects without providing them any benefit. That would contradict the physicians' obligations to put the interests of individual patients first, and to avoid harming them. As the Tribune article noted,
[Dr Adriane} Fugh-Berman, with PharmedOut, said companies put patients at risk when they promote drugs that haven't gone through the FDA's regulatory process.
'These drugs are being promoted for conditions they have not been shown to be effective, and they might be dangerous,' she said.
So a $1.3 billion penalty would actually be a cheap price to pay for such ethical offenses. Note that the Bloomberg report did mention "criminal penalties," so this may be one of the infrequent cases in which a big health care organization actually would plead guilty to some crime.
Note however that neither article mentioned anything about any individual who authorized, directed, or implemented the conduct in question suffering any negative consequence or paying any penalty. These reports are preliminary, so it may be that such penalties are part of the final settlement. But it is also possible that this settlement becomes another, and particularly flagrant example of health care corporate executive impunity.
If no one turns out to have to pay a penalty for training physicians to lie to the government, and giving them kick-backs to prescribe a possibly useless and likely harmful medicine, what will deter other executives from authorizing and directing such actions again to make more money? Note in the Bloomberg article:
Sales of Depakote 'rocketed to over $1.4 billion per year' as a result of improper marketing, according to a complaint filed in February by ex-Abbott sales representative Meredith McCoyd. 'Compensation for senior executives soared as well.'
Furthermore, if no one turns out to have to pay a penalty for these actions, this case will just contribute to the ongoing demoralization of health care professionals. It will be another example of how insiders take advantage of the system for their personal gain, to the disadvantage of patients, and at further cost to an already overly expensive health care system that fails to provide adequate access and quality care.
So I repeat, repeat, repeat... to really deter bad behavior, those who authorized, directed or implemented bad behavior must be held accountable. As long as they are not, expect the bad behavior to continue. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.